Q2 2020 CoStar Group Inc Earnings and Completed Acquisition of Ten-X Commerical Call
To the Costar group's second quarter 2020 earnings conference call.
At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you will need to press star one in your telephone.
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I'd now like to hand, the conference over to your Speaker today, Sarah spray Investor Relations. Thank you. Please go ahead.
Thank you.
Good evening and thank you all for joining us to discuss the second quarter 2020 results of the Costar group before I turn the call over to Andy Florence, Costar, CEO, and founder and Scott Wheeler, Our CFO I would like for you our safe Harbor statement.
Portions of the discussion today may contain forward looking statements, including expectations for the third quarter and pull your twentytwenty forward looking statements involve many risks uncertainties assumptions estimates and other factors that can cause actual results to differ materially from such statements are.
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 our 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 data for this call Costar assumes no obligation to update these statements whether as a result of new information future events or otherwise.
Reconciliation to the most directly comparable GAAP measure up to the non-GAAP financial measures discussed on this call, including EBITDA adjusted EBITDA non-GAAP net 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 Dotcom under pressroom.
As a reminder, today's conference call is being webcast and the link is also available on our website <unk> under investors.
Please refer to today's press release on how to access for replay of this call and with that.
I would like to turn over to our founder and CEO and before.
Thank you Sir good evening and thank you for joining us today for Costar second quarter 2020 earnings call.
A caveat I see a large thunderstorm rolling into by possession, so Nick when I got disconnected, Scott Wheeler CFO will pick up my script and.
Deliberate not quite as well as I do but he'll he'll muddle through.
[laughter] going into the second quarter, because it's been one of them, it's difficult to predict quarters my decades of experience.
It'd be hard to ever imagine the scale dislocation or countries experiencing.
Despite the challenges we face so far our team here Costar group, that's performed exceptionally well turning in one of our strongest quarters. However, we grew revenue, 16% increase adjusted EBITDA, 17% set a record sales spot.
Raised $2.7 billion, an equity and debt in the equity debt markets, an acquired Kinex, all while working 100% from remote locations.
Traffic to our apartments talk on the Loopnet marketplaces rose to a new record levels exceeding pre pandemic levels. We had 62 million monthly unique visitors and our platforms in the second quarter, an increase of 13% over our record traffic levels of 55 million monthly unique visitors reached in the first quarter twice.
Morning.
I Hope you can agree with me that these results indicate that our business is not only Brazilians what does in fact countercyclical.
Our business like I believe most businesses was slowed in the first part of the quarters people adjusted to the new normal this progress back in each month this quarter eventually reaching our best sales results ever in June.
Costar Loopnet apartments Dot Com lands of America, Bizbuysell real estate manager risk analytics and STR all showed positive growth in the bulk of gen.
In a world of social distancing, our digital marketplace is uniquely enable their clients continue their mission critical leasing efforts well many were debating whether recovery would be V shaped costar group's recovery to date looks more like a check mark well I believe the challenges from a pandemic are far from over the progressive improvement smart.
Operating results each month throughout the second quarter gives us greater confidence in the positive outlook for our business.
Costar group's total revenue grew 16% year over year to 397 million across the second quarter. Our sales Frost force brought in 35 million of net bookings with 22 million of that being in June alone.
Marketplace businesses delivered strong revenue growth with apartments, dotcom growing 21% and loop that growing 18% year over year in the second quarter.
Our net income was strong at 60 million. Our overall EBITDA was well ahead of expectations at 109 billion, an increase of 17% year over year.
And our non-GAAP net income per share of $2.34 was up 5% well ahead of expectations, regardless of the 2% dilution from our equity raise in May.
Apartments Dot com was truly the counter cyclical stand out in Q2 getting new records throughout the quarter net new sales were up 33% against our previous record set in the second quarter of 2019.
In fact every single month this quarter, our sales hit a new record high in the true inaccurate words of page four star head of multifamily sales every single benchmark was blown away.
We had a series of all time record high traffic numbers for apartments network sites during the quarter, including 23 million average monthly unique visitors up 6% year over year, and 200 million visits up 16% year over year. According to Comscore.
Our apartments Dotcom sales force log day, 58%, increasing quality meetings interactions with our clients delivering critical service to our customers at a time of significant challenges for their business.
Apartments are they new quarterly record revenue.
146 million.
This June the largest annual multi family industry conference. The National apartment Association conference was postponed due to the pandemic.
This conference is a significant customer event for apartments Dot com and typically makes June our best sales month for the year.
Without the possibility of meeting in person, we organize and produced a two day virtual summer showcase event conducted entirely with video meetings, we lined up speakers from top check digital media and advertising companies long with our own research staff, an economist to speak on a range of topics from local market update.
Let's turn marketing and anxious times all in support of our customers.
That was a resounding success over 3200 customers participate resulting in connections to over a thousand new customers. The customer response was tremendous and contributed to a record June in terms of net new sales nearly 20% above the previous record and for less than 5% the cost to the annual.
In person that we saved $4 million going digital.
As announced last year, we've increased our marketing spends and we've increased our marketing investments in apartments dot com by nearly 50%. We plan to continue our increased investment in marketing. Despite the pandemic because we believe that we can still generate an outsize ROI on that investment even this environment.
Based upon our results. This quarter. We think we are in fact seeing an excellent ROI on that increased investment.
Our Q2 marketing campaign highlights start with the launch of our new broadcast ads featuring that kinda like Jeff Gold Bloomers right bellflower, the inventor of the apart from Internet.
He has hit the Airways hit the Airways end of March with an increase of 12% more ads over a 2018 campaign airing across and even wider variety of digital streaming video platforms.
This year, we also increased marketing via paid social media and Retargeting ads as well as addressable TV through personalize advertising based on household composition.
We raised our STM spend significantly leading to a higher frequency of number one positioning in a broad range of search terms over.
Overall these paid initiatives led to a 50% 7% increase in impressions.
Paid advertising is the whole story, either our continuous investment the functionality of and content on our site helped to continue to fuel organic site traffic growth of 16% in Q2.
We were also rewarded by new highs and unaided brand awareness and important measure of the reach and effectiveness of our campaigns.
And we are now leading the pack with Zillow and second placing Craig's list and rent dot com tied for third we believe that strong and improving levels of consumer awareness is the key to our ultimate success and penetrating the broader rental markets and the timing and magnitude of our investment is clearly paying off.
The strength of our business is evident and that we can make these aggressive investments in growing apartments dot com, while still generating 109 million of EBITDA in the quarter.
[noise], we're focused on accelerating our sales penetration across all categories of rentals from the largest apartment buildings to mid size apartment communities to single family homes Cod doesn't townhouses.
In late 2019, we added inside sales team based in Richmond, Virginia to focus on selling apartments Dotcom solutions.
You owners of midsized and smaller part buildings and single family dwellings.
Nine months into launching this under 100 unit sales force, we're seeing great results.
This quarter, we grew our net new sales in the under under 100 unit segment, nearly 70% versus Q1 2020.
Over the last 12 months high Vol. Advertisers, we added 2400 properties, where in the sub 100 unit category.
While we when we acquired apartments dot com in 2014 little to no effort was made selling two apartment communities with under 100 units now 16% of apartments Dot Com revenue comes from properties with under 100 units.
This means that today, we have more revenue in the previously overlooked below a 100 unit communities then apartment stock comp how did total when we bought them clearly there is demand for apartments dot com and rentals of all types big and small but as much as we have sold we are still less than one per se.
Penetrated into the sub 100 units segment.
We are excited about the amazing multibillion dollar skill the opportunity we have here and plan to continue to build out the marketing efforts and sales teams to fully monetized, our leading physician.
Sunk costs get behind us.
On June nine the bankruptcy court signed off on rent past chapter 11 plan and our acquisition proposal as part of the plan. So the remaining hurdle as the FTC process.
On April 29, we received the second request as part of the FTC approval process for our proposed acquisition of Red pest.
This was anticipated and we were are responding quickly to the request should we get approval to close the transaction. It would be completed within a three to 12 month timeframe that we gave in February.
In the meantime, weaken Sanchez compete aggressively in the market as always we believe that we're continuing to take significant market share away from redpath, because we offer vastly superior traffic more exposure and thus more leads and leases.
[noise] over this past quarter, we've began integration of our successful lender risk analytics solutions and because start suite.
Practising they solutions into the larger platform will allow costar to expand its reach from the top tier of sharing leaders to the many thousands of institutions that could greatly benefit from analytics only available with costar data for over a decade are highly experienced risk analytics team has been a trusted source to lenders providing credit risk.
Models for portfolio stress testing and loan loss reserves, Houston regulatory reporting examinations and for internal risk management.
Leveraging curated Costar property data in market research, we can provide up to the minute information on a lenders collateral, allowing them perform real time performance surveillance. This is a capability unmatched in the industry. We think combined these time proven models with Costar data is a scalable plan in a scalable platform creates.
Exceptional growth opportunity in the lending market.
[noise] loop that finished the quarter on a strong note overcome in the market disruption that began in March and April caused by the pandemic.
Monthly unique visitors are now tracking over 7 million, which is an all time high beating the record set earlier this year.
Net new sales improvement filed improvement traffic, finishing Chen with net new sales up 91% year over year to keep this momentum going we have really lean Dan was significant product enhancements and marketing efforts.
We position loop that diamond and platinum level student you're asked a property owners as powerful digital marketing innovation that generates unprecedented differentiated marketing reach frequency and branding for their valuable properties.
Beginning in April we dramatically expanded our use of broad reach targeting to further increase the frequency reach a brand enhancements their top signature advertisers enjoy a move that with over 7 million unique monthly visitors loopnet is by far and away at the most heavily traffic commercial real estate web site. So we believe we at the best inside.
Sites into who is currently in the market for commercial real estate.
Once we identify a perspective tenant or buyer on Loopnet, we re target them across the internet, thereby increasing the critical frequency of views for our tops signature ads by 600% above the great before mr. already getting.
In addition to driving up the frequency of valuable exposure for advertisers. This re targeting investment as a benefit bringing a significant number of loopnet visitors back to loop met for further reengagement.
In addition to Retargeting, we've launched a new program to leverage our database of 6 million tenants and digitally target them across the web and social media to bring these tenants to our advertisers properties digitally.
We've also added video conference enabled co turning to lose met this quarter. This allows registered loopnet users to invite colleagues to virtually tour potential spaces together.
At the end of June we closed our first virtual M&A deal with our acquisition of Pfenex 10 acts as a leading innovator of online commercial real estate auctions have been completed more than $24 million in property sales online.
In the few weeks since we closed the deal Tenaxis help to auctions transacting in aggregate value $50 million.
We have approximately 400 million in aggregate value going to online auction over the next two weeks.
Pemex has been used by all the major brokerage firms in America to transact properties online and closed deals faster.
While tenants is used to transact both performing and distressed properties. It was born out of the great recession, and the need to liquidate a high volume of distressed properties quickly.
We believe that Texas highly counter cyclical if theres an increase in distressed commercial properties in the cycle. We believe that 10, X., we'll see an increase in auctions in revenue.
We are starting to see tangible signs of financial distress in the commercial real estate market. The first being delinquencies, which are clearly on the rise.
This month 30 day delinquencies jumped five percentage points versus June 2019.
This is only two percentage points lower than the peak of the great recession and this time around delinquencies are driven primarily by reach on logic.
In June of this year, we saw 7% of CMBS got 30 days delinquent, which could translate into over 3% of CMBS defaulting over the next few months.
You may remember that one of the key synergies of the Tenex acquisition as that we can leverage our millions of loopnet visitors and global coaster users to increase awareness of properties going to auction that pfenex and thereby dramatically increase the potential bidder pool for properties auctions with three or more engage bidders are much more likely to transact.
Above the reserve than our options with just one or two bidders more bidders drive more closed auctions, which we believe will draw more properties for sale, which in turn draws in more bidders and all that generates more commissions for our brokers one of the first steps we've taken as to move Tenex auction candidates the top of.
Loopnet and Costar and present them as enhanced nyman placements with enhanced retargeting, which will dramatically increase their exposure potential bidders, we will continue to invest and in harvesting our unique data sets of millions of potential buyers and their search activities on our sites digitally target them.
And draw these potential bidders to Tenex, we're very excited about the enormous potential of this acquisition.
This quarter the SPR business model has clearly proven its resilient in what must sadly be the darkest days, but hospitality industry in modern times.
Remarkably STR generated positive net new sales in Q2, and a recovery in AD hoc revenues that was a positive surprise.
In April this year, 19% of hotels in the U.S. were closed but by this month only 7% were closed.
Looking elsewhere in April 98% of Spanish hotels were close but in contrast today only 3% of the hotels in China remained closed.
Globally. The hotel industry is slowly recovering from the bottom although more recently I could be ensign demand have started decline again, the U.S., but.
But as long as hotels are open STR is essential with global occupancy rates in the mid Fortys.
40% and little hope of a quick recovery business travel is very probable, but we will see many hotels restructuring and changing hands, but lenders investors a new owners will also need STR data in order to accomplish those transactions.
As you know our strategies combined SGR hospitality data with costars complementary building set in order to create new products that provide a full view of building data income and occupancy information sales comps and for shell information, we're making good progress on the staff and hope to launch within the next year.
We had two successful capital racing events in the quarter in May we issued 1.7 billion in equity in June two of the three rating agencies awarded our initial debt issue with an investment grade rated.
Wisely as a result, we were able to issue 1 billion 10 year debt with a coupon of 2.8% on July one.
Including our cash generation this quarter. This leaves us with a current cash balance of approximately 3.8 billion.
This combined with our Undrawn revolver of 750 million gives us over 4.5 billion of firepower and growing.
As we move forward to grow this business aggressively we're positioned with a phenomenal balance sheet and are well prepared to take advantage of we what we expect could be significant opportunities in the coming years I'm grateful for the confidence of our investors.
Great from the confidence there investors and placed in us.
Our investors a 12 player in the Costar football team and one of our Companys greatest strengths.
We have a long successful history of acquisition integration, having made over 30 acquisition since Costar was founded.
A number hard great acquisitions have been made during down cycles. Examples include Comstock, which we purchased and 22000.
60% discount to the pre dotcom premium and looked at which we acquired.
2012 at a 40% discount to its pre great recession premium.
In total acquisitions have provided about 30% of our revenue growth since our IPO, but it is how we integrate them and how they accelerate our organic growth that's more important.
During the two examples of above comps dot com now brings in eight times its acquisition level revenue and looked at four times, it's just kind of discounted development potential that we aim to exploiting the coming years and why we view market stress as an opportunity rather than a concern.
Over 7000 prop tech companies have emerged over the past decade, or so probably 500 or so have truly viable business models that are interesting that create plenty of future M&A opportunity for Costar group.
Costar group is the largest prop tech company were the strongest balance sheet and the most experience and successful M&A. So we believe we are well positioned to make a number of accretive acquisitions in the proper tech space in the years to comp.
We are very patient and I've always waited for the right opportunity.
Digital real estate consolidation is clearly a very hot space right now.
I think the proof point is bill Foley Canadian Senator launching a 7 billion hard dollar hostile takeover bid for core logic in the midst of the global pandemic.
I'm very familiar with Corelogics since decades ago as a young software engineer, starting Costar group I invented the first ever version of their flagship digital public records product.
Perhaps my first M&A success for our investors was declining and offer from Corelogics predecessor company to acquire the fledgling Costar group for $250000 in our first year of operations.
I had thought we were aggressive in acquiring tenants in a friendly deal during a lock down, but I must say that even leaving aside the clear antitrust issues fully has one up to us with the aggressiveness of seeking to operate a company acquired in a hostile takeover in the midst of a pandemic.
Lastly, a few words on what we're seeing in the U.S. economy and commercial real estate.
The rebound the labor market that began in April was largely driven by workers coming off of furlough and re attaching to their previous jobs in restaurants in retail.
However, as a second wave of infections is spread across areas, the south and southwest Lumentum and job gains is predictably slowed as reopening plans were paused and reverse.
The improvement initial claims for unemployment has stalled the level that is still more than doubled the worst single week during the great recession other high frequency indicators on hiring seem to have slowed as well. So it seems that the initial V shaped recovery in the labor market is likely to pause and with the emergency unemployment benefits set to expire in some form of the end of the.
The sharp bounce back in retail sales could also be at risk.
Looking into commercial real estate market, the locked down as affect demand drivers for every property type in very different ways, none have been as negatively impacted us hospitality and retail the retail sector has shown a sharp bifurcation in property performance and rent collections between tenants teams essential and those label.
Non essential the former merely on affected the vast majority of rent forbearance and delinquencies during the life kind of come from hospitality and retail and we've seen a corresponding pickup in activity from clients and asset management and special servicing as well as for billions of dollars of opportunistic capital that had been raised in recent months.
While certain parts of the industrial market have also been negatively impacted the locked down has accelerated positive trends for logistics in fact, one once costar researchers capture all the leases signed in the month of June it looks like it'll be a record month for industrial leasing volume all time record.
For multifamily data from the apartments Dotcom suggests that the spring leasing season was disrupted as you would expect asking rents are largely flat year to date and so the gains that are typically seen during the warmer months. The year, we're seeing more noticeable moves lower in the rents of four and five star properties, a major metro's the CBS.
Predominantly but these are also metrics where their record high levels of new supply coming into the market. Given this increased competition among landlords looking to fill newly delivered space. It's no surprise that apartments dot com continues to experience record sales months.
The office sector is perhaps the most talked about property type of them all and it's fair to certainly the most heavily debated the media.
For leasing volume predictably dropped as the transition to work from home began and people were more worried about getting a new router delivered to their home office and looking at office space that being said April still salt nearly 15 million square feet of new leases signed as we move through the quarter the number of increased sharp.
As the news cycle shifted from Restless stories about the benefits of remote work to ones about it's obvious pitfalls.
There seem to be fewer story today about companies moving toward full time work from home and we're hearing more about hub and spoke office models, where firms are looking to lease additional space is closer to residential nodes from where their employees are commuting.
Even if we have a successful vaccine full herd immunity, maybe elusive and the realities of social distancing, maybe with us for years.
In that context, I think it's highly likely the the amount of office space utilize at the workstation expands from a typical 36 square feet per workstation two of our squared or 3.4 times six squared or 113 square feet from 36 square feet to 136 113 square.
That could be a huge demand boost requiring tens of thousands of new office buildings.
Albeit in shifting geographies.
Uncertainty has permitted the capital markets landscape.
Permeate the capital markets landscape, and we've seen a drop off in deal volume, which registered at just over 46 billion in the second quarter of this year about 30% of where it trended in 2019 and 40% of what we've seen over the last five years.
Yes, the absence of deal flow isn't a reflection of series.
Much real estates relevance waning.
Rather that investors in lenders are finding it difficult to underwrite deals in this uncertain environment and that Theres, a pricing disconnects between buyers, hoping for a steep discount and sellers holding onto a pre pandemic valuations, we expect that rising vacancy slowing or negative rent growth and rising cap rates is likely.
Impair pricing and valuations by upwards of 10% relative to treat coded levels.
These capital market trends illustrate the counter cyclical nature of costars business and its suite of products during times of change and exhaustion acyclicality investors owners operators and lenders and tenants relied justice heavily on technology and data insights to inform their decisions and facilitate their deals operations.
And apartment searches.
On the apart from Internet.
As we conclude our first quarter operating results in this terrible pandemic I'm very grateful to all of my colleagues, who can seem to execute in our business at the highest levels of professionalism.
My colleagues did not Miss a beat and I have the greatest confidence in their ability to consented delivered great results for our customers and investors whatever the challenges we face in the quarters ahead.
Our services clearly remain mission critical our online marketplaces are providing critical support to tens of thousands of clients, maybe hundreds of thousands of clients, who need our virtual leasing solutions to bridge them until we can return to normalcy of an end person property tour.
As a great quarter to be especially grateful to our great team, including you are investors the 12 player.
At this call having survived the thunderstorm without a power failure.
I will turn the call over to our CFO Scott Wheeler.
Well done thank you Randy move to that quite quickly to avoid the storm.
Didnt have to pick it up and read it never quite the same coverage for me.
So yeah I'm also encouraged by our second quarter results and we've seen great improvements in each month of this quarter since the pandemic disruption began back in March and April.
Our revenues in the second quarter of 2020 increased 16% over the second quarter 2019 coming in above our 13% revenue growth guidance for the second quarter and $5 million above the high end of our revenue guidance range.
Revenue growth in the second quarter, excluding SPR was 12% year over year.
We did not record any revenue from the tenants acquisition in the second quarter.
Costar suite revenue grew 8% in the second quarter of 2020 versus the second quarter 2019 coming in at the high end of our guidance range.
Costar suite sale to the low point in April and improved throughout the quarter with June sales for Costar coming in as the strongest month of the quarter, resulting in positive net sales bookings for costar in the second quarter.
This is certainly encouraging when you compare it to the all eight or nine recession, when net sales bookings for Costar were negative for four consecutive quarters, we certainly didn't see that trend materializing in the second quarter.
As the lower subscription sales levels. This past quarter start to impact the second half revenue revenue growth rates for Costar are expected to be sequentially lower for the third and fourth quarters of 2020.
Accordingly, we now expect the revenue growth rates for Costar suite to be in the 6% to 7% range for the full year of 2020.
At this time, we don't have any renewal price increases assumed.
Your outlook.
Revenue in information services grew 47% year over year in the second quarter to $31 million coming in above the high end of our guidance range.
Overall, we expect reported revenue from information services to grow at a rate of approximately 45% on a year over year basis, and 2020 with STR contributing revenue in the range of $52 million to $54 million for the year.
Multifamily revenue growth for the second quarter was outstanding improving the 21% over the second quarter 29 team.
As Andy mentioned, we had record sales and multifamily in the second quarter driven by an increase in the number of proper type properties advertising with us, which went up 10% in the second quarter as well as growth in average revenue per property, which increased 11% in the second quarter as properties continue to upgrade to increase our exposure.
Based on continuing strong sales, we expect revenue growth of approximately 21% for the full year 2020.
Commercial property inland revenue grew 13% year over year in the second quarter exceeding the high end of our guidance range.
The Loopnet marketplace grew 18% year over year in the second quarter sales results improved each month following a low point in March and April very similar to Costar.
With Loopnet traffic now above pre pandemic levels and increased exposure that our signature ads are producing for our customers, we expect sales and revenue to improve sequentially in the second half of this year.
Perform more likes the apartments marketplace.
For the full year, we expect organic growth for commercial property in land of approximately 13%.
Beginning in the third quarter 2020, we will be including 10 X. revenue in the commercial property in land category alongside Loopnet.
Including forecasted revenue in the range of $25 million to $30 million in the second half of 2020 for 10 X.
We expected the commercial property and land revenue growth rate will be approximately 25% to 28% for the full year of 22000.
Our gross margins came in at 81% in the second quarter exceeding our forecast of 80%.
We now expect gross margins of 81% to continue for the remainder of the year.
Our profitability was strong in the second quarter with net income adjusted EBITDA and non-GAAP. EPS result, all ahead of the guidance that we issued in April.
Our second quarter 2020, adjusted EBITDA of $129 million represents a 17% increase compared to adjusted EBITDA of $110 million in the second quarter of 2019.
Q2, adjusted EBITDA was approximately $16 million above the midpoint of our guidance range.
Approximately half of the favorable profit outcome was from higher revenues in the quarter. The other half was from holding overall spend levels inline with the first quarter 2020.
Our marketing cost increase seasonally in the second quarter, although less than expected given some of the disruptions in April.
Our hiring restrictions continued throughout the second quarter, resulting in modest headcount declines as attrition continues its slow paces.
And resulting in lower personnel costs.
The resulting adjusted EBITDA margin of 32% is 350 basis points above the midpoint of our guidance range and it's in line with the margin we achieved in the second quarter of 2019.
Now, let's take a look at the performance metrics for the quarter.
At the end of the second quarter, our Salesforce totaled approximately 860 people, including approximately 60 salespeople from SPR interconnect, which you included for the first time in our reporting.
Excluding STR in Tennessee, our Salesforce totaled approximately 800 people, which is in line with the sales head count we had at the end of the first quarter 20.
The renewal rate on annual contracts for the second quarter of 2020 was 89%.
Down approximately 100 basis points from the first quarter of 2020.
Which was better results than the 200 basis point decline that we expected we gave you our outlook last quarter.
Our current forecast for renewal rates anticipates, an additional decline of approximately 100 basis points in the third quarter with stabilization and gradual recovery expected thereafter.
This is indeed, a positive trend and testament to the value our customers place our information.
In the great recession of late in our nine or renewal rates declined approximately 800 basis points before recovering we're not seeing anything near that type of.
Over a recession impact in this downturn.
The renewal rates for the quarters for customers, who have been subscribers for five years or longer was 95% inline with the renewal rate of 95% in the first quarter 2020.
Subscription revenue on annual contracts accounts for 82% of our revenue in the second quarter of 2020 slightly below the 83% from the first quarter of 2012.
Now onto our outlook, we're reinstating revenue and earnings guidance for the remainder of 2020, given the stabilization or improvement in our sales and the operating results over the last 90 days.
Although there are still potential for continued economic disruptions in the month ahead. We believe we can forecast the remainder of 2020 within a reasonable range of outcomes.
Given the relative predictability of our subscription revenue model.
We currently expect revenue for the full year in a range of $1.63 billion to $1.64 billion.
Which represents a growth rate of 17% at the midpoint of the range compared to 29 team.
This estimate includes approximately $25 million to $30 million in revenue from 10, X. and the second half the year.
We expect revenue for the third quarter of 2020, it in a range of $415 million to $420 million are presenting topline growth of around 18% at the midpoint compared to the third quarter of 29 team.
This estimate includes approximately $12 million to $13 million in revenue from Tennessee.
We expect adjusted EBITDA for the full year 2020 to be in the range of 515 to 525 million.
Which is within $5 million of the previous full year guidance range of 520 $530 million that we provided back in February of this year prior to the impacts of the cold and 19 pandemic.
Our current forecast assumes roughly breakeven adjusted EBITDA for tenants in the second half year.
Our outlook for the are currently includes year over year increase in our marketing spend of approximately $80 million.
Which is a significant increase year over year, although lower than the full year estimates we provided to you back in February.
And then he discussed our marketing efforts are focused on the most effective digital and broadcast marketing channels for both apartments dot com and loop that and they are proving to be very effective.
Our marketing spend in these channels was briefly disrupted in early March and April but since returned to the spend levels that we anticipated in original plans.
On the other hand, there are certain marketing activities from our original 2020 plan such as in person industry conferences direct mail advertising major sports events. These are no longer possible more effective and so they're not included in our outlook for the remainder of this year.
For the third quarter 2020, we expect adjusted EBITDA in the range of 120 125 million.
We expect marketing costs to increase sequentially in the third quarter as we continue to build momentum on the heels of our strong second quarter marketplace performances.
We now expect full year non-GAAP earnings per share in the range of $9 in 22 to $9.42 a share based on 38.3 million weighted average shares.
This estimate includes the impact of the recently completed equity and debt offerings.
For the equity offering in May we issued 2.6 million additional shares.
The additional shares dilute our non-GAAP EPS by approximately six cents for the second quarter and approximately 38 cents for the full year.
Which is an approximate 4% dilution, which is lower than any of our previous follow on equity raises.
With regard to the debt offering which closed July 1st the net interest impact of the new notes after the pay down the revolver is expected to be approximately $7 million or 14 cents in non-GAAP earnings per share for the full year, that's incremental for the interest on the revolver.
For the third quarter 2020, we expect non-GAAP net income per share in the range of $2. The $2 in 10 cents based on 39.4 million shares.
So I'd like to make a few comments about our balance sheet, our capital structure before we open up the call for questions.
Over the past 90 days, we raised approximately $2.7 billion consisting of our follow on equity offering a 1.7 billion in may and our first public debt offering of a billion dollars in June which closed July 1st.
In addition, we renewed our revolving credit agreement for additional five year term at $750 million, we converted it to an unsecured structure.
Our balance sheet is stronger than ever.
We now have approximately 3.8 billion in cash 1 billion of structured debt and an undrawn revolver.
We're in a very strong position to take advantage of both organic and acquisition growth opportunities that might present themselves in the months in years ahead.
We have a strong track record of successful value, creating acquisitions, which is why I believe investors are confident in our ability to effectively deploy acquisition capital in the future.
Over the past 10 years, we've used a balanced approach to fund almost $3 billion of acquisition.
Deploying operating cash equity and debt in roughly equal amounts.
Just the pasture, we've committed approximately $1.2 billion for three strategic acquisition, STR Kinex and rent path.
If we can continue executing our acquisition strategy at this pace it would take us approximately three years to deploy our current cash reserves.
In summary, we had a very eventful second quarter.
We adjusted to a new way of working we continued to support our customers protect our employees delivered very strong financial results complete our first remote acquisition and raised $2.7 billion and significantly strengthened our balance sheet.
I can't wait to see what we're going to do next.
Thank you for your continued support I look forward to updating you on our progress in October.
With that we will now open up the call for questions.
As a reminder to ask a question you will need to press star one in your telephone to withdraw your question press the pound key.
Please limit yourself to one question only for any follow up questions. Please contact costars Investor Relations. Following the call and your first question comes from a line as Pete Christiansen from Citibank. Your line is open.
Good evening, Thanks for let me take.
Ask a question here good trends and congrats on the recent capital raises.
I had a question.
Welcome.
As the health crisis is this kind of changed here and its migrated to other states.
Do you believe that you can continue the bookings momentum that you saw in June into into July have you have you seen similar trends there.
Just curious.
If you've seen changes in bookings activity with the health crisis change.
The the trending seems to be similar to what it.
Has been in the last three months, so it seems to be performing.
Roughly the same so we're not seeing much of a shift in the way.
That's helpful. Thank you.
Your next question comes from a line of David Chu from Bank of America. Your line is open.
Hi, Thank you so Andy why do you believe that renewal rates will be so much better and this recession versus the past recession is this a reflection of just lower CRT broker bankruptcies.
I think it's.
Thanks, a couple of things.
I think one factor is that in the great recession, we had two super low cost competitors, so you're competing against a very well funded acceleration back in the great recession.
And.
Approximately.
For every.
Dollar they charge to customer they were spending two to $3 producing the products. So they were heavily subsidized and they were charging probably.
Probably charging 15, 20% of what we charge for a service. So we saw people shifting down to the lower cost product. We also were competing against loop that at that time, who is offering a product at 5% or the cost of our product.
So those two things are no longer a factor and.
I think that we've made good progress over the last.
Gosh, the last 10 years or so.
To improve the product the night of the product.
News more functionality people are living in it more frequently so unless someone is going out of business, which is certainly happening.
We would anticipate.
More resiliency and this downturn than the last on the Costar side and then the other is I think are in fact countercyclical.
I think we're ready for the next question.
And your next question comes from a line of George Tong from Goldman Sachs. Your line is open.
Hi, Thanks, good afternoon.
So.
Suite revenue growth Hello.
Decelerated into Q2, 8% year over year can you elaborate on the broader sales environment for Costar suite, including changes in the sales cycle in salesforce productivity as well as what impact you expect the commercial real estate market. They have on Costar suite.
Yes, I think the.
The big takeaway is that first month of the quarter April was just a stop.
Not much was happening so that was a big factor and then.
It began to build back up and I think it will continue to build backup.
Sales productivity.
Began to return back to more normal levels as we went into June began to improve.
And.
One of the things that one of the considerations is that we have this the costar sales force in selling both Loopnet and Costar. So you can get.
You could get.
Sales force productivity climbing, while you have one of those two products not climbing as quickly. So one could take from the other so one of things we'll be looking to do over the next year. So is.
Continue to invest at a modest level in.
Building more resources to be able to go after both.
Product areas simultaneously, but.
Thank you I think in them in my remarks have addressed.
The fact that I think costar remains in and strong demand throughout the cycle.
Opportunistic PE folks come in with billion hundreds of billions of dollars to invest and look for dislocation.
We continue to return renew leases.
Fully expect that and so people are going to still be looking at costar to understand where the values are what transactions are possible.
So I think we'll we'll do.
Optimistic about we're also remember, we're adding more and more to costar. So you'll be seeing 10, x. auctions and Costar, maybe seeing STR data in Costar.
We're going to continue to see enhance what you're going to see lend more lending solution. So.
It's grown as strong feel good about it.
Your next question comes from a line of Bill Warmington from Wells Fargo. Your line is open.
Good morning, good good afternoon, everyone Bill.
Hello.
Thank you for 20 years, we do have things in the morning, we switch that evening and I can take a while to catch up.
I appreciate your patience.
So I had a question for you on signature ads and it sounded like in some of your prepared remarks, you talked about.
Recovering.
You know I remember in first quarter. It sounded like January and February had started out really strong and then co bid had you real thing.
And I was hoping you could talk a little bit about.
What.
What the average price you're getting these days is and where you're getting traction now within diamond platinum gold and the premium Lister and what the.
But the contract links look like the I think that started out at three months not and moving more to six months I was hoping heading in a better picture where signature ads are headed.
Yes.
That's correct. They started three months they've gone to six months and that's basically because we invest a fair amount upfront and bring them up on line and.
It takes more than three months to lease a $100 billion building.
Or just sell a large populate that Scott do you have specific numbers on the on the movement I mean is small but yes.
As far as the like the signature and pricing that you're you're talking about we continue to see upward lift in signature had pricing is there.
Shifting into more high value.
And the average price now on the senior tragic blended across the different tiers is about $750.
For those and.
Compared to the the premium Lister is what you're somewhere in the low to mid Sixtys per ad.
So we're overall blended around 70 to $75 bill on the AD with the mix. So so still seeing good positive pricing.
Generation and pricing momentum on the signature and.
And Bill if we were to look out.
Over the next five years.
I actually feel that those that $700 price point could move into the thousands of dollars pretty comfortably and I think we could take significantly more share into the signature ads.
Up from the premium listing, which would give us dramatic growth in the blended average price and and do that.
With a satisfied customer base, which were feeling they get in value and I'm very.
Very bullish on the value we are delivering our advertisers I think we're delivering amazing value of these folks right now and I think that's our job to communicate how much value, we're bringing to them. So I think we'll have a lot a good story there for five years plus.
Your next question comes from a line of Ryan Thomas So from KBW. Your line is open.
Hi, good evening, everyone. Thanks for taking the question.
I want to.
Hone in on apartments Dot com it really seems like the current environment is a bit of a goldilocks scenario for that business.
With the accelerated moved to digital and some of the counter cyclicality I'm starting to play out. So I guess my question is.
This backdrop is changing your strategic thinking if at all around.
Apartment business in terms of penetrating that Tam that you've talked about with products outside of just advertising.
Do you think that there is enough greenfield opportunity there to continue to do to continue just to focus on the advertising product or is there also an opportunity you know more near term to move beyond lead Gen and more directly monetize other areas and leasing and payments and areas like that.
I think that the the approach we're taking his first of all to be very clear I.
I think there is.
Massive amount of Greenfield site I I'm, absolutely convinced that the area below 100 units is just as relevant as the area.
Above 100 units and it's just sort of an accident of history that hasn't been monetize today.
And.
So we have growth above 100 units and we have only penetrated 1% of the below a 100 units. So we have 99% to go.
So it's a massive opportunity however.
We doesn't keep us from wanting to add more tools to improve the overall experience and.
The margin as we invest in these tools and we can spread that across a large audience. It won't really impact our margin. So we want to provide as much value as we possibly can to accelerate penetration.
I think that the addition of this relatively small inside sales team and Richmond, and the fact that bait spun up and became productive working a new sector. So quickly.
Is a.
As a lesson that we.
We may want to invest in.
Growing our salesforce at a measured level, because we the productivity per salesperson ROI of per sales person is great and the market is huge.
Your next question comes on line of Sterling Auty from JP Morgan Your line is open.
Yes, Thanks, So you Tony necessarily.
Good evening.
And I'm glad I was worried as I guess the Twentyth page.
I was curious I got the Twentyth pastry be feedback.
[laughter].
Yes.
So you talked about the efficiencies in terms of the customer acquisition by doing digital marketing versus in person. How do you think about you know as we move past business travel opens up et cetera, you know to whatever extend that does.
How much did you have a learning experience that made you are going to be able to capture it even drive higher margins than what you may have thought six and nine months ago because of how effective this has been through this environment.
Well I think it's a really excellent question and there's a lot of truth.
At least in there so.
There are lot of things, we do as we deploy people in different markets and the amount of business travel we do.
To reach our customers.
Face to face and we invest a lot and travel and move even within a city.
And I think theres no substitute for face to face interaction with our customers over time, but.
We have seen.
100 million people now just learned what zoom is and face time and go to meeting and Webex and so 100 million people, who before were complete luddites are now well versed in digital.
In video communication, so our ability to train onboard support grow our accounts of very cost effectively I think is really enhancing them. That's a positive that's come out of this but I do think they'll still be returned they'll still be a need for face to face but dramatically less.
So I was little little little bit of margin benefit there little probably a little bit of customer acquisition benefit there.
Maybe a lot.
[laughter].
A question comes the line of Mario Kart philosophy from Jefferies. Your line is open.
Hi, it's Sean filling in for Mariano.
I have a lot of cash right now could you give us a sense for what a third likes the business might look like the tunick steel was interesting and that you haven't played that market before what other types of this are you look at any specific criteria from a growth perspective or end market or prototype. Thank you.
Okay.
Well I think one of the challenges it be careful not to say anything.
So.
That's probably the hardest thing is not answering so.
The.
There are a wealth of opportunities and if you look at the things we've done in the past those are sort of indicative what we might do in the future. So we're looking for things that.
Hi overlap with strengths, we already have so where we look at their business and we think that there are things that we can bring into our business that will not incur incremental costs, but incur incremental value into our existing business and vice versa. So that we can bring things into their business.
That we already have as part of our inventory and part of our sunk costs and we'll add value to their business that could be distribution channel data software.
Marketing any number of things. So for example at San acts.
We can.
Turning that into our into our operation and bring them.
Massive exposure for their auctions, which I think will dramatically improve their business.
And it has relatively low cost to us so things like that that we're not going astray sharply far from like there's no need to stray terribly far from where within the past because there are literally hundreds of companies that are.
Immediately adjacent to some area we're already in.
And they range from small to very very large.
So.
I think the future is going to be more like the past.
I know I've been waiting for the first phone call. We raise a quick first question on the call. Thank you for delivering it I talked about it while we're raising the capital I said.
We will complete this capital around and.
And we'll be answered the question, but we'll be patient first earnings call of answering the question. What are you can do with money.
We will be patient and we'll be prepared to answer the question multiple times until we find the right deal. It may take 1234 or five deals to make an impact that may take four or five earning calls it may take 10 earnings calls, we're looking for the right deal right value.
With low risk.
And with us prepared to.
Do the right integration.
Execution, so that will be patient and it will be related and.
I'll have more than two or three theses for why we think the deal will work.
Your next question comes from line of Jeff Miller from Baird. Your line is open.
Thanks, Good evening was hoping you could expand on your comments about data that you're using board digital outreach targeting and Retargeted again look not signature. So you mentioned the tenant data just if you could be more specific about how granular you get said, obviously have a broad welcome data throughout suites.
So I would just love more detail on the data informing the targeted in Retargeting.
Sure I think I go to painful detail there but.
Give me a couple of examples.
So.
We can look at any particular cluster of buildings in the United States by property type and say office in Tysons corner and then we can look at 15 years of leasing history, and we could see what are the most probable sources of attended our for any particular building. So we know that there's a high correlation.
We should between tenants in Tysons corner tend to lease in Tysons corner, but also tenants in Boston tend to shift the tysons corner is a little bit less going from breast in tysons corner shockingly some from the Fas over to Tysons corner. So we can look at those patterns and then we can we have a list of all of the tenants that are roughly in that.
Quality zone for property in the chart in the in the source markets over history, and then we have lifts of emails and people associated with those tenants and then we re target those people aggressive so we bundle or spend per tysons corner building against the people who are most likely to come in.
Now we also know the lease expirations, we know when they move into the space. We know if they are growing its or contracting. So it's very very targeted spend then when someone when we see someone come from a particular organization to look at a property in Tysons corner.
We can look at other people looked at that same property what other buildings. They looked at me is collaborative filtering and similar delay Amazon does to Ben.
Invest in Retargeted against people, but other looked at the the subject building to to sink in frequency or we may use a collaborative filtered property to bring in bring someone from ability to just like that one and try to engage them in this other building and that's also true with people there.
We look at buying patterns of what people are investing and we're looking at what people are searching looking at for 10 Act. So.
It's just an endless sort of big data exercise AI exercise of.
How we invest money against the rights.
Targets.
Two very efficiently drive people and Thats working like a rock star right now the I'm very very happy with.
The 600% increase in frequency.
We delivered to our silver.
Our diamond and platinum advertisers looking over the last quarter that is real value, they're going to see and it really drives their brands homes their target. So.
And then sort of fun to do a bunch folks enjoy doing that couple of walks over here.
Okay.
Your next question comes from a line of Andrew Jefferies from Suntrust. Your line is open.
Hey, guys I appreciate you taking the question.
Hi, Andy maybe.
We'd like to expand a little bit on a question asked earlier.
On a more strategic level.
I hear you talk about for example, the sub 100 unit apartment market is being you implied a 10 billion dollar Tam I.
I think when you add out these marketplaces cans day or bigger.
I would argue how many times bigger than suite, but bigger than suite.
And clearly have these counter cyclical even structural growth attributes in terms of the shift to digital so I guess I'm getting at is.
Does there come a time, Oh, you approaching a time where suite.
Although it's still grows his position more as.
Funding source for growth in these marketplace businesses, which are bigger.
And.
Perhaps can sustain faster multiyear growth I mean would you articulate.
That kind of strategic change in costars business.
Well.
I think your if you look at five to 10 years.
I think there'll be a lot of growth in those marketplaces.
The for sure and I wouldn't be surprised if they don't.
It's our source of revenue doesn't come more and more diversified between siri marketplace multifamily marketplace, some land marketplace, bizbuysell marketplace and and other marketplaces, we may enter.
So I would not all be surprised to the marketplace has been eclipse the revenue from Costar suite as Costar suite grows, but I wouldn't count Costar suite out there are many many growth drivers for Costar suite. So we are well penetrated the brokerage community, but we have a lot of green space lot.
Of Greenfield.
In the owner area in the lender area and in international growth. So we.
We.
We have some exciting stuff happening in the fourth quarter and in the first quarter.
Third fourth quarter and first quarter. So the third fourth quarter, we're going to have a.
Fully internationalized version of Costar suite.
Many languages so people can.
Look at properties from Spain, and Spanish across multiple European countries and across the United States and I think that just like the company experienced a surge growth as we went from big in three or four U.S. cities to being largely national footprint I think we have that same opportune.
The internationally and will.
Be communicating some.
Things over the months to come that I think we'll sort of reinforce that opportunity and I think that it will.
Change the way that London broker perceives us when they're terminal isn't just showing them there mayfaire information, but as showing them.
The whole civilized world in their term novel eventually right I think it'll change perception in the value of the product and the reach especially the owners and lenders investors in private equity so theres a lot of growth there.
Also.
The the tools that are going to product ties to our lender solutions to a much broader audience.
I think are pretty exciting so I think that a lot of growth drivers there.
I worried about one other things I think is a stress or on the business right now is not the market is not the.
It's just it's the fact that our sales force over the last.
Five or six years hasn't grown much we have roughly the same size salesforce salesforce, but.
But it has costar and Loopnet now it has the banking side. It has the has so many things going on but I just think that may be.
We need to grow that sales force a little bit too.
Able to capture all the different opportunities we've got.
Your next question comes from a line of Brett Huff from Stephens, Inc. Your line is open.
Good evening guys. Thanks for taking the time appreciate it.
Good evening, a quick question a follow up on net.
When we met that was the business of yours that we struggled modes and trying to figure out what would happen in the pandemic looking at history. It was I think Andy you mentioned it was hit harder than this time.
My gut is that there's some demand.
Compression because people may just not be advertising as much and some in from food bid ask prices are bid ask spreads are wider and the other hand, you have a much stronger shifts to quote on digital advertising within the vertical that as commercial real estate.
Can you talk about that trend and kind of the power of the down arrow in the up Arrow and where we're getting the fact that Scott said revenue is going to get better over the next couple of quarters is really I think indicative, but how do we think about those down enough arrows and then I'll ask again. The question I asked last time, which I thought was helpful. If any change, but microeconomic decision a person thinking about.
Amortizing a building or lease has that changed at all gotten better worse et cetera. Thanks.
Yes so.
Loopnet is I think the arrows overall go strongly towards.
I understood nickel coal to Loopnet, and and I think it's a trend you're going to see even after we come out of kind of out of this particular cycle. So your comment about bid ask spread is correct people are.
The hot.
Going to be doing as many transactions, but you're going to actually pick up that business over in the tech side. So you will pay us differently.
But we will manage monetize the transaction.
Really the value we are delivering as the digital marketplace, which are going to monetize it over and Sanex.
On the leasing side I think you're a nut job right now if you're not leasing you are high and marketing your high end building on Loopnet and then I think I'd just beyond me what you'd be thinking. So you have this 200 million dollar building no one wants crowded and elevator and go up and down you're building with a bunch of people look at it but you have.
The.
Most people searching for office space on Loopnet, right, now where retail specced industrial space.
And to not the front and center in front of that community and that buying audience. In this environment is just nutty.
So I think it's more of an education thing I think that.
Permanence Dotcom was its education thing and it's a size of Salesforce thing so apartments dot com had a much bigger salesforce going into this cycle and people were more it was more established and people were more used to.
Digital marketing for apartments, so the combination of bigger salesforce and them behavior allowed it to flex hard into counter cyclical loopnet.
In the.
Predominantly been a lower end broker marketing solution was newer at the upper end property.
Solution area the interest the the office retail industrial industry was less experienced a digital marketing with smaller salesforce. There. So it's it's taking longer for it to flex into counter cyclical, but we're going to be looking for it to do that and.
Truth is on our side, so we'll work into that in play into that.
Your next question comes from a line of man Tandon from Needham and company. Your line is open.
Hey, good evening, it's actually cow Peterson from mile.
Okay.
In.
Just wanted to drill down the Fcr business.
It's a good times seems like the trends in that new sales have actually been at least better them, we were expecting given all the headwinds.
Travel industry is facing I'm, just wondering if you could just drill down a little bit more into what drives the sales and eventually revenue growth if its vietnam directly I guess related to.
Things like occupancy.
Yes, so the.
One of the first thing that drives the positive sales result in the face of just astoundingly negative economic conditions.
Is the fact that no one.
People don't cancel their STR because things are going poorly so.
On a rough environment STR is your compass when you're lost in the woods STR should compass to try to find your way out.
And you're paying you've got multi million dollar property or $100 million property and Sdrs costing you a couple of thousand dollars a year. So it's the you don't when you discover your loss in the woods, that's not the time threats are compass.
So thats critical fact secondly.
You know the some independent owners.
This will be too much for a sustained low occupancy levels will break their ability to.
Keep their properties.
Theres billions of dollars of capital looking to take advantage of that dislocation and some of those folks are coming in and paying information services from STR. So we're getting a little countercyclical going on there.
We anticipate.
That we will lose some of those independents bad debt is coming up little bit somewhat smaller independents.
But there may well be significantly more revenue in the kinect side as we pick up that business and other forms elsewhere in our business.
Longer term I think we have.
A.
Really straightforward opportunity to provide some real software value to the industry.
Lenders investors operators.
Riets bye.
Integrating the STR content into Costar STR.
Sdrs technology Magic for the first decades of its life were.
Benchmarking.
And the ability to keep the data anonymized and secure and get people quality benchmarking I think we'll retain that technical skill, but we're going to bring a new skill set which is.
More processing power against the analytics more correlating data.
Expanding the breadth and depth of the different sorts of datasets, we have from benchmarking to PML benchmark into forecasting too.
Forward looking information all that sort of stuff so product flow will probably drive a lot of growth in the future.
There will likely be we also going into the future intermediate term.
STR did a really great job at selling into the hotels themselves, but there's so many other parties that are interested in the intelligence STR produces that a larger sales force a larger marketing operation will allow us to reach.
More on tap segments, there so a bunch of drivers there and I think all of us.
Our investors or analysts and our staff are pleasantly surprised that the fact that STR has actually been sort of resilient in.
And unprecedented.
Economic headwind, so hats off to the team at STR, Amanda height, and Elizabeth and all team hold things together.
Marching on in a.
Tough environment.
Your next question comes from a line of Stephen Sheldon from William Blair. Your line is open.
Hi, Thanks.
One of the assets in more detail on bookings trends.
How much of bookings activity in June was potentially a catch up of activity from prior months.
And booking trends look like so far in July and then Andy maybe what surprised you. The most in terms of bookings activity overall and the pandemic again. Thanks.
Yes so.
I had never had a context for a pandemic so anything that surprise me.
What is the decision [laughter] everything was a surprise so by far and away the biggest surprise was the.
Mega empirical counter cyclicality of apartment stock on that was just amazing.
And.
I don't think the the selling activity as catch up I think the management team Fred St Page Forest, Patrick Dan did a great job of innovating you know when any a.
Cancel their conference our team put on their own comprehensive sold a lot of products for little to no money invested.
So I don't think of catch up I think this is new business. There. They are winning and I think they're just people in a world, which they can't put the sign spinner further apartment building productively or buying digital instead, so that's just a.
Very positive trend you know and.
And I think that's just that's going to go forward I also think that one of the positive things that comes out of these bad situations is that people modify their behavior is going into one of the severe disruptions, but they don't modify them back very often that that 30 unit community that never bought any solution for Parvus Dot com.
Start buying it because of a particularly tough environment.
But settles into it likes the results and stays with it for a while I.
I think the other thing that I could say surprise me was the fact that.
I've spent 30 years looking closely at a deployment data.
And this is the worst it's ever been by far.
So I would've expected a much more severe down drop than weve actually experience, so and to come into June with virtually every one of our product platforms growing is remarkable that was a big surprise that everything is growing there's nothing I mean, even STR is growing.
And.
So the speed with which we came out and I think that I'm, just going to we will definitely chalk up.
April permanently to just people, saying, what's going on it's the it's the buying a comfortable office chair for home and.
And a router that's that's what April 2020 was so.
Your next question comes from the liner Joe Good one from JMP Securities. Your line is open.
Hey, guys that you're taking the question.
Right.
But I can you talk about how the pricing for firms like calm changes when you're selling into the sub 100 units segment.
Perhaps maybe how you're approaching that segment differs on pricing versus the north of 100 units segment.
Thank you.
Yes actually so.
The price per unit comes way up so actually the cost of marketing Department.
10 unit apartment building in traditional methods versus the cost of marketing a 400 unit a part of billion traditional methods your cost per unit as much higher at the smaller properties and on down to the.
If I take the cost per unit at a single family dwellings.
That might be paying a real estate agents a month of rent, which that's where you're getting your highest cost per unit. So our pricing sort of follows a little bit of that.
So you're going to come down where you might be spending seven $800 for 830 unit community.
For a midline add you buy that price may come down to several hundred dollars at this at the lower end also.
You may be inner now the market at the single family dwellings.
So that may be a shorter contract period.
But.
But surprisingly another pricing is actually not that dissimilar to what really happens is that people with the 200 unit community will go aggressively for the diamond plus because they need higher lead flow they've got more units to fill so they might choose to up their exposure, there sort and go up to seven.
Hausen dollars a month.
Whereas the person with a single family dwelling can be quite happy with the results. They get at you know.
$295 in the month.
For $295 for campaign that my last for two months for three months.
So it's not wildly dislocated there's more money at the bottom than there is at the top in this industry I believe.
And there are no further questions at this time, Andy I turn the call back over to you for some closing remarks.
Well. Thank you all for joining us on this call we had we had a solid quarter.
Despite the challenges and again I want to thank the investors the new investors who joined us.
Thank you for your confidence and we're getting.
To work deploying your capital responsibly.
In the best timeframe possible. So thank everyone for joining us.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
Now disconnect.
[music].