Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Costar fourth quarter results Conference call. At this time all participants are in listen only mode. Later, we will conduct a question and answer period instructions will be given at that time, if you should require assistance during today's call.
<unk> friends call. Please press star followed by zero and an operator will assist you offline all sold today's conference call is being recorded I would now like to turn the conference over to your host Cerus spray Investor Relations for the Costar Group. Please go ahead.
Thank you good evening and thank you all for joining us to discuss the fourth quarter and full year 2019 results of the Costar group before I turn the call over to any Florence, Costar, CEO and founder and Scott Wheeler, Our CFO I would like to review the Safe Harbor statement, which has some new language so well.
Portions of the discussion today may contain forward looking statements, which involve many risks and uncertainties that can cause actual results could differ materially from such statements important factors that can cause actual results to differ include but are not limited to those stated in Costar group's press release issued earlier today and in our filings with the FCC, including.
Most recent annual report on form 10-K, and quarterly report on form 10-Q under the heading risk factors.
All forward looking statements are based on information available to Costar on the date. This call Costar assumes no obligation to update these statements are whether as a result, a new information further events or otherwise.
Reconciliation to the most directly comparable GAAP.
GAAP statements.
And <unk> GAAP measure to the non-GAAP financial measure discussed on this call including.
Adjusted EBITDA non-GAAP income and forward looking non-GAAP guidance are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at Costar group under Pressroom as a reminder, today's conference call is being webcast and the link is also available on.
Our website under Investor Relations. Please refer to todays press release on how to me play this call.
Over to you operator, Oh, no sorry, actually one of my thing actually I would like now turn call over so our CEO and people Arts Andy. Thank you very much there.
We're joined.
Right.
I'm sorry, a we're now turning over to any parts of the CEO apologize for the short delay.
[laughter]. Thank you Sir [laughter] good evening.
Sorry. This is a TNT operator, we did I hear any sound.
Right.
I'm, sorry can you hear us and you hear us now.
Yes, great. Okay. Please.
Continue okay, well get going here. So good evening and thank you for joining us in Costar group's fourth quarter and 2019 yearend earnings call.
We're pleased that Costar can change deliver outstanding growth throughout 2019, Costar group's total revenue grew 17% to 1.4 billion for 2019, adding 200 million of revenue in the full year.
We generate strong double digit growth across all our primary businesses was multifamily leading the way with 21% year over year gross.
Fourth quarter revenue of 375 million was up 19% over the fourth quarter of 2018.
Fourth quarter includes results from SGR for the first time, which contributed 9 million of revenue since our late October 2019 close.
Net income for the year was 315 million an increase of 32% over full year net income of 2018, our adjusted EBITDA crossed over the half billion Mark This year and reached 507 million, an increase of 21% or the full year of 2018.
We adjusted EBITDA, Mark with adjusted EBITDA margins, improving <unk>, 36% and 110 basis points increase over adjusted EBITDA margins in 2018.
If you like nice round numbers or you can remember long after the call our fourth quarter revenue annualized was 1.45 billion and our fourth quarter EBITDA was 500 million or 500 million on 1.5 billion growing.
[laughter], we grew our earnings and profitability during the year, while continuing to invest for future growth in 2019, we increased the size of our Costar field sales force by 20% and added 40, new Midmarket sales positions enrichment for multifamily we increased the level of spending in digital marketing later in the year.
To grow our traffic and the lead flow of apartments dotcom.
Our product James completed new signature add packages and loopnet as well as the new digital tools for small property owners in multifamily.
Both of which we started selling in the fourth quarter.
The highlight metrics for 2019 and operations for Costar group were impressive users viewed 6.3 billion pages on apartments Dot com commercial real estate professionals conducted 40 million searches on costar potential tenants visited Loopnet 131 million <unk>.
Our clients are researchers in software teams added 2 billion pieces of new content to our database in 2019.
Looking ahead to 2020, we continue to invest and future growth.
We're focused on the huge opportunity in the apartments marketplace as well as live event and the massive commercial real estate marketplace.
We believe the addressable market for residential rental in commercial real estate marketing alone is over 10 billion and we have a unique opportunity for growth in their early stages and these marketplaces.
We're also focused on commercial real estate hospitality information analytics and software services and 2020 were also embracing accelerating our international growth opportunity.
We had an actual sales year in 2019, adding nearly 210 million of net new bookings for the year, an increase of 24% over 2018.
In the fourth quarter alone, we added 52 million of net new bookings our efforts to build online marketplaces in commercial real estate or certainly paying off.
With almost 62% of our sales in 2019 coming from apartments Dot com Loopnet and our other marketplaces.
Trend, we can expect to continue in choose twentytwenty.
Our apartment stock comp sales team had a remarkable year in 2019.
On the integration of the for rent acquisition in 2018. The team was at full strength and focused on growing throughout 2019 as a result, we ended the year with net new bookings up over 45%.
Congratulations to page Fortunately entire apartments team on a great year.
The fourth quarter was up a trick, particularly impressive sales quarter for live that historically the last quarter. The year has been the lowest seasonal quarter for Sherry advertising in fact, when we acquired Loopnet their revenues typically fell in the fourth quarter Walter debt today revenues typically grow in the fourth quarter over the past five year.
Fourth quarter Loopnet bookings have dropped sequentially, an average of 43% for the third quarter bookings levels.
That was certainly not the case this year as part of our rebuild and launch of the Loopnet since your AD products, we rolled out a sales contest for the fourth quarter that resulted in live net bookings growing 80% over the third quarter of 2019 live net sales.
Livnat St. Your ads grew almost 500% over the same quarter the previous year.
Obviously this is an outstanding result.
I believe this is only the beginning of the Loopnet growth opportunity ahead.
Our loopnet marketplace had the strongest year, yet in 2019, and we expect loopnet to be a significant contributor to our growth in 2020.
Luke net revenue was 150 million in 2019 growing 18% over full year 2018, with fourth quarter revenue growth, reaching 20%.
Our strategy of rebuilding and launching Loopnet as Im sure online marketplace is working.
According to Google analytics average monthly unique visitors to the Loopnet network reached 6.1 million in 2019, an increase of 16% over 2018.
We believe that Loopnet has approximately 20 times the monthly unique visitors Assa second most traffics site.
In 2019, we redesigned and launched our dramatically improve signature ads for office space for lease there is similar to the high end quality ads on apartments dotcom signature as sort of the topline results that are larger in the standard ads and contain much more marketing content then do the standard ads.
The signature ads are featured prominently across multiple Costar group's aerie marketplaces information solutions and newsletters. We also retarget Loopnet bet visitors as they move across the web that's coming out this quarter, our signature add diamond level delivered 24 times more and.
Presence in our basic at tier.
The signature ads on Loopnet present, very high quality architectural imagery, including photographs shot fire professional photographers drown videos or Threed walk throughs.
Our marketing consultants cure rate and provide rich content for the signature ads in some the signature add features dramatically expands our reach frequency and brand impact of our clients property marketing.
We're now working on building out similar detail that packages for the retail industrial land multifamily and investments sales sectors, which we will launch across the year.
These advertisements provide exceptional value for owners of commercial properties that need to fill vacant space or cielo building.
Remember that these buildings and the vacant space and then can be worth millions or hundreds of millions and even billions of dollars.
By using Google analytics and tracking the IP addresses of end users searching on Loopnet, we can see that many if not most of the largest companies across the U.S. our regularly searching for space on Loopnet and then signing multimillion dollar leases with our clients.
For example, we can see users are originating from Amazon IP addresses in from IP addresses of similar Mega companies viewing properties on Loopnet and then the ensuing months, we see them purchase or lease those properties.
In some cases, we see major tenants viewing of proppant loop net months before their tenant rep brokers first view the property.
That suggested that China is fine in the property first and sharing it with their broker.
Should not surprise anyone because that's exactly how the process networks today in residential real estate.
We believe that this is a seismic shift in how owners effectively market commercial properties.
And owner now needs and effective strategy to market their property directly to the tenet.
Traditionally or historically in commercial real estate the broker built a short list of potential properties for a major tenant to consider and then closely accompany that China on that Oh, So important tour of those perspective properties.
Owners marketing efforts have focused on making sure they made that brokers shortlist they spend billions each year to accomplish that.
Now it appears tenants are building their own short list online by themselves on sites like Loopnet and the first or the property occurs virtually online on live net.
In many cases, the tenant will spend dramatically more time exploring the property virtually online then they will spend physically touring it before they sign a lease.
To be clear tangible continues brokers to represent them, but the marketing realities are shifting dramatically. These are huge industry changes.
We have thousands of examples suggestion that test now find their space on Loopnet. We saw Facebook IP is viewing six new locations are busy on Loopnet and then Facebook later signed an estimate of 670 million at least deals and those properties. Similarly, pwc execute as seven lease deals and properties. They viewed on Loopnet was.
The value of approximately 145 million.
And there are many other examples including a single out of Loopnet for an office business Park in Pennsylvania, where we can see six of its new tenants viewed the properties on Loopnet first before they signed a lease.
We're investing a lot of effort into training our sales team on the best way to communicate the value of marketing on Loopnet.
On a good idea to run a contest to get US Salesforce is attention in the fourth quarter of 2019, we ran a loomis sayles contest that lift delivered very strong results.
Our field sales force shortly thereafter sold five times the number of signature adds value fourth Q4 than they did in the quarter the prior year.
A year ago, our sales team was focused on selling relatively lower cost loopnet listing plans to brokers now they're shifting their focus to selling much more significant placements to the owners of the properties.
Have so much more to win from a successful lease.
When we acquired Loopnet, the marketing potential bloomnet wasn't after thought and non differentiated adds were often given away for free or sold to brokers for as little as a few dollars a month.
I believe is the average AD was about $14 a months back in 2011.
We still sell very affordable and effective basic adds to brokers, but with a very valuable signature adds the average price point is averaging almost $3000 per month.
To preserve the value and impact of a diamond or platinum signature Ed.
We kept the inventory to three or Chen respectively per sub market.
While this preserves their value. It also creates scarcity as a result, we're seeing some owners make some significant but we would argue very wise investments Cygnus signature ads in high profile Submarkets for important buildings.
The Durst organization owns and manages a fantastic 750000 square foot office property in the times Square Submarket New York.
They are currently marketing 470000 square feet, a really nice space there.
They know that major tenants are searching for their next space on Loopnet and that top brokers search for their tenant space on Costar.
Just want to make sure that they have the biggest most prominent presence on the internet for the best building in times square.
They locked in one of three diamond as slots in times square for $11000 per month on a six month agreement.
Locked in a number of other slots for other great properties at similar price points.
You have to stop and think about that that price point is almost 1000 times the oil price point for lower quality on differentiated assets.
But I would argue durst knows exactly the value of effective leasing.
Leasing that space on a 10 year deal could generate 300 million to $400 million that revenue for Durst would you invest $66000 for an effective marketing solution that could bring you a 400 million dollar deal.
The price points were seeing for commercial office space ads on Loopnet are now thousands of dollars above the price price points, we achieve on apartments stock comp that makes sense. It major apartment development and lease up may signed leases, where the value of 10 million, whereas a major commercial leases worth hundreds of.
Millions.
There was a company based in Australia, we admire called ARIA Group that provides a commercial property marketplace, there their commercial and developer depth and subscriptions generated $134 million Australian dollars in 2019 I.
I believe that's basically an equivalent of an Australian loopnet.
The us economy as approximately 15 times larger than Australia's if you scale the ARIA commercial business Pro rata. It implies a 1.3 billion dollar addressable size of market in the U.S. for Loopnet.
Overall, we believe we are seeing clear evidence that loopnet represents a multibillion dollar growth opportunity.
Our apartment business delivered a stellar year, achieving 21% revenue growth in 2019, making this the fifth consecutive year of revenue growth over 20%.
According to Comscore, our apartment stock comp network had almost 650 million visits in 2019, a 22% increase over visits in 18.
We averaged over 20 million monthly unique visitors to our sites in 19, an increase of 15%.
During the second half of the year apartments Dot Com moved ahead of Zillow rentals and monthly unique visitors visitors and continues to attract more visitors and truly rentals.
Rent Dotcom Hot pads apartment list Streeteasy apartment guide zone for rent Cafe apartment ratings rentals dot com and many others that compete for renters in this space.
We acquired a parvus dot com and 2014 day in the industry.
Were largely focused on selling advertising to large apartment communities with more than 120 units.
As a huge loss because approximately 65% of renters or rent and properties that are in buildings with less than 120 units.
The industry was mixing missing 65% of the potential market.
That strategy was an artifact of the old print World, where your volume of ads were limited by the maximum numbers pages glue that holds together in a book.
Today apartment stock comp does not rely on glu. So we focus on selling marketing services to all size of rental properties.
Three major ways in which we're doing this.
First we are building tools that enable an owner of a single rental or small apartment to buy via E. Commerce AD placements and comprehensive digital leasing tools second we're building a large richmond based sales team focused on selling into the mid market, our apartment opportunity and single rental opportunity.
And finally, we're accelerating our investment in apartments marketing to lift awareness of apartments dotcom across all of these segments single rental midmarket and large.
In the fourth quarter 2019, we began beta testing our online renter tools, which are aimed at facilitating and improving the customer and landlord experience for leasing smaller apartment buildings and rental homes.
Our new online leasing tools give landlords the ability to create a listing perform credit background checks, creating exchange and signed leases and provide a platform for deposits and rental payments.
These tools are offered free to landlords and independent owners as a way to drive consumer adoption and build a national network for digital leasing.
In addition, we offer the option to purchase an add on apartments, dotcom, which provides better placement and twice the leads as a free basic listing does.
We launched the full national rollout on January 15, 2020.
The uptake has been very encouraging.
So far we've already have nearly 17000 active users of the digital tools.
2000 landlords have purchased adds via E commerce and over 2000 potential renters has completed online applications.
This is excellent adoption when you consider that we've yet to launch in any of our new supporting advertising campaign.
I'm really pleased with the headway, we're making and look forward to keeping you posted on our progress throughout the year.
Our apartment field sales force is an excellent one but as nowhere near large enough to sell into the millions of rental units in properties that are smaller than 100 units.
The current Salesforce is doing excellent work generating huge revenue growth in the hundred unit plus world and we want them to keep doing that.
We've just launched the Midmarket sales team in Richmond, with 40 salespeople their prospecting and selling into communities are small midsized or large in contrast to the field sales teams are selling into huge communities.
In the first few months this new sales team is doubling their sales production each month.
This point, 84% of the team has achieved their first sales.
100% of the first October classes now selling.
The top producer Morgan Rogers delivered 6000 of net new monthly sales last month.
Which is more than 90% of the field sales team was able to achieve in January.
In total the group has sold 200 property ads.
The vast majority of those properties they've sold were into.
Equities with less than 50 units.
Once we have the vast majority of this midmarket groups selling at their full potential we plan to grow the team indefinitely. So long as it remains unclear positive ROI.
Back in October, we announced that we'd be stepping up our apartments dot com marketing spend by an incremental 100 million to a spend level of approximately 250 million in 2020.
Over the past few months, our team RPM and Jeff Goldblum have been working hard to build our 2020 marketing program.
The 20 campaign will clearly be our biggest ever our plan is to deliver 10 billion impressions and 800 million renter visits a significant increase over the 6 billion impressions and $650 million runner visits we generated in 2019.
The expanded campaign is expected to drive our unaided brand awareness higher over the long term.
We currently fluctuate in the low 30% range for unaided awareness when our media campaigns are running.
Our goal is to reach over 40% unaided awareness year and eventually 50% as we continue beyond 2020.
Once again, we have Brad bellflower inventor of the apartments or net played by Jeff Goldblum, leading our Parvus Satcom campaign.
We plan to double the investment TV launching in mid March and stay on the air through November, reaching 95% of households, with more frequency than ever.
We ran 10000 TV spots in 19, and we plan to run 20000 spots in 2020.
We will air in Primetime premiers Banalities, and top rated sports events, including the Summer Olympics and the NFL.
We will focus again on reaching the cord cutters audience with three times the video on demand through you to Kulu and other streaming services.
This year, we have selected 37 of the top local apartment markets to provide increased local presence median focus.
Each of the markets, where the most most growth opportunity for apartments dotcom.
We plan to increase our exposure in these key markets by 50% and include custom market specific TV versions of our advertisements.
We will create our biggest digital presence targeting 2 billion impressions through display advertising and re targeting and increased presence on social media, making sure were there whenever renters are online.
Our marketing message for the first the half of the year, we'll focus great lengths.
On apartments that goes we'll be looking at the great lengths that apartment stock comp goes to to make sure that renters, we'll find their greatest number of rental options on apartment stock comp.
With 40 million people, having found their next place an apartment stock comp the campaign establishes a farmer stock hub as the most popular site for renting an apartment.
Beginning in July we will launch the second half of our 2020 campaign, which will be focused on our new online renter application tools, which we rolled out nationwide in January.
The message is one of simplicity that you can now apply for a new home with a single click in one commercial and man is devastated because the love of his life has just dumped and told them to move out.
Tier rolls, Dennis cheek and lands iPhone hitting the rent now button on apartments dotcom.
With a tier driven click here against the perfect Department as he moves and defines the next real love as life.
Isn't life grant.
In 2020, we expect to invest a 110 million to 115 million in paid search approximately twice the run rate of the spend in 19.
We're focusing on specific neighborhoods and appearing 95% of time in the top positions and Google searches.
We've seen the benefit this has brought us in terms of increased traffic share the past few months of 19.
We intend to maintain this pain this spend over the year.
This magnitude of investment into key words as efficient for three reasons first with our massive branding campaign renters recognize apartment stock comp and are more likely to click on it driving our cost per click down comparatively secondly, we currently appear in the number one scf position on 20000.
Pardon apartment keywords, 90% of the time.
When renters see us in both top organic and top page placement, we believe they recognized as as an authority.
Resulting in Forex not to X. The clicks you would expect from two placements.
Finally, we have a large number of advertisers who are effectively pulling their resources through apartment stock comp in order to affords the very expensive best keywords on Google.
Two weeks ago, we announced our agreement to acquire rent path from chapter 11 bankruptcy.
The transaction is subject to the customary closing conditions regulatory review as well as approval by the bankruptcy court.
We're in the early days, the process, which could less anywhere from three to 12 months.
I want to emphasize that we believe our acquisition of the Rentpath business, especially our ability to invest in their product and marketing represents the best way forward for all stakeholders as we discussed earlier, giving its CRIP given its crippling debt burden.
And pass was simply not able to buy enough traffic from Google or to build a consumer marketing brand to give their sites a recognizable brand.
Harvests dot com Rentpath and Zillow, all relied to one degree or another on Google to drive traffic to their websites.
The price of many popular apartment rental keywords or SCM has soared over the past two years climbing several hundred percent for example in 18, the key word for downtown Los Angeles apartments can be purchased for 42 cents.
By 2020, it's reached $7.56 for an increase of 714%.
Apartments Dot com has enough budget resources continue to invest in these keywords and spread the cost out across a large customer base. By contrast, redpath was priced out and resorted to purchasing a volume of key words, such as apartments for rent under $500 in Los Angeles.
At a 33000 apartments for rent la the other one I found for under $500 was an upper bug group passed in South Central Ella.
That is not the market institutional apartment advertisers are trying to reach with their dollar.
In addition rent past number one supplier Google is also competing directly against them for the same business.
In contrast, we believe that the synergies efficiencies and scale, we could gain from the combination will make it possible to continue to sustain more advertising and marketing to build more brand awareness and in turn generating increased flow of quality leads for all of our customers. It's important to build enough scale that we can.
Build more direct traffic to our sites that are not subject to Google price increases from where we stand today. The proposed timeline has not changed versus two weeks ago.
And we look forward to being able to welcome the rentpath websites and their team to Costar before the end of Twentytwenty.
Rentpath has an excellent field sales team led by our lean Mayfield.
Earned our respect as a very capable group of competitors with great relationships in the industries.
As we grow our sales force to meet the opportunities, we have and loop that apartments Bizbuysell lands of America and other marketplaces, we look forward to joining with them and the rest of the Rentpath team.
Colleagues.
This quarter, we released a great new feature and Costar that makes public record data on 33 million properties accessible through Costar.
This enables our users to see raw data on virtually every commercially zoned parcel in the us.
They can search the public record data directly and see the record ownership loan valuation data zoning and more in total they're 150 attributes.
The public record date is connected to the Costar data on the same properties, making convenient to cross reference the information.
The second quarter, we plan to add the ability to search lenders in their loan activity in the third quarter will integrate state Corporation data to allow users to research who the people are behind the companies that on these properties in the fourth quarter will permit planning and lean searches. This will allow users to monitor who is building the new properties who is ran.
Evading and which companies are moving into new facilities are expanding.
These features will be provided to our customers at no extra charge in order to enhance the value of our products extend the reach of Costar more customers.
Our new more business.
Since closing the acquisition of STR in October I am more positive than ever that SCR in Costar together can create significant value for all partner participants in the hospitality sector and.
In the part of commercial real estate that focus us hospitality.
We've had an overwhelmingly positive reaction from customers of both STR Costar.
The SCR customers recognize the technology and integrate product expertise that costar can bring and the costar multifamily customers would love to see STR create benchmarking products for the apartment industry.
In addition, brokers developers lenders appraisers and local government excited about having access to high quality hospitality statistics within Costar.
It's great to see such a positive response, which further confirms our rationale for combined these two businesses.
I'm also delighted by the enthusiasm.
Doozy ASM and dedication to the SCR team.
Demand to height CEO of STR told me recently that the reaction of her staff has been a static and that they're all very confident about their future and the costar family.
We're a static as well.
Buying that data and technology of STR with data analytics and software from Costar is one of our biggest development projects and priorities for 2020.
We're working hard and completing the technology integration by the end of 2020, which will position us to focus on growing the combined business, which we believe is a potential 500 million addressable market as outlined when we announced the acquisition four months ago.
Finally, I will conclude by reviewing where we stand the commercial real estate economy.
Total investment the commercial multifamily real estate set a new record 19, topping 650 billion for the first time.
Fundamentals remained very healthy as well with vacancy rates near record lows with limited construction.
Despite the lack of space available, though leasing activity continues to rise and all property types posted rent gains for a 10th consecutive year, although the pace of right gains has slowed slightly.
In the multifamily sector elevated supply continues to meet with strong demand both from renters and investors. The scepter set a new record with nearly $190 billion investment in 2019, and the multifamily vacancy rates held steady at just above 6%.
Many of these renters would likely have been homebuyers and another time today.
Single family home construction remains at very low levels relative to population and urban apartment development has largely replaced the serve suburban subdivision as the new model of American housing.
At present, we are tracking about 630000, new apartment units under construction.
We believe that most of these units as well as the 330000 units that delivered last year will be advertise on apartment stock comp.
And the office sector large tech occupiers container lease large blocks of space. Despite a single digit vacancy rates in limited new supply.
However, the developments underway is largely concentrated markets long considered to be supply constrained like New York, San Francisco, Boston, Washington DC.
In these markets new office developments of fundamentally shifted the geography of office demand.
With major tenants, leaving aging space in traditional cbds for new space in Hudson yards, the Boston Seaport South of market in San Francisco, and the Capitol Riverfront to say nothing of National landing in Washington DC.
In the industrial sector demand slowed and 19, but mostly because so little space is currently available the vacancy raised rates rose over the year, but to just 5% which is extremely low.
Despite the ultra low vacancies leasing actually picked up anticipating the coming wafer supply.
Rent growth slowed but at 5% is still really strong.
And investments set a new record at more than 120 billion.
In the retail sector gloomy headlines obscure the reality that retail vacancy rates are at historic lows and rents are rising in most markets. The wave of urban apartment development and markets large and small has left many downtown areas under retailed relative to growing populations and in need of grocery stores and pharma.
Seized to say nothing of restaurants.
End bars.
But little supply is underway and some markets or even seeing a net reduction space as defunct big boxes or malls or re purpose.
Economic conditions support ongoing commercial and multifamily real estate activity at similar levels.
Economic uncertainty, particularly around the trade the crown a virus in the 2020 election of broad interest rates back to historic lows supporting investment real estate, even at very low cap rates and ongoing economic growth and consistent job gains are driving demand for physical space.
Our gross products and services have become important tools for owners managers and developers and investors to make quality choices and realized successful outcomes.
Any economic environment.
Clearly the Corona viruses, becoming a factor in our economy.
As a company, we're making preparations in the events the outbreak impacts areas, where we have significant operations.
Fortunately, we do not have factory floors, nor do we have to gather clients physically to provide our services as we've already done in China were playing disburse operations to work at home status, if outbreaks occur in cities, where we operated.
Before I hand, it over to Scott.
There is less concerned about that.
I would like to acknowledge that our outstanding 2019 results would not have been possible without the hard work and dedication of all of our awesome Costar team members. The matter, where you are around the world or what part of the business you support I'm very proud of the people that make costar a great place to work.
I will now turn the call.
Over to our metrics obsessed CFO Scott Wheeler.
Thank you Andy can you just a second right takes a microphone on west disinfectant with as little White.
Okay.
Display my concern.
Piracy do issues.
All right.
We had a great year in 2019, we reached 1.4 billion in revenue exceeded 500 million and adjusted EBITDA and delivered over 200 million of net new bookings for the year.
In addition, we acquired STR and off campus partners in 2019, and we recently announced an agreement to acquire rent path.
It's great to see and we continue our very successful strategy of both double digit organic growth coupled with highly synergistic acquisition programs.
We certainly don't see either of these growth strategy slowing down anytime soon.
Our fourth quarter 2019 revenue was $375 million growing 19% year over year.
Selling and 9 million above the high end of our guidance range.
Revenue growth in the fourth quarter, excluding STR was 16% year over year.
STR contributed $9 million in revenue in the fourth quarter, which exceeded the $3 million to $4 million of STR revenue expected.
This is primarily the result of favorable outcomes from the deferred revenue purchase accounting adjustments.
We have included the revenue from STR as part of our information services revenue sector.
Looking at our revenue performance by services Costar suite revenue growth was 13% for the full year of 2019 as expected and 14% in the fourth quarter of 2019 versus the fourth quarter 2018.
As we head into 2020, we anticipate Costar suite revenue growth will moderate somewhat as we have shifted the focus of our sales teams to ramp up sales of Loopnet signature ads that Andy mentioned.
The revenue growth rate for Costar suite in 2020 is expected to be approximately 11%.
As Andy discussed its important that our field sales team learned how to sell high value add packages directly to owners, even if it comes with a slight substitution effect in the near term on the Costar side of the business.
Overtime, we believe the relationships of the sales team builds now selling loopnet to owners will pay off in sales of Costar suite subscriptions to those very same owners in the future.
On a combined basis looking at Costar suite and Loopnet together the incremental loop net revenue in 2020 is expected to more than offset anticipated slower revenue growth in Costar suite.
Revenue and information services from for the full year of 2019 grew 31% to $88 million.
Excluding STR the full year growth rate was 17% with Costar real estate manager growing 34% year over year.
Revenue and information services for the fourth quarter of 2019 grew 52% versus the fourth quarter 2018.
Which translates to around 3% revenue growth in the fourth quarter excluding STR.
We expect reported revenue from information services to grow at a rate of 60% to 64% in 2020 with STR expected to contribute approximately $61 million to $63 million in revenue in 2020.
Multifamily revenue growth for the full year 2019 remained strong at 21% versus 2018 and fourth quarter 2019 grew 20% over the fourth quarter 2018.
Our multifamily revenue growth is split between 11% increase in volume of properties advertising on the network and a 10% increase in average revenue per property.
For the fourth quarter 2019, our average revenue per property reached $800 as our customers continued to by higher value advertising packages or increased lead performance.
We did not increase list prices for any of our multifamily advertising in 2019.
Looking forward, we expect multifamily revenue growth to continue at approximately 20% for the full year 2020.
Our forecast assumes continued strong growth from our field sales team selling into larger communities with a growing contribution throughout the year from our Midmarket sales team.
We assume minimal revenue contribution from smaller independent owners using our digital tools in 2020, as we focus on landlord adoption of these digital tools. So we can build scale.
Commercial property inland revenue grew 17% year over year for the full year of 2019, and 18% year over year in the fourth quarter.
Our loopnet marketplace represents approximately 75% of the revenue in the commercial property inland product sector.
As we continue to reposition loop that as a premium advertising solution to property owners, we're seeing growth rates accelerate.
In the fourth quarter of 2019 loop net advertising revenues grew 20%, which has doubled it right that loop net revenue was growing in mid 2018.
For 2020, we expect growth rates for Loopnet to move up over 25% in the second half of the year.
The commercial property in land sector is expected to deliver approximately 22% revenue growth for the full year 2020.
Looking at our gross margins, we came in at 79% for 2019 up almost 2% versus 2018. This as a result of our very strong cost leverage.
Our gross margin came in at 80% in the fourth quarter 2019.
In line with a margin we achieved in the third quarter of 2019.
We expect our overall gross margins to move up to 81% in 2020.
Net income for the full year of 2019 was $315 million at 32% increase compared to prior year.
Net income for the fourth quarter 2019 was $88 million, an increase of 5% or 4 million compared to Q4 2018.
Our effective tax rate in the fourth quarter was 23%, while our effective tax rate for the full year of 2019 was 19%.
Adjusted EBITDA for the full year of 2019 was 507 million, a 21% increase compared to adjusted EBITDA of 418 million for the full year 2018.
Adjusted EBITDA margins of 36% increased 110 basis points in 2019 compared to 2018.
I'm pleased with our ability to increase profitability for the year and at the same time increase investments in our new product development and the apartment search marketing than we did in the second half a 29 team.
Our fourth quarter adjusted EBITDA of $142 million was approximately $7 million above the top end of our guidance range.
Favorable revenue of $5 million from STR related to purchase accounting and other revenue favorability is contributed to the positive earnings.
Non-GAAP net income for the full year, 2019 was $373 million or $10.19 per diluted share above the high point of our guidance by 17 cents and an increase of 23 compared 23% compared to full year 2018.
Non-GAAP net income for the fourth quarter, 2019 increased to $103 million or $2.82 per diluted share.
We received an insurance settlement of approximately $11 million related to the Accelerant litigation in the fourth quarter 2019, which we recorded in other non operating income.
We adjusted this settlement gain out of the non-GAAP net income.
Non net GAAP net income also includes adjustments for stock based compensation and STR acquisition related expenses.
Non-GAAP net income for the fourth quarter assumes a tax rate of 25%, which does not include discreet items, such as the impact of share based payment transactions.
Our cash investment balances were approximately $1.1 billion as of December 30, Onest 2019.
Which is almost identical to our cash balance at the end of 2018.
We generated a little over $450 million in cash from operations. This year and then we pumped it all down to buy STR.
Okay, great way to use cash I think.
Now, let's take a look at some performance metrics for the quarter, none of which include any performance metrics for STR, which will add later in this year.
At the end of the fourth quarter 2019, our Salesforce totaled approximately 844 people up about 24 people from the third quarter of 2019 and up over 100 people from the fourth quarter of 2018.
The Salesforce growth in Q4 was primarily in our multifamily midmarket sales team.
We expect to ramp up headcount in this team towards the target of 100 people later in 2020.
We ended the year with approximately 275 salespeople in our Costar Loopnet sales team an increase of 20% for the year, but a bit short of our goal to grow the team by 30% during the year.
We expect to reached approximately 300 field sales reps and this team sometime in the second quarter of 2020.
Finally earlier rather than later.
The renewal rate on annual contracts for the fourth quarter 2019 was in line with the rate achieved in the third quarter of 2019 at 90%.
The renewal rate for the quarter for customers, who have been subscribers for five years or longer was 95% inline with the renewal rate of 95% in the third quarter of 29 team.
Finally subscription revenue on annual contracts accounts for 83% of our revenue in the fourth quarter up approximately one point compared to Q4 last year.
I'll now discuss our outlook for the full year and the first quarter of 2020.
To be clear our outlook does not include the impact of the proposed Redpath acquisition.
However, we have included approximately 7 million of legal and other professional feels fees associated with the pending transaction.
We have included these costs in the non-GAAP adjustments to EBITDA and net income.
I'll begin with the outlook for STR as Weve said previously the businesses business exited 2019 at a revenue run rate in the low $60 million range.
We will lose a few million dollars of GAAP revenue in the initial quarters due to purchase accounting adjustments.
For 2020, we expect that STR will contribute approximately $14 million in revenue in the first quarter of 2020, and approximately $60 million to $63 million in revenue for the full year.
The purchase accounting impacts to revenue and EBITDA, primarily impact the fourth quarter 2019 in the first two quarters of 2020.
We expect EBITDA for STR to be between negative seven to negative $9 million for 2020, which includes significant retention bonuses paid by the seller along with other acquisition related costs.
After adjusting for these costs and other typical items like stock compensation, we expect adjusted EBITDA for STR of between $7 million to $9 million for the year.
STR adjusted EBITDA is expected to be roughly breakeven in the first half of the year and turning positive beginning in the third quarter. After we move past those purchase accounting adjustments.
These estimated impact to revenue adjusted EBITDA from the acquisition of STR are included in the following consolidated outlook for 2020.
We expect revenue in the range of 1.65 billion to 1.665 billion for the full year of 2020.
This implies an annual growth rate of 18% to 19% over 2019.
Moving STR, we expect revenue growth rate of approximately 15% for the full year of 29 team.
We expect revenue for the first quarter of 2020 in the range of 387 million to 392 million.
This represents approximately 18% to 19% growth compared to the first quarter of last year, and approximately 14% to 15% growth excluding the first quarter revenue contributions from STR.
We expect adjusted EBITDA to be in a range of 520 million to $530 million for the full year of 2020.
Representing 3% to 4% growth versus the first full year of 2019.
As we discussed on our third quarter results call. This past October we plan to increase our marketing spend for multifamily by approximately $100 million in 2020.
Bringing our total multifamily marketing budget up to approximately $250 million.
Excluding the impact of STR, which I just discussed our organic adjusted EBITDA margin for 2020 is expected to be approximately 32%.
And 400 basis points compared to 2019 as we discussed back in the October conference call.
Adjusted EBITDA for the first quarter 2020 is expected to be between $115 million to $120 million.
We expect second quarter adjusted EBITDA declined from the first quarter as we've seen in the past years as departments media campaign ramps up during the peak rental season.
With significant increases in adjusted EBITDA and margins in the third and fourth quarter.
We anticipate our adjusted EBITDA margin for the fourth quarter 2020 will be at or above the 38% adjusted EBITDA margin, we achieved in the fourth quarter of 2019.
In terms of earnings we expect full year non-GAAP net income per diluted share of $10 in 20 cents to $10.40 based on 36.8 million shares.
For the first quarter of 2020, we expect non-GAAP net income per diluted share in a range of $2.25 to do dollars 35 cents based on 36.7 million shares.
In summary, we had a fantastic 2019, and we've set ourselves up for a great performance in 2020 and beyond.
We believe that by continuing to invest aggressively in our business in the form of new products marketing and acquisitions, we're positioning the company for years of strong growth and attractive EBITDA margins.
As I've said many times our margin trajectory may vary considerably from year to year based on the timing of investments. However, I'm confident we're still on track to reach our long term goals of $3 billion in run rate revenue and 40% plus adjusted EBITDA margins in 2023.
Having read all of those numbers. It is time to open up the call now for questions.
Let me start over.
So well now turn over to the operator, we will continue instructions foreign like non but we would also ask that you limit your questions to one question per person, we have time, Michael the Q background. Operator, you May proceed.
Thank you ladies and gentlemen at this time, if he would like to ask a question. Please press one and then zero.
Hi, Dan if you do have a question. Please press one then zero.
And our first question.
From Ryan on the fellow with Kane VW. Please go ahead.
Good evening, everyone. Congrats on the strong finish.
To the year.
Right.
Wanted to ask about apartment Soc.
Clearly.
The platform continues to see strong momentum and it seems that the push into the middle market in the low into the market holds promise.
I was hoping maybe that you can give us some color on your thoughts around how you frame the risk of competitive pressures in that market for lead generation.
I think on the Rentpath call you alluded to the.
The position that Google housing that marketing controlling render traffic. So was wondering if you see the risk of them increasing their stake in this market.
As a threat similar to what they've done in the online travel booking world.
Sure.
So.
Certainly Google has the pull position on controlling renter flow or the majority renter flow and then the an online travel world.
Hi, guys like bookings Dot Com Expedia has spent.
Invested large sums of money to build direct traffic that are independent of.
Google Intermediation.
In there and frankly, while they have those hotel OTN have taken.
A bit of ahead, they still have outstanding margins are very profitable businesses.
So we we think that Google is a competitive factor there.
They are growing revenue in the apartments space people do make a decision between spend the money directly with Google or spending the money with apartment stock comp, but we believe we offer a number of advantages have some strong client loyalty and we'll continue to grow and thrive.
And while we look at Google as providing a competitive element to the company. We also look at them as a very important partner and we believe that our investments into Google key words, and other initiatives with them have been very fruitful. So.
Nothing in life is.
Nothing in life is.
Without some risk, but we feel comfortable with it.
Our next question comes from Sterling Auty JP Morgan. Please go ahead.
Great. Thanks, guys. This is Jackson ader on consumer light.
My question is on the the.
Middle market sales now that that sales team up and running how should we or how are you guys thinking about the unit economics for that particular segment.
I believe it's running about an average of $320 per unit like that was in the definitely in the silver adds an overall, it's about 444 hurdle in any of what we sold so far.
The largest mix of as as we mentioned was in the on the silver level within some goals and then some flattening and diamond has been sold licensing, but don't get excited because there is only tens of millions of opportunities down there in that segment.
Our next question comes from Stephen Sheldon with William Blair. Please go ahead.
Hi, Thanks.
And that was a lot of detail.
Andy.
There was a brief comment in your prepared remarks that you plan to accelerate international growth. This year. So wanted to get some more detail on that I know you've been gathering data in the UK, I think Spain, Germany, and France and have re all in the UK that you've talked about using the gather public data and parts of Europe, but I guess first do you have enough data.
Scale internationally to more meaningfully monetize it at this point and second is the plan here to accelerate I guess data gathering maybe with STR as international footprint and EMEA and APAC.
Yes, so STR does have a really strong international footprint.
You know meeting with their leadership team Dan.
Asia Pac and.
The nine Vietnam, It's a strong group, it's great foundation to grow and.
Yes, yes, what we're thinking about 2020 I do not believe we'll have a huge negative financial impact of drag on earnings are material. One what it's really about his acknowledging the fact that we now have 500 staff and tens of thousands of users outside the United States and multiple and.
Dozens of different countries.
Users and probably 60 70, some countries at this point and.
So a lot of it is how we're thinking about providing the products in the service and delivering it so.
As we pull STR and Costar together, it's going to be important that both of those platforms support users in dozens of countries. We want to continue the work, we began with apartment stock comp and.
Make all of our products polyglot ideally supporting both English language in the local language in those products. We also want to make the movement between viewing data in various countries as seamless as possible. So today, a user in London or user in Madrid may look.
At our product is being very local to that town and we believe there would be value in.
Just opening up that system at their subscribing to their local country, we would let them see the internationals network. So that would be a pretty big change when investment broker in London currency and compare a property in London for Edinburgh to a property in Toronto or Vancouver, or new Max.
Our Madrid, and so that'll be in the first big change, we think they'll have a pretty positive impact thats. The way Bloomberg has segmented their products. If your Bloomberg client you can see all over the world. We want to go that way. So people don't evaluate us as a single city player anywhere they can work in their native language, that's particularly.
Level in the investment sale area and in the analytics area, where we think we can provide a lot of value.
Our next question comes from Mario.
Quite a lucky with Jefferies. Please go ahead.
Hi, Thanks for the time.
Yes.
Sure shifting the Salesforce focus from from going from Costar suite over to loop that could you just update us.
How many costar customers are using that and vice versa, or maybe just give us a little more quick update on how much runway still exists there.
So you're in particular, you're talking about well is talking about the runway for both of them, let's talk about the runway for costar and the runway for Loopnet.
I plan to live for a very very long time, and I will not live long enough to ever see the end of runway for either Costar Loopnet. So we we just have.
Back in the place where I'm feeling like our Costar Salesforce.
Is smaller than the opportunity, they're selling into because that costar sales forces of Costar and Loopnet Salesforce. There is very high overlap between the people who are trying to sell costar too and to the people who would be would benefit from marketing on loopnet. So very very.
Hi overlap both ways.
I would think I don't have a hard number on that but I would believe us. The majority now some of the new particularly valuable customers to us.
For Costar, so important area for us in Costar selling honors that.
Now we're in the early stages of penetrating that opportunity.
Hi value they pay higher numbers for Costar.
But a great Avenue to reach them is to provide a marketing solution for them in lieu of net that's unique in new and different and allows us to build a relationship with them and then ultimately.
To expand that relationship and provide them information analytics, we believe that are offering.
It is incredibly pelling to that owner universe on both sides. So.
I really mean that.
It's a huge market by the time, we sell everybody and.
Czechoslovakia Costar subscription will be in like 23 20.
Our next question is from Brett Huff with Stephens. Please go ahead.
Good evening, guys well Brett.
My question is you Didnt see is that the guidance implies organically about 15% growth and Scott I think you gave us that number inbound and by my math I think you guys in that you're pretty close to that in 19 give or take.
Correct me, if I'm often asked I think on campus.
Our next question is given that the AD spend is going and ran pretty dramatically through the year.
Why wouldn't we expect to see.
Revenue growth.
Actually in the back half of the year than we did say in 2019, I was asking Fred saying page for US. The same question go ahead.
Yes.
You are correct, we have about a 15% organic.
Growth rate scheduled out for the year.
We certainly see.
Solid growth starting into the year, we had a great year selling at apartments, and the last year will start to get the the ramp up in.
The marketing spend starts in the mid to late March timeframe and Thats when our.
Our broadcast advertising will kick in and then by the time, we hit mid to late summer, we'll start to advertise more around the use of our one click.
Neil digital rental tools and Andy was mentioning.
So we have built in early this year, we've built in.
The 20% growth is almost entirely from our large direct field sales team in large apartments. The amount of revenue that we're forecasting right now and inside sales team is very small and we're really forecasting nothing coming from.
Marketplace. So what we're doing this years really building the brand building the momentum building those sales forces and those capabilities and Midmarket and building that network in the small properties space.
It's really revenue on the comp.
We'd love to see those developed rapidly in the first half and really take off in the second but at this stage, where we're planning on really taking the large market and and decent momentum into the mid market, but really not much beyond that in our forecast right now.
Our next question comes from peak Christensen with Citi. Please go ahead.
Thank you good evening.
Great momentum guys.
I just I just want to follow up on on that last question.
I know you don't provide.
And outlook for bookings, but how should we think about the cadence throughout the areas that is it something that starts picking up into Q3, Q and just building from there or is it more of a hump. This I know, there's a lot of moving pieces hiring and all that other stuff, but how should we think about the cadence.
Yeah, I think the I think the hiring starts to really advise the cadence, particularly with a combined costar Loopnet Salesforce and then and then the later in the year building that been market Salesforce.
That's really what's different than maybe what we've seen in the past otherwise, we typically see second quarter via a very strong sales quarter.
Third quarter, a little bit less than that and I think like we saw this year fourth quarter, which we just proven loopnet, we can actually sell advertising in fourth quarter, which hasn't really been the case in the past.
Both in apartments, and and loop that you'll see fourth quarter strong strong quarters, and I think to equipment, our second strongest quarter in apartments. So.
So the Bill will go with the sales head count in General and then the others regular seasonality patterns will.
It will hold up for the year.
Our next question comes from George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, good afternoon, you're going after the middle market is sub segments of the multifamily space. This year, you talked about launching tools targeting smaller properties building out your Richmond sales team and then also accelerating investments into apartments marketing can you discuss how you plan to phase in these initiatives how much growth acceleration in.
We in general you expect from these initiatives and then how your strategy aligns with your proposed acquisition of Red path.
Sure so.
I don't think anyone ever taught me about phasing, we just do it all up on.
Anything is now yes sure at all going on now.
We've been working on the Io initiative for a long time, so thats been a year and a half or more of software development acquisitions and research. So we were right in the first focus groups on that Io product over two years ago, and tweaking and adjust in the business model.
Now it's in the markets National and we're seeing great traction we are seeing revenue growth from it because.
People are opting into a really good clip to E commerce purchase of advertising these individual properties.
Buying an add on on a parvus stock comp so that that will track through the year, we're going to watch it really closely and grow it I have been out talking to a lot of the leaders the biggest clients in the multifamily industry over the last couple of weeks and.
I have been surprised by.
Their interest in those leasing tools and participating in those program. So we're going to also focused this year on potentially enabling more of our larger customers to put the leasing tools on apartment stock comp so people can initiate a.
A lease from apartment stock comp.
Directly into our clients backend systems, so that would make that tool work throughout the spectrum that would have a good impact on revenue through the year. One of the highlights for me last week was I was meeting with one of our biggest customers. The president of one of our biggest customers who.
Manages hundreds of thousands of units.
He just bought a very small 10 unit property for himself as a as a.
Gag I guess had enough and he said he was shocked when they got this property had no idea how to lease properties got thousands of people for is big business, but it doesn't have to leases on property. So he's actually becoming a client for our online leasing tools for small property owners, which is helpful. As we try to move it up upstream so the mid.
Market, we're being careful there because we're launching a new sales model.
Involves bringing on a lot of.
Relatively new people both at the.
At the of aligned sales person and the manager doing something kind of new so we want to make sure they bring their skill sets.
Fully up to development before we start scale in the group, we want to be careful that it doesn't scale.
Too quickly and that we lose control of quality and then struggled to bring it back so.
We are waiting till they're all up and producing at a good level and we sort of worked out Kinks. Now will then we'll begin slow measured growth through the year, there, but that really as a group that could go from 40 to 100 from 40 to 200.
From four to 300 over time.
As it has a good ROI.
And then how all that integrates in with what we're doing with the rent path acquisition.
While we had a lot of great products here with good growth and we are.
Prospecting. Unfortunately, a relatively E commerce solutions are working at the IPO side, but we're prospecting at relatively.
Small percentage of our target market and with the run path acquisition that would bring more sales resources into our organization.
For both selling of Department industry, and then also.
Into the other marketplaces that we're active in so with the apartments sales conference why things. We did as we began to present training materials on lift net in order to.
In order to familiarize apartment sales team with that and we ended up a lot of interest with people want to move in there. So hopefully we're able to close the redpath deal and move some more people into the apartment side. The other thing rent past helps support us with is that.
And enable us redpath, probably the most important thing rent past does for US is it enables us to enter a completely new market to us and that is this io marketplace. So the euro rental com is very valuable in particular in our relationship in partnership with Google too.
New.
Build great FCO around words that people tend to associate with renting a townhouse a house or a condo or a walk up unit in a property. So we'll.
We'll use rent path and rent dot com in particular as a vehicle to enter this news.
Smaller property market in which were less than 1% penetrated right now so that will be another helpful element.
To an acquisition there.
Our next question comes from Andrew Jeffrey with Suntrust. Please go ahead.
Hey, good afternoon, guys appreciate taking the question.
Andy when you look at STR and.
The revenue generating this year I think you said on the call. When you when you bought at that you. Ultimately can leave you can double the revenue growth there when I look at the information services segment. This year Xx STR looks like it might be down a little bit I Wonder if you can comment Andy or Scott on on that and then sort of what that total.
Segment growth should look like over time as STR ramps up.
Yes, let me let me cover the numbers on that sector, what we're seeing.
Which has been the fuel under info services has been real estate manager for the last couple of years.
You may recall that that is comprised of both subscription revenue and then when they took all those big orders over the last 18 months to add a bunch of implementation revenue. So right now the implementation revenue is running down since for past that way and the subscription revenues growing so underlying we're expecting to see anywhere between 50.
And 20% continued growth.
In information services sector. After we get passed that runoff, which I think by the end in 2020, we will be.
So thats sort of X. STR.
When we look at STR in Standalone basis on a global enterprise are growing around this 10% year over year similar to what it was doing just before we bought it.
And as you pointed out we expect we'll be able to grow that revenue, 20% or more.
We will need the year to get the technology integration that Andy mentioned to start rolling out some of the new products in a more meaningful way and so the post 2021 will start to see that revenue ramp up.
Go higher in STR.
Now keep in mind, when when that starts to happen and its integrated into a costar suite platform. Those revenue growth will show up in Costar suite and not in info services.
So so info services will continue in this 15%, 20% growth range with real estate manager risk analytics and few other businesses powering that over the longer term and STR will start growing above 10% to 20%, but that that will shift up into costar suite. So we've had a bit of time now to really get into that.
And work with the STR team.
I understand the opportunity better.
And I think the product strategy is very clear and concise now.
So.
STR has built a fantastic company focused intensively on their relationships with the major hoteliers around the world as well as the.
Accuracy clean lists and privacy of the benchmarking and the quality of how they do the benchmarking.
And where there's a tremendous opportunity is too.
Take a whole set of disparate tools that STR provides and pull them together into one.
Seamless log in one interface.
One system using a lot of technology that Costar group already has available to us and.
Also integrate that with.
The analytics market analytics, Mark search functions forecasting.
Property level data that Costar group has put it into one solution.
And.
As I look at that opportunity I'm very confident that when we.
Go through that process that technology path.
We can produce a product that.
The customers will love that will be an absolute next generation solution in hospitality information.
How and when we monetize that exactly.
We'll we'll evolve, but if you build a great product that is.
Magnitudes of order more powerful and useful it will pay off but one one just.
Tactical thing is we'll be able to sell to the non hospitality world.
Analytic solutions for people trying to appraise property buy and sell hotels, great quality market data and our Costar salesforce will be able to carry that product and.
Theres just a lot of people in the Costar Salesforce, so with just a lot more bandwidth that as a doubling factor right there, but I feel very good about what we have right. Now there was just lot of work and we don't mind that.
And again, if there any further questions. Please press one then zero.
And we other question May Yang pardon uneven. Please go ahead.
Hey, Good evening section, how Peterson on from Mount.
Thanks for taking the questions sorry.
So it's great to hear about the dilute net bookings in the momentum in Fourq Hugh.
Definitely impressive sequential growth there.
Just want to see if you give us any color on kind of how the bookings momentum and is ban in January and February just to kind of tease out kind of how that momentum is skin.
No we lost our good friend Maya, but I think we knew where he was going he wanted to know if we had any insights on the bookings momentum in the first quarter.
Unfortunately, we can't talk about booking or booking momentum in the first quarter until our first quarter conference call, which will be the third week or fourth week of April Tuesday evening, five PM and we'll be happy to update.
Sorry can say much more than that.
All right I'll, let the carrier bag, we did sell that we did sell in that we saw some stuff in aggregate and we're still selling selling stuff in February.
Okay, let's get our last question operator.
Final question is Bill Warmington with Wells Fargo. Please go ahead sense.
Wow onto the or are there.
Very very close Hello.
Yes.
How are you guys doing today, great how you doing today.
Im doing okay, I'm doing okay that Andy the operator, Florence, Hey, I thought it was.
So.
So what's what's up 54 minutes of prepared remarks, you can come up with another six minutes of material make it a rounded out to an hour what's up with that.
We are getting old.
Okay.
All right so.
I had a two part question if you well. So one is two to ask if you could give us a little color on the sales incentives. This specific sales incentives that you're giving for the loop net sales force in 2020 little color. There and then also if you could talk about how far.
You are from being able to actually score a lead with the apartment owners managers.
Okay. So.
In terms of how we incent the Costar sales force on.
Matt.
Production I will.
Take a shot at that it's approximately 20% of their billing book, so whatever they've got building in a given month, they get approximately 20% of that and they get a accelerator towards their rates that they earn on their costar side once a cross.
20000 element of monthly bookings and so that motivates them that motivates them to quickly get to that.
That base points.
And.
Yes.
I think it doesn't count towards.
Presidents club and things like that but it's it's enough its interlink system, that's pretty attractive to them and mobility quite well with that and as they do well, we'll do well too.
And then the second question it was not authorized to ask but we will answer anyhow, we always do.
Lead scoring well at this point, we are one of the elements that we initially have pursued with the online leasing tools with the fact that we could do better lead scoring I think that is a long term investment for us as we see more and more renters go through our online application process in may.
And more people participate we can help people.
We can help people understand right off the bat as they fill out.
Their application, which other properties they are likely to qualify for or not qualify for.
Just save several lot of time help someone get to the right solution faster.
And then.
Thats sort of a wind direct way by educating the renter of scoring the leads coming in.
And also enough people to participate in especially as we.
Meet the needs of millions of college students using.
Off campus partners and we try to bring these tools into that environment as students come out of University and begin renting their first off campus housing will have built up a fair amount of information about those leads as they go and go into.
Our clients inbox. So it the capabilities are there, but we're taking the long term on it.
And there are no further questions in queue. Please continue.
Bill you want to get back in line.
With that ill as the conference call. Thank you very much for joining US next time, we're hoping to get a 60 minute prepared remarks, or maybe a 45 minute. Thank you very much.
And ladies and gentlemen that does conclude our conference for today. Thank you for your participation and you may now disconnect.
Hello.
We're sorry your conference is ending now please hang on.