Q4 2020 CoStar Group Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Costar for year and fourth quarter, 'twenty and 'twenty Group earnings Conference call and.

At this time, all participants are on a listen only mode.

After the speaker's presentation, there will be a question and answer session.

And I ask a question. During this session you will need to press star one on your telephone I would now like to her and turn the call over to your speaker today. Mr. Bill Warmington. Please go ahead Sir.

Thank you Angela and good evening and thank you all for joining us to discuss the fourth quarter and year end 2020 results of the Costar group.

For I turn the call over to Andy Florance, Costar, CEO, and founder and Scott Wheeler, our CFO I would now.

To review, our Safe Harbor statement.

Certainly certain portions.

Discussion today may contain forward looking statements, including the company's outlook and expectations for the first quarter and full year 2021.

Forward looking statements involve many risks uncertainties assumptions estimates and other factors that can cause actual results to differ materially from such statements important factors that can cause actual results to differ include but are not limited to those stated and costar as press release.

Issued earlier today and in our filings with the SEC, including our most recent annual report on form 10-K, and subsequent quarterly reports on form 10-Q under the heading risk factors.

All forward looking statements are based on information available to Costar on the date of this call Costar assumes no obligation to update these statements whether as a result of new information future events or otherwise and reconciliation to the most directly comparable GAAP measures of the non-GAAP financial measures discussed on this call including EBITDA.

Adjusted EBITDA and non-GAAP net income and forward looking non-GAAP guidance are shown and detailed in our press release issued today, along with definitions for those terms and the press release is available on our website located at Costar group Dot Com under press room.

As a reminder, today's conference call is being webcast and the link is also available on our website under investors. Please refer to today's press release on how to access the replay of this call and with that I would like to turn the call over to our founder and CEO Andrew Florance.

Thank you well done Bill you really did that preamble beautifully and I have to sit here and reflecting that and.

And your career, you've probably listen to easily 10000, and earning calls and now.

Actually reading the preamble so.

Hanging and this is a big day for you okay well.

Evening, everyone else and thank you for joining us for Costar group's for.

And this quarter and full year 2020 earnings call and I just assume all of you are as excited as I am to be here Tonight. So welcome.

Total revenues for the full year 2020 were 166 billion, which is a 19% year over year growth rate and 9 million ahead of the top end of our guidance range given in late October quarterly sales bookings for a solid $49 million with second half bookings rebounding, 24% versus the first half of 'twenty two.

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Our profit performance was equally strong delivering full year, 'twenty and 'twenty adjusted EBITDA of $553 million and increase of 9% year over year and 23 million above the high end of our guidance given in October.

What I believe is even more impressive despite the severe disruption of our customers and our team's caused by the pandemic and March is that our financial results are either in line with or exceed the initial full year guidance forecast, we provided in February of last year.

Costar group is absolutely a resilient business.

In addition to the strong financial performance of our businesses and 'twenty and 'twenty over the course of the year, we raised $1 7 billion and equity and launched our initial $1 billion bond offering with an investment credit rating investment grade credit rating.

Our marketplace businesses, particularly apartments Dot Com network hit record highs across all of our metrics. We also closed three important acquisitions in 'twenty and 'twenty 10, ex imports and homestead tax.

<unk> positions us with nearly perfectly counter cyclical business and an opportunity to leverage digital marketplaces integrator commercial real estate liquidity.

And for US extends our reach with content on hundreds of thousands of properties around the world with the addition of home snap and December we expand our addressable market beyond commercial real estate into residential.

Overall, 'twenty and 'twenty was clearly a transformative year and as we look ahead to 2021, our strong balance sheet and acquisition and track record and position us to successfully pursue multiple large growth opportunities through organic investment and M&A.

Before we get further into our results I want to briefly address where we stand with our recently announced offer to acquire Corelogic.

One week ago today, we delivered a letter to the board of directors of Corelogic setting forth. The terms of a superior proposal to acquire Corelogic.

Under the terms of the proposal Corelogic shareholders would receive 0.1019 shares of Costar group common stock and exchange for each share of Corelogic common stock representing a value of approximately $95 and 76.

<unk> per share based on Costar group's closing share price on February 12, 2021, and as I described the Corelogic offer.

I'll be using that closing share price and the all the share prices relative to that day.

The Costar proposal implies pro forma diluted ownership of approximately 16, 2% and the combined Eddie for current Corelogic stockholders Costar group's offers clearly superior to offer to the corelogic shareholders and immediate value.

Our all stock merger with Corelogic improves the value of their pending transaction with stone point by 20% basically the day to the offer more importantly, we believe that with hundreds of millions of dollars of identified synergies, which I will discuss in a bit more detail the implied ownership of for of our proposal.

Provides substantial value upside, which we believe would deliver value and excess of $105 per share for corelogic stockholders over time.

Costar group stock is a solid currency and has performed exceptionally well through the decades, driven by solid fundamentals such as our compound annual revenue growth of 21% over the past 20 years.

There are only 21% over the last 10 years and 19% over the last five years.

With consistent growth and a huge addressable market Costar group share price has appreciated 496% over the past five years 1000, and 491% for the past 10 years, 3000, and 640% over the past 20 years, and 10003 and 42% since our IPO Costar.

Stock has consistently proven equally as valuable as cash.

In addition to our all stock off and we plan to invest approximately $2 billion to pay down corelogic existing debt and another 500 million for $1 billion to unlock the value of the company's assets.

We believe the combination will create long term growth opportunities that will help support double digit revenue growth for the combined company for many years to come.

This combination would triple Costar group's total addressable market by combining the global leader and digitizing commercial property with a global leader and digitizing residential real estate we.

We estimate that globally commercial properties have an aggregate value of 66 trillion dollars and residential properties have an aggregate value of 114 trillion.

Combined these companies will be very well positioned for growth meeting and the information and analysis and marketing needs of the 180 trillion dollar global real estate industry.

The global value of real estate is twice the value of all public companies combined.

We believe that we can significantly accelerate corelogic or Gavin organic growth rate Costar.

Costar group has a well established track record of acquiring slow growth companies constrained with single digit or grant ganic growth rates and have managed them to become fast growth companies with double digit organic growth rates and the three years prior to Costar group acquired Loopnet revenues on average were negative two.

3% a year and the past two years Loopnet has grown almost 20% a year and already we have grown and loopnet revenue more than fourfold since acquisition and.

And if the three years prior to acquiring apartments Dot com revenue grew at seven 7% a year on average and the past three years apartments Dot com has grown almost 30% of your on average already we have grown apartments dot coms revenue by more than six five times.

We believe that with product enhancements, new products more direct selling cross selling shine to new audiences and segments and integrated product offerings, there's a similar opportunity significantly increase corelogic organic growth rate.

Costar group is the perfect strategic partner for Corelogic and together, we can drive transformative innovation Costar group provides commercial real estate solutions and Corelogic provides distinct residential real estate solutions to brokerage firms and real estate agents banks lenders local state and federal agencies.

Property owners developers investors appraisers and firms selling solutions for people and companies that use real estate.

A very large percentage of these organizations have and interest in both residential and commercial but today have to purchase different solutions from Costar group and Corelogic to meet their complete real estate needs.

Using disparate point solutions is inconvenient and reduces the value of the respective offerings. This is a strategic acquisition and will provide our combined clients with integrated solutions across all the relevant real estate sectors.

The combined company expects to eliminate the artificial difference between commercial and residential real estate digital solutions. We believe that these integrated solutions will create massive cross selling opportunities significantly increasing product uptake sales and hundreds of millions and revenue synergies.

Corelogic has approximately 150 professionals and its sales organization and Costar group has 1600.

And 1060 I'm sorry.

1060, and Costar group 150 and Corelogic.

And combination when you put these companies together, we have the resources necessary to realize the potential cross selling opportunity. We believe that many of the solutions Costar group. So successfully offers today, which are only delivered to commercial real estate can be extended into residential real estate marketplaces like apartments Dot com.

And Loopnet are just two examples of these sorts of opportunities.

Conversely, many of the products Corelogic only offers to residential audiences today could also be offered to commercial real estate audiences property tax solutions appraisal management, some ability flood data solutions and building cost data are just a few examples of these sorts of opportunities we believe that by leverage.

<unk> existing technology assets into new segments of real estate. The combined company can create additional significant new cross selling revenue synergies.

Further we believe that we can achieve all of these synergies while significantly reducing the volatility of Corelogic revenue, which have historically, which has historically experienced exposure to micro cycles much of Corelogic revenues are reoccurring, but that's very different from being subscription revenue.

And reoccurring revenue is volatile while subscription revenue is much less so and has greater visibility, which allows cfos to sleep better at night.

Costar group has a track record of acquiring business with seasonal or cyclical revenue variances associated with reoccurring revenue and converting these businesses to predictable to predictable and stable subscription revenue.

80% of Costar as revenue is subscription based.

From 67% five years ago, Loopnet apartments dot com for rent an apartment finder, where all businesses with only reoccurring revenue and aggregate. We have now converted the vast majority of the revenue and those products to predictable subscription revenue we.

We sell our information services to banks for commercial loans origination and surveillance and a subscription basis, while corelogic sales and on demand basis or on a reoccurring revenue basis. We believe there is a clear opportunity clear opportunity to convert that revenue and other corelogic revenue and a more predictable subscription revenue.

And since Costar group and Corelogic serve very different industry segments with cycles that are generally not correlated combining the companies will further diversify the revenue sources and create a more stable combined revenue stream.

In addition to these attractive growth and revenue synergies there are significant cost synergies and this combination because there are probably hundreds of millions of dollars and duplicative costs.

Costar Group provides commercial real estate solutions, and Corelogic provides residential solutions and while the solutions of Costar group and Corelogic provider completely different both companies invest heavily and very similar underlying technology processes that collect and create real estate information including property.

Data photographs drone imagery maps aerials market analytics and analytic models.

The basic technology required to search for listings and display data and photos and a map for the same one.

For the properties are office buildings for houses for sale Costar group and Corelogic combined will have nearly 10000 and personnel software developers researchers and photographers all collecting similarly structured distinct but related real estate content and combination there's vast potential.

Duplicate processes and achieve significant cost synergies.

Considering both revenue growth and cost synergies a combination of the existing costar business with Corelogic would result in $150 million to $250 million annual run rate EBITDA synergies. These synergies alone are worth over several billion dollars of value for our stockholders.

Throughout this process Corelogic and advisors, our advisors analysts reports and major Corelogic shareholders who've done the analysis have agreed that theres little antitrust risk and this combination Costar group provides commercial property listings and analytics to commercial real estate brokers and owners and Internet marketplaces for lead generation for.

Property is for lease and sale.

Corelogic on the other hand aggregates publicly available property tax assessment data.

And they reported sales and mortgage transactions to provide various solutions needed and real residential real estate.

In addition, core lab provides multiple listing services and the software and hosting services they need to manage residential listings.

Our respective companies are and completely different markets Costar and Corelogic do not compete with one another and anyway.

No client or prospect ever chooses between bank and Corelogic solution versus by Costar group solution. They cannot because our products are completely different given the presence of multiple providers of the publicly available data corelogic resells, there are simply no meaningful antitrust concerns and argue.

We believe that our February 16th proposal for Corelogic will provide great value to the stockholders of both companies were very excited and we believe that the staff of both companies are very excited to have the opportunity to unlock the amazing possibilities this potential combination.

Could create.

The next steps involve corelogic sport and making the determination at Costar is offer is a superior officer office.

Let's try that again.

[laughter].

The next step involves corelogic sport and making the determination and I hope they do soon that court costars offer is the superior offer.

After that stone point I believe will have the opportunity to improve their offer and we sincerely hope we can move forward without delay.

As I am confident that we could complete a deal rapidly and we expect that transaction could close within four to 12 months.

At the end of this call we look forward to taking your questions on our results that we're announcing today.

But we will not be taking any questions on corelogic the offer or the possible transaction I hope you can understand that the process. We're engaged in and at this point is very sensitive and open Q&A is not appropriate at this time and this for them. Thank you for your understanding on that.

Now, let's get on to.

The rest of our earnings call.

Despite of all that despite all the dislocation and anguish and the pandemic 'twenty and 'twenty was a record year for our marketplaces, and especially for apartments Dot com.

People need a home and a pandemic more than ever virtual shopping and apartments dot com provide a safe alternative to touring apartments and person.

More renters than ever are looking for a new apartment and more research is taking place from home with runners taking advantage of the innovative virtual search tools available and apartments dot com and our network of websites Ren.

Renters took a breath, taking 170 million and virtual tours on our site and 2020 twice as many as the year before as Youre aware apartments Dot Com has turned and strong performance several years in a row and in 2020, we significantly increased our marketing spend to a record $221 million up 44%.

And that's versus 2019.

We will not be increasing it again this year and the fact is down a touch the increased spend was clearly exceptionally effective resulting in record site traffic of 1 billion networked visits according to Google analytics, a 20% year on year. This extraordinary and milestone reflects the company's unmatched growth and investment garner.

And over $160 million more visits than last year strengthening our position as the nation's leading network with more visitors and all other competitors.

In total visitors to apartments dot com viewed nearly 10 billion property pages in 'twenty and 'twenty.

When we look at the Comscore, Scott stats, which allow us to compare against peers. The apartments Com network had annual site traffic growth of 17% and comparison rent past grew its total network site visits by 9%.

I've heard others quote stronger growth, but those must be an internal numbers lets say, because we're not able to collaborate them externally.

For purpose dot com our record traffic translated to record annual net new sales that was up 35% versus 2019, and a full year record 2020 revenue of $599 million a gain of 22% year on year, and and addition of $120 million on a Q4 run rate basis and.

We expand the number of advertising properties by 10% year over year, adding over 5000, new advertisers.

Clearly all of our initiatives are paying off from our expanded sales force of the mid market to our efforts to better serve the independent owner market just one year after launching our online rental tools apartments dot com is processing nearly $18 million and monthly new rental payments and over $355 million and monthly rent in combination.

And with our cozy platform rental payments, which were migrating into apartments dot com and the near future.

That is $5 4 billion and annual rent payments now, which is a great start to build from and the years ahead.

We were disappointed that we were not able to close our proposed acquisition of rent past, but believe our time and money was ultimately very well spent and the process, we and rent past recognize going into the proposed acquisition that the antitrust hurdle could be significant since we were clearly competitors.

And that rent path was bankrupt made the failing firm defense a possible viable path. The inflection point for us came down toward learning of a nonpublic rumor that a household name Internet giant.

Shared their plans to launch a marketing solution that would be more directly competitive with both us and rent path.

While the Giants and tenant to partner with us They would clearly provide a potential competitive alternatives, we felt and the face of the giant entering this space. It was unlikely that the FTC would find that rent path.

Handled on represented any material or significant competitive impact.

Hence we felt the deal was likely to clear.

I've heard during the process the giant drew significant antitrust scrutiny of their own and we have reason to believe that and conversations with the government and the giant pledged not to enter our space.

As a result, three things happened.

One giant did not and aerospace.

Which is really good news.

And secondly, the antitrust analysis and acquisition of rent past shifted out of our favor which was bad news.

Third and the FTC's opinion, they stay that their investigation concluded that zillow was not and effective competitor to apartments dot com, which we enjoyed.

So it was a reward for nearly a year. We spent on rent path. We had for the five best selling quarters and the history of apartments Dot Com sold and all time high of $37 $5 million and new sales and the second quarter of 2020 and add over 5000, new advertisers to our platform to the year and at 57, and 828 and had over one.

One third of the property as it began the year advertising exclusively on rent path decided to switch their marketing to apartments Dot com.

So I think you'll agree that all non including with a break free it was break fee. It was not such a bad outcome for the process.

Costar suite enjoyed a strong finish to the year recovering nicely. After a brief pause earlier this year when we entered the pandemic from a low base and Q2 Costar suite has doubled its net new sales for the second quarter and a row, demonstrating the resilience and mission critical nature of the product.

A number of important costar products and enhancements, we invest and during 2020 are coming to fruition.

And we're just now beginning to rollout some groundbreaking new functionalities, we just launched the integration of a wealth of commercial mortgage backed security C and B S information and to Costar.

This continually late updated see MBS information provides valuable insights into more than one trillion dollars of outstanding commercial loans made to 100000 commercial properties.

That's very valuable information on 90000, and some of the largest commercial leases or tenants and enables our customers to gain additional visibility into lease explorations and actual rental rates clients can use this information to attract new clients and influence their pricing or leasing decisions. The new information also prevents regularly updated.

Tailed building and operating cost statements on 40000 large properties. This information is very valuable to investors tenants brokers and developers who need to understand what like operating costs might be and a new property or is it performance cost comparison for properties that are already owned leased or managed.

Another important new value, we're now bringing to our clients as new visibility into the distress and thousands of properties.

This visibility gives brokers investors and even our own 10 ex salespeople insights into who may be pushed into divesting of property soon or who may not have the ability to fund necessary tenant improvements or who might not be able to pay leasing commissions and the deal.

This information is enhanced by the high frequency and market data Costar provides on new leases and vacancies that are leading indicators as to whether or not the credit on certain loans is improving or deteriorating.

And this newly integrated see MBS data gives our lender and mortgage banking clients great data on maturing loans, we're feeling and opportunities for them to originate new loans.

All of this information adds additional value to our market economic analysis tools with future releases clients will be able to monitor over time geography, and property type overall, new origination trends default trends expense trends rental rate trends and a lot more.

I'd like to give a big shout out to John Vecchia, Bacchae Oney and his team for the great work they've done here.

And another 2020 development initiative has begun to has been to integrate the STR data into Costar suite and we've moved very quickly on that acquisition before I describe that let me just say that and a year, which has brought the hospitality industry to a complete standstill.

<unk> performance of STR has been nothing sort of short of miraculous.

Client retention was 97% and subscription revenue in Q4 actually grew 5% year over year. Despite hotel seeing occupancy rates followed by 80% during the dark days of the first half of 2020, So again S. T. R. Like the rest of Costar group is resilient and appears to be.

Almost countercyclical, but certainly downwardly resistant.

And the first quarter 2021, we'll be launching the hospitality data embedded into Costar suite, which we believe will be a significant interest for the 4000 customers at 11000 prospects. We have that are both the hospitality industry.

Combined the see MBS tool with STR data also creates a powerful tool for distressed assets. So the timing of our product launches is ideal.

Our significant product enhancements include 2200, 50, new hospitality specific fields, such as occupancy average daily rate and Revpar 90000, new and enhanced hospitality property Records 50.

50000, New hotel sales comps enhanced with relevant data, including brand parent company, and operator, and 22000, new architectural quality hotel photos.

The most valuable aspect of this integration of unique high frequency STR fully anonymised hospitality data bench.

And Im sorry, hospitality performance benchmarking data is the trend and market analysis value will bring to our clients for the first time anywhere ever our clients will be able to see aggregate hospitality performance by geography and property class through time.

Daily reliable trend information occupancy and occupancy and rental rates and all that stuff is super valuable to investors lenders and operators, who need to understand the risks and opportunities and these asset classes.

There will be another major STR upgrade and integration of Costar later this year that will allow our benchmarking clients to access their information in Costar and a dramatically more powerful and valuable way, we think that our new hospital for hospitality clients will value and their performance and much broader context of a wealth of hotel inventory.

<unk> comps market analysis and forecast and also the new product will have portfolio level analysis for our clients I feel our STR team is doing some very inspired work in this area and I am confident that our STR clients will feel that we have delivered beyond expectations and our promise to enhance the.

STR technology platforms.

Finally, an update on launch of our international product later this quarter.

We expect to launch a new international polyglot, multi currency and imperial metric version of Costar.

We plan to open up the commercial real estate information, our clients see from being domestic only to international.

Who is to know has only seen London data will now upped of Costar and see news information and analytics and the U S, Canada, Europe and the rest of the world much institutional capital flow and commercial real estate and cross border and fact.

The majority of it.

But until now the information systems had been largely local we think this change to our product will have a profound impact and long term on the value, we can deliver to investors tenants and brokers that work across borders and.

As the pandemic travel restrictions ease and the future we intend to initially further expand the breadth of information we provide on 15 additional European markets. The integration of the global and poorer state is going very well with 195000 properties now loaded into Costar suite.

International datasets and the number and a number of our enhanced features are only available to our costar suite customers and are not available to those customers that only subscribe to our costar comps tenant and property and modules over the course of the next 12 to 18 months, we're going to focus intently on reaching out to the thousands of firms that only subscribe to a subset.

And the Costar product and upsell them to the full capabilities of the full Costar suite product.

We believe this upsell effort will be a significant revenue accelerator for costar.

Ultimately because we can provide our clients more value more cost effectively by only producing the one suite product, we intend to sunset seller and the individual modules of Costar.

All of these new features and future releases. We're currently working on gift tens of thousands of prospective costar clients. One more reason why they really should subscribe to costar.

Sure.

Strong Q4 performance capped a breakout year for Loopnet that demonstrated the business is growing traction and countercyclical characteristics I believe the single most effective way to market commercial real estate today is online using the loopnet marketplace and its massive audience of millions of engaged tenants and investors.

And 2020, we saw strong growth across all levels of our Loopnet advertising solutions, we have achieved strong success and high penetration with our standard advertising levels and we're increasingly focused on driving revenue by selling differentiate it adds to our clients that deliver more reach frequency and branding benefit that our standard add level.

And on average our top level, a diamond AD receives 170 times more exposure than does a standard debt.

In addition, it receives nearly twice the frequency or repeat exposure of a standard listing with our new investments and re targeting we identify the most engaged prospects viewing diamond ads.

And we on average achieved a remarkable repeat frequency of them.

With them of 172 times and a monthly basis, there's excellent marketing saturation for our clients our top tier ads diamonds platinum and gold to provide unrivaled benefits such as professional photo shoots three D virtual tours drone photography, and individualized re targeting.

Revenue for our higher tier diamond and platinum and gold advertising products grew 48% from $24 million and 2019 to 36.002 million 20, and net sales bookings of higher tier advertising levels doubled and.

And comparison premium Listers, which are bundles of silver at the basic level of standard level, which our original advertising option grew 17% year over year from $120 million and 2000 $19 million to $140 million and 2020.

Property owners saw increasing value and our higher tier advertising solutions with Q4 average revenue for listings up 94% from $481 to $936 per month per at with some of them moving into 5006 thousand and $7000 a month.

Overall loopnet marketplace revenue grew 20% year over year, and Q4, Q traffic showed strong growth with 37% year over year growth and monthly unique visitors, reaching a record average of approximately 8.9.

9 million unique monthly visitors.

We believe that the evidence shows that we're picking up speed with our Loopnet strategy and a total addressable market is and the billions of dollars. We can interpolate revenue results and a relative GDP basis from a similar marketplace to Loopnet based in Australia, and see clear evidence of a multibillion dollar Tam opportunity.

The current commercial real estate market economics are also ideal for loopnet sharply rising availabilities across almost every U S market, there's more demand and normal for advertising solutions to generate prospects to help owners and brokers convert their vacancies back into revenue.

When we accelerated our marketing investment to apartments Dot com based on its outperformance. We believe that we are able to look back and demonstrated very attractive ROI on that investment because we believe we have a similar excellent investment opportunity to invest and Loopnet growth, we intend to significantly increase our sales force head count SCM investment digital and <unk>.

Broad based media investments going into 2021.

As we've discussed previously we're building a dedicated Loopnet sales force alongside our Costar Costar.

Costar sales team and Q4, we added 40, new dedicated Loopnet sales people. These new dedicated reps and the Costar suite sales force continue to aggressively market and sell Loopnet products.

To complement our investments and product and sales this year were increasing our marketing program for Loopnet targeting all of our constituent networks property owners and their brokers touch investors, we're launching our first media campaign this quarter across digital channels. This.

Are you and the loop campaign, which launches. This week is focused on evaluating the loop I.

And I am sorry, elevating the loopnet brand to brokers and owners across digital channels, specifically and larger metropolitan areas. These marketing efforts will supplement our growing sales force by increasing both awareness and our best in class marketing solutions.

We plan to release, a broader media campaign and a little bit later this spring announcing loopnet as the place for all spaces. This campaign will be broadcast across TV and other broad based media outlets and effort to generate mainstream awareness of the loopnet brand by reaching tenants investors and becoming a more colloquial brand loopnet.

Land to replicate some of the successes apartments dot com has seen over the past few years.

In addition, we continue to intelligently invest and search engine marketing for relevant keywords loopnet already enjoys a considerable advantage for both organic and paid search rankings and I'm proud to say that Loopnet now ranks number one for 125000 relevant and commercial keywords on Google and our SCM spend.

Supporting that with them with Inc.

A fourfold increase for an investment since 2019, we will combine investments and SCM and with re targeting programs for increased reach and frequency Loopnet re targeting strategy taps into our extensive database of broker owner investor tenant contacts and matches them with hyper relevant property ads that match.

And their search criteria, increasing the reach of our property ads and placing our ads across the web on high quality sites, including Santa and Yahoo.

Business, now et cetera, Biz, now et cetera, et cetera, we also take into account unique data ricard regarding which market tenants.

Tend to relocate to or from to ensure we match them with the property is that the higher likelihood that theyre going to lease into keep in mind. These investments made and Loopnet also will benefit tenex given the cross pollination of traffic between those sister properties and we view using we view this rising tide is lifting.

Both of these sites.

Our loopnet marketing investment.

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In the first half of 2020 was $10 million and we expect that investment to triple to $31 million and the first half of 'twenty and 'twenty one.

Overall, our Loopnet marketing investment is expected to be around $66 million for the year, which is double the $32 million we invested in 2020.

While we're still in the early stages. We are excited about the progress we're seeing at Loopnet and think this is the time to increase investment and sales and marketing to help ex <unk>.

<unk> accelerate the conversion of that Tam into Costar revenue.

And we're nearing the end of my brief remarks, just about 20 minutes to go.

I'm very happy with the initial results, we're seeing as we combine the strength of Costar and Loopnet and 10 ex the.

<unk> revenue grew 14% Q4, 'twenty and 'twenty over Q4 2019.

Well ahead of our expectations and tax even generate a small profit and the quarter. The first time and that's happened and many years, we've already made a number of improvements and investments of the business. Since we closed the acquisition in June and those improvements are already delivering results.

And we're focused on driving series of improvements to both the demand side and the supply side of 10 X, we need to drive improvement in both areas in order to drive meaningful adoption and revenue growth and.

Improves and demand side means and prove the number of qualified bidders that show up on our online auction events ready to bit.

Improving the supply side means increasing the number of owners bring valuable property as the site with realistic pricing expectations. When you increase the demand side dramatically. It makes it much easier to attract more sellers for the supply side.

Our first efforts have therefore focused on the demand side and I'm very happy with the results and more importantly.

And I think and know our clients are very happy with those results for.

For leveraging the massive audience of Costar, and Loopnet and promoting the tenex auction properties, where the most prominent advertising placements on both of these sites. These internal ads are bringing thousands of new bidders to 10 ex.

Property for Ochsner, and have visible and both Costar and Loopnet with rolling counters, appearing on the properties for auction counting down to the time of sale. In addition, we've dramatically increased our investment tenex related keyword marketing and Google. We've also used our massive database of active investment sales brokers buyers and owners and if we got and agree.

<unk> retiring and with them with display advertising across the internet for specific relevant tenex auction properties.

As a result, the exposure of auction properties and the tenants site has increased significantly with unique visitors doubling from Q3 to Q4 was quite amazing.

Our efforts and investments are paying off and we can see clear improvements and the demand side. The average number of fully approved bidders on and auction increased 153%.

And from four two and Q4 of 19 to $10 seven and Q4 'twenty.

The number of those watching bidders that engaged and placed a bid increased 66% from 2.2 and Q4.

19 to three six in Q4.

20.

On a per property basis. This increase in demand had the result, we wanted which is the percentage of properties that came to auction and successfully sold increased 42, 6% going from 43, 8% and Q4, 19% to 63% and Q4 'twenty.

This is the so called trade rate and it's now approaching double the industry average offline trade rate since were only paid when the property trades. This increase and trade rate resulted in an increase and our revenue.

Moving forward into 'twenty, one we're planning to continue focusing on best and increasing the demand side, but will begin to make significant investments and increasing the supply side success on both sides could have a very positive revenue growth impact.

The original pricing strategy for <unk> was just a port from the offline auction world to the online auction World I do not think it really made a whole lot of sense to do that but you know moving.

Moving on the dynamics now are completely different if NASDAQ had simply stuck with the OTC pricing model and none of us would probably have ever heard of NASDAQ. The tenex tenex as historically charged the buyer and 5% fee on the larger properties Thats more and the brokers Commission tenex as historically offer consistent rebates and discounts, which means theyre stickers.

And price could scare people off but they are effective price was much less.

Looking at the gross margin per sale Theres plenty of room to reduce price with an eye to increasing volume and more than making up for the reductions and the volume of a vibrant marketplace. We believe it will create we expect this pricing simplification will create a modest near term revenue headwind, but ultimately will increase total platform volume, especially.

Actually volume from first users of the platform, we're expanding our sales force <unk>. Currently has only 25 salespeople and we plan to grow that number significantly in 'twenty one and in addition, we plan to leverage our team of over 1000, Costar market, researchers, whose daily contact with property owners and managers provides a great opportunity.

And <unk> to source new properties for sale for 10 X.

We're making a very significantly and significant investment and marketing in 'twenty, one to drive demand and supply to tenex.

We have developed a broad campaign for television and digital media re targeting increased SCM.

The tagline. These campaigns will use is don't just sell it 10 exit.

And this tagline focuses our prospects and the fact that the property is much more likely to sell in line with 10 ex that is offline and as much likely to sell faster as well.

We plan to use it battle, the big Gasification campaign to drive visibility traffic and traction with a broader real estate community and 21 hundreds of thousands of CRE investors owners and brokers will be invited to a number of 10 ex auctions, whether it would be able to guess what 10 properties will ultimately sell for in the auction and more accurate.

Guests for more like the when a lot of fun lot of prices a lot of money, we think a lot of folks will show up and play.

So we're increasing our investment tenex marketing by 400% from $9 million and 2020 to potentially $36 million in 'twenty one.

A fourfold increase we have made great progress on our 10 ex integration plans and 20 and now is the right time to accelerate our investments to be ready to take full advantage of the expected increase and distressed assets coming to market.

And while it's difficult to quantify the amount of timing and expected increase and distressed assets.

Currency and best for closure rates are trending upwards and are now above the levels seen at this stage and the last recession of <unk> nine.

Our estimates our estimates indicate potentially hundreds of billions of dollars of distressed properties will materialize over the next three to five years, implying potential for hundreds of millions of dollars and revenue for 10 ex.

Now I'm going to skip the economy update section of my script.

And start moving closer to the CFO section and the challenges of 2020 highlighted the strength of Costar business model or.

Our mission critical subscription based products combined with disciplined investments and the business enabled us to deliver outstanding financial results.

And 2021, and we expect to deliver double digit organic revenue growth and margin expansion, while simultaneously investing very aggressively and loopnet and <unk> and we believe and those investments were.

Going to use our strong balance sheet and successful acquisition track record to pursue multiple large growth opportunities.

At this point I'm now going to turn the call over to our distinguished but still useful CFO Scott Wheeler.

Well, thank you for that introduction.

Yes.

I will try and display my useful figure as a March through my comments today. Thank you Andy.

So 2020 was a great year for Costar, both strategically and financially and personally at least I find it much easier to sleep at night with $3 $8 billion and the bank a negative leverage and a shiny new investment grade debt rating sitting on my nightstand.

And we certainly stay as a great comeback rally after the early pandemic scrambled our plans this past year and we managed to beat the original 2020 profit guidance that we gave way back in February.

I think it's a great complement to the strength of our business model the value of our products and the execution focus of our leaders and all of our teams.

Of course, you throw in a few exciting acquisitions along the way in 2020 starts to feel like a typical year here at Costar group.

But as Andy mentioned in his comments, we're excited for the potential opportunity to add corelogic to our business, but I won't be providing any financial comments, nor we will take any questions on this topic during the Q&A session.

And so on to some color on the results.

So revenue as you heard Andy talk about was up nicely and the fourth quarter margins were also improved and the fourth quarter, our adjusted EBITDA grew.

Over the over the year and from the third quarter and we ended up outperforming the high end of our guidance by $23 million, which is <unk>.

Fantastic outcome.

Even as we can and do to continue to invest to support our future growth, which involved the marketing investments. We made this year for apartments Dot com and increased marketing that we began later in the year for Loopnet.

Before I go through our sector results, you'll notice that our EBITDA and our net income results for the fourth quarter and the full year of 2020 include one time costs related to the terminated redpath purchase agreement.

The proposed transaction was terminated and the fourth quarter, and we recorded a $59 $5 million charge as part of our G&A expenses.

And this charge includes settlement of the termination fee for $52 million as well as the cost for extension payments that we made earlier and the year.

The total $59 $5 million charge is removed and our adjusted EBITDA calculation as nonrecurring acquisition related expenses.

The approximate income on net income for the year is $44 million or $1.15 per diluted share.

So onto our revenue by services Costar suite grew 5% and the fourth quarter and 8% for the year, which is a little bit ahead of what we projected back in October.

We've seen stronger than expected sequential performance and Costar suite, and both sales and renewal rates and we expect a quarterly growth and revenue will continue.

We expect Costar suite growth and the 5% to 6% range for the year 2021, with the first quarter, representing the low point of growth at around 3% to 4% with the most significant difficult comparables to get past for the next year.

The Costar suite revenue growth is expected to increase sequentially throughout the year.

We've not assumed any contract renewal rate increases and our outlook. Although we anticipate that this could occur if the economic environment strengthened and the latter part of 2021.

Information services revenue grew 16% and the fourth quarter and 47% for the full year and includes the impact of the STR acquisition, which we closed in mid fourth quarter of 2019.

Excluding STR revenue and information services and 2020 was broadly in line with revenue and 2019 for both for full year and the fourth quarter.

As we move past finally, the high levels of onetime implementation revenues that were and our 2019 results for the real estate manager business.

Subscription revenue growth remained strong and real estate manager up 11% and the fourth quarter and increasing 13% for the full year of 2020.

STR results and 2020 were very encouraging as we work to integrate STR data and products into Costar.

As we all know the hospitality sector sort of took it on the Chin in 2020 with hotel revenue per available room down as much as 50% and the U S and up to 90% and.

And some European markets net.

For the last STR proved vital to the operations of our hotel customers and our revenues grew in the fourth quarter sequentially up 5% to 6% over the third quarter of the year.

Retention rates on STR subscriptions remain over 95% and STR subscription revenue has increased in both the third and fourth quarters of this year, a strong and a positive sign as we work towards launching the new SCR products and Costar that Andy talked about and 2021.

Overall, we expect double digit revenue growth and the 10% to 12% range for and information services sector in 2021.

Starting at approximately 7% revenue growth and the first quarter of 2021 and improving as we continue throughout the year.

We had another great year, and the apartments business with 23% growth and the fourth quarter and 22% revenue growth for the year all of which is organic growth.

The number of properties advertising with us increased around 10% and the fourth quarter, while the average revenue per property increased by approximately 11%.

The revenue per property increase as a result of customers continuing to trade up to higher value add packages as we did not raise pricing on our rate cards at all during the year.

For 2021, we expect to see continued strong performance and sales and revenues for apartment with revenue growth of approximately 20% and the first quarter and 19% to 20% for the full year.

That was my 20% growth alarm goes off every time I get a business growing over 20% organically and of course, because we do land rigs.

2021 revenue growth and dollar term.

Steve the dollar revenue growth in 2021 for apartments as we continue to focus efforts on penetrating the mid and the small property market sectors.

The commercial property and land sector grew 51% and the fourth quarter and 31% for the full year, including the impact of the 10 ex acquisition.

Organic growth was 15% for both the fourth quarter and full year respectively.

For 2021, and we expect total revenue growth for commercial property and land and a range of 45% to 50% for both the first quarter and for the full year organically.

Organically, excluding the revenue from the tenants and home snap acquisitions, we expect growth of approximately 20% for the full year.

Loopnet revenue growth was stronger than ever at 20% for the full year of 2020, and 20% and the fourth quarter with signature AD revenue growing 50% on a full year basis.

We expect Loopnet revenue growth to continue at around 20% and 2021 with growth of around 15% to 16% and the first quarter against tougher year over year revenue comparisons.

Revenue and our land and small business market places were essentially flat and the fourth quarter and growth single digit rates for the year.

The small business marketplace, and particular with sharply impacted by the pandemic and 2020 we.

And we expect growth rates to recover and both land and business for sale marketplaces, and 2021 with revenue increases and the 8% to 10% range.

<unk> delivered a strong finish to the year with $19 million of revenue and the fourth quarter and 32 million in revenue and 2020 exceeding our initial revenue estimates and delivering positive pro forma growth year over year since the acquisition.

Now each of the years three years prior to our acquisition of 10 ex revenue had declined by approximately $10 million per year.

Of course, one positive data point is not yet a trend, but the metrics. So far are promising for tenex as Andy talked about.

And due to the transactional nature of the revenue and <unk>, we expect to see revenue fluctuate from quarter to quarter, depending on economic conditions historical seasonality as well as our own investment and integration initiatives.

Historical seasonality for Tenex indicates lower transaction volumes, typically and the first quarter and stronger volumes and the fourth quarter.

Our 2021 forecast assumes around $50 to $55 million of revenue for <unk> with approximately 20% of that revenue and the first quarter.

We have built our revised pricing rate card for <unk> into our outlook, but have not assumed a material volume lift from distressed property sales or from our marketing investments and 2021, making this what I consider a relatively cautious forecast.

Until we see how the year starts to turn out for the business.

<unk> is our latest addition to the commercial property and land family, having completed the acquisition in late December of 2020.

Did not include any homes net result for the handful of days that we owned the company and 2020.

<unk> revenues are comprised of both advertising and subscription revenue with advertising, making up approximately two thirds of the revenue.

Our 2021 and forecast assumes around $50 million for revenue for homes now with approximately 10 million of that revenue and the first quarter.

Pro forma growth rate of the business is a little over 20% year over year and 2021.

Profit contribution of home snap and 2000, and Taiwan is expected to be around.

Negative $5 million as we.

And you invest for growth we absorbed both the acquisition deferred revenue adjustments, which are typical and acquisitions of this type and the cost of moving the approximate 165 homes step and plays to our costar compensation and benefit plans.

Our gross margin was 82% and the fourth quarter and 81% for the year up two full percentage points from last year and for full percentage points from 2019.

This is a great reflection of the strong leverage that's inherent in our subscription business model. We believe we can continue to deliver revenue growth over our underlying platforms and produce margin improvements over time.

We expect gross margin of approximately 81% for 2021 with margins early in the year around 80% as we add home snap to our results and improving to around 82% by the end of 2021.

Net income was $36 million and the fourth quarter and 227 million for the full year, which as I mentioned includes the tax affected impact of the $59 5 million of one time charges relating to rent path.

Our effective tax rate was 23% for the fourth quarter and 16% for the full year.

Fourth quarter, adjusted EBITDA was $167 million up 18% from the fourth quarter of last year and came in approximately $23 million above the high end of our guidance range.

The improved adjusted EBITDA was the result of outperformance of $9 million and revenue lower spending on personnel and marketing and improvements and our bad debt levels from earlier in the year, which is certainly a welcome sign.

And the resulting adjusted EBITDA margin of 38% and the fourth quarter was a full five percentage points above the midpoint of our guidance range.

Cash and investment balances were approximately $3 8 billion as of December 31, 2020.

We generated almost half a billion dollars and operating cash flow and 2020 $486 million to be exact and we deployed approximately $440 million of that positive cash flow to buy <unk> and homestead.

In addition, if you've been following news and Richmond, Virginia, lately, which I do religiously you will have noticed we purchased a parcel of land adjacent to our current Richmond location and the third quarter of 2020, and we recently purchased the Richmond building that we've occupied under sublease for $130 million and the first quarter of 2021.

Both of these purchases provide a variety of expansion options for our teams enrichment.

For perhaps we should become a digital commercial property flipper.

And by here, that's a trend and new business model that is emerging these days, but.

We'll leave that for a future earnings call.

Underperforming onto the performance metrics, which won't include anything for homes and app until future quarters.

We achieved $49 million of net new sales and the fourth quarter rounding out a great second half recovery and sales following the pandemic disruption and the first half of the year.

We saw continued solid sequential improvement and costar bookings and another very strong quarter and departments.

The strength of our sales efforts along with planned investments in both sales and marketing and the coming year are expected to keep us on track for strong double digit organic growth and our subscription businesses and 2021.

Our sales force totaled approximately 900 people at the end of the fourth quarter of 2020 and increase of around 40 people from the third quarter and up over 50 people from the fourth quarter of 2019.

We continue to build out our dedicated Loopnet sales team as we discussed last quarter, which accounted for most of the growth and our sales team and the fourth quarter.

So for perspective at the end of 2020, our largest sales organizations are costar with 340 salespeople apartments with around 320, salespeople and Loopnet with 115 salespeople.

The renewal rate on annual contracts for the fourth quarter of 2000, and Tony was 90% slightly better than the 89% and Q3.

Great to see our renewal rate moving back up.

And you recall earlier this year that were there were concerns of a deeper and more sustained drop and renewal rates.

Similar to what we saw and the last recession, but it looks as though those concerns can be later to rest at least for now.

In fact, the fourth quarter 2020 renewal rate is essentially in line with the fourth quarter of 2019.

The renewal rate and the fourth quarter for customers who've been subscribers for five years or longer was 95% in line with the renewal rate of 95% and the third quarter of 2020.

Subscription revenue on annual contracts accounts for 78% of our revenue and the fourth quarter down.

Down approximately five percentage points compared to last year.

The decline is entirely due to the addition of <unk> into the portfolio this year.

If we include subscriptions on shorter duration contracts, such as three six or nine months approximately 92% of our revenue is subscription based.

I will now discuss our outlook for 'twenty 'twenty, one and the first quarter.

We expect full year revenue and a range of 195 billion to $1 95 billion, and 2021, which implies an annual growth rate of 17% and the midpoint for the year.

As I mentioned previously our outlook includes approximately $50 million for the homes net business, which we acquired at the end of 2020.

And on an organic basis, excluding the full year impact of homes, Nap and <unk>, which we acquired in mid 2020, we expect growth of approximately 12% to 13% for the full year of 2021.

We anticipate organic growth rates will be lower and the first quarter and the 11% 12% range.

And this is expected to be the low quarter for Costar suite.

Throughout the year, we expect organic growth growth rates to improve sequentially and finish the year around 14%.

For the first quarter of 2021, we expect revenue and a range of 450 million for $455 million.

Net revenue growth of 15% year over year at the midpoint of the range.

For the full year of 2021, and we expect adjusted EBITDA and a range of $640 to $650 million.

Implies an adjusted EBITDA margin of a little over 33% at the midpoint of this range.

Excluding both the revenue and the adjusted EBITDA of Homestead are adjusted EBITDA margins are expected to improve by approximately 120 basis points and 2021 to 34, 5%.

Compared to the adjusted EBITDA margins of a little over 33% that we achieved in 2020.

So overall, our underlying margins are improving over 100 basis points year over year, and 2021 to a little over 34% prior to the acquisition of home sales.

We plan to increase our investment and marketing in 2021 to support the significant growth opportunities, we have and both loopnet as well as the <unk> business.

We expect total marketing cost of approximately $345 million and 2021 and increase of around $70 million over our marketing costs and 2020.

The home snap acquisitions brings along a little over $20 million of the increased marketing spend with the remaining net increase focused on loopnet and tenex as Andrew talked about.

When you think about it just a few years ago increased investments of this scale like the ones. We expect in 2021 would've had a significant negative drag and our profitability.

And what's becoming increasingly obvious is that with the increasing scale of the company were now able to invest much more aggressively for future growth while at the same time, improving our profit margin.

For example, and 2021 our expense growth.

Without counting the recent acquisitions year over year into our results is probably around $120 million, which happens to be about the same amount of marketing investment that was made back in 2015, when we launched departments Dot com.

You may recall at that time that 120.

$120 million of apartments Dot com marketing investment wiped out all of the Costar group's profit.

By contrast, and 2021, we can make that same size investment and not only will it not decrease our profit level, but we will generate close to $100 million more of adjusted EBITDA and 2021 than we did in 2020.

This is a significant growth advantage as we continue to enter new market sectors.

We expect adjusted EBITDA of approximately $1 40 to $1 $45 million and the first quarter of 2021 for and adjusted EBITDA margin of between 31% and 32% and up approximately $20 million.

Third to the first quarter of last year.

In terms of the timing of adjusted EBITDA across the remaining quarters of the year, we expect second quarter adjusted EBITDA slightly lower than the first quarter as our marketing spend typically increases and the second quarter.

And the third quarter adjusted EBITDA is expected to move back up above the first quarter levels with fourth quarter, increasing significantly as the marketing spend is expected to tail off near the end of the year.

In terms of earnings we expect full year non-GAAP net income per diluted share of $10 83 to $11 and <unk> <unk> based on $39 7 million shares.

For the first quarter of 2021, we expect non-GAAP net income per diluted share in the range of $2 33 to $2 43 based on $39 5 million shares.

Now with 2020, and the rearview mirror I believe we're firmly on track to achieve our long term objectives of $3 billion and run rate revenue and 40% adjusted EBITDA margins in 2023.

2020 was certainly an amazing year for our company for Costar Group and we ended the year with strong double digit revenue growth both in total and organic revenue growth and despite the continuing global pandemic and uncertain economic environment.

We generated over half a billion dollars and profit and nearly the same and operating cash flow, while strengthening our balance sheet with both equity and investment grade debt.

The acquisitions, we completed represent significant strategic and financial growth opportunities for the company and the acquisitions. We are pursuing can truly transform the business.

Thank you for supporting Costar this year and so many ways and I look forward to updating you on our results as we navigate the year 2021.

Bill and turn the call back over to you. So you can issue the ground rules for today's fun and exciting question and answer session.

Thank you Scott.

And that's before we start the Q&A. This evening first one question per participant so make it and exceptionally insightful or probing one.

And second a reminder, that we will not be taking any questions about our bid to acquire corelogic.

Angela would you. Please assemble the questions a question is for the Q.

As a reminder to ask a question you will need to press star one on your telephone keypad to withdraw your question.

<unk> press, the pound or hash key we ask that you. Please limit to just one question. Our first question is from the line of Sterling Auty with Jpmorgan. Please go ahead.

Yeah. Thanks, Hi, guys. So in terms of the marketing investment that you're making across the business. What gives you. The comfort that now is the right time that you can actually lift the gas pedal on spending for apartments for.

For the multifamily segment.

Well we are.

I would say is that we've got the pedal down pretty firmly were well over 200 and some million there on that.

We're not increasing it were easing it off a little bit, but we're still there and a very aggressive pace.

So it's a little bit of.

A little bit of net new investment into 10, ex and Loopnet, but we think we need to balance those investments across the whole portfolio and.

And we think the ROI and Loopnet and 10 ex.

We will be we will be more impactful over the next two to three years and a similar investment apartments dot com and thats not to say anything negative about apartments dot com, but we've had the pedal down pretty hard there for a while.

Your next question is from the line of Pete Christiansen with Citi. Please go ahead.

Good evening, Thanks for the question Andy.

Obviously outside of Corelogic, how you're feeling about the M&A environment.

Are there other.

Essential assets out there that are of interest and.

How are you feeling about valuations for potential acquisitions.

Sure so other than that six 9% or $7 billion deal up here.

Yes.

There actually are other things out there that we are engaged with and.

Developing.

We have definitely and and so.

And.

And that is not the only thing occurring there are things occurring they all have a similar theme right now for us Theyre all growing.

And they are supporting the kinds of directions, you are already familiar with or just strategic.

Building blocks on the same theme.

The valuations.

I'd say that I have certainly seen a couple of deals going by.

At valuations that.

Left me very very comfortable not to participate.

And.

I took my hat off for those folks and said Wow. Good work, that's a heck of a evaluation, but there are a couple of things recently and usually my skepticism on some of the evaluations I've seen in some places recently.

Around the total addressable market relative to the evaluation and so they may be performing well and their context are and their field, but theyre field is relatively small don't doesn't have the long term growth. So theres little frostiness out there, but there are also some real value plays out there that we're focused on.

Your next question is from the line of Ryan Tomasello with <unk>. Please go ahead.

Thanks for taking the question.

Andy I was hoping you could dive a bit deeper into.

Your strategy for entering the residential portal space Theres, obviously, a lot to talk about there, but I think one key question is how you intend to cost effectively build consumer traffic.

Considering the existing well branded competition in that space.

What traffic synergies do you think the existing apartments dot com audience can provide and is there any competitive advantage that home snaps.

<unk> user base of agents can bring to help you build that consumer traffic on the residential side.

Yes so.

We're not trip.

<unk> been thinking about this and building that strategy and we.

And believe there is a pathway to build.

Organic traffic very cost effectively.

We are not and are positioned to share our thinking on some of that right now.

And for competitive reasons, but.

I think that these things building traffic does not happen overnight I mean, these things you build this up through time.

Obviously know how to build up traffic through time, we've done that anytime we enter into a new space and.

And try to build traffic, there's generally skepticism that you can build traffic and that space through time, and we've proven we can do that.

And in particular.

Entered the apartment space seven years after Zillow had made a significant priority and we ultimately were clearly more successful and doing that I think one of the important considerations as you build a marketplace or build trapped brown and marketplace is what is your revenue model and how much.

And how strong is that revenue model and will that revenue model fund investments to continue growing traffic or is your revenue model actually a drag on your ability.

To grow traffic and I think we see those conditions existing and the Huntsville market debt.

Definitely.

And definitely home staff is it useful component and this and there's one or two other useful components.

And that we're looking at but.

There's no guarantees on any of these things, but we are pretty excited to get working on it and we have a pretty clear view as to where we think we can take it and how we can get it there and then.

I'm, sorry, I can't give you more detail and stuff, but I wanted to have success and telling you about it will make it less likely.

And.

Your next question is from the line of George Tong with Goldman Sachs. Please go ahead.

Alright, Thanks, good afternoon, commercial property and land saw a step up and organic revenue growth. This quarter as we continued to sell higher to your ads and Loopnet and you're guiding for further acceleration in 'twenty and 'twenty one how much of your client base do you believe you penetrated with higher to your ads and Loopnet and how sustainable is 15% to 20% plus.

Organic growth and commercial property and land.

I really appreciate that question.

I really do.

So we.

We had just I mean, it is really early early days on these higher tier ads. So we've been very successful with that standard AD placement and in fact, and some markets we have too much penetration and southern Florida, we might be 80, some percent penetrate which I think is too high.

But I think we are less than 1% penetrated these higher tier ads.

And that's because we've just begun to really focus on and bring them out.

As you remember.

Wired Loopnet.

We separate out the information side from Loopnet upsell them to Costar, and then began developing.

And more fully the potential of Loopnet marketplace.

We began aggressively bringing the apartments dot com style tiered advertising levels and to Loopnet.

Last year was the first time, we began doing this this is really the first year of doing that properly and aggressively and.

And.

You have I think if we have a thousand or 75000, and we're keeping an eye on but you have two components moving one is penetration and to which properties one and move up debt.

Prominence level and Loopnet and the other is what people are willing to pay for that top position and both of those items are moving so.

It's sustainable for a decade or more I feel comfortably that we can sustain this for a long long time.

Your next question is from the line of Jeff Miller with Baird. Please go ahead.

Yeah, Thanks on the opportunity to.

Upsell existing comps and tenant module clients and the suite since that's where the innovation is going and can you just help size up how big of an opportunity that is like how much of the revenue base for that line item is still for comp or tenant module clients.

Much uplift do you typically see when they transition over to suite et cetera. Thanks.

Sure so I'm going to be giving you. These are not precise numbers and I'm just going to EBIT numbers that are and educated guesstimate and order too.

I'll give you a feel I believe.

15%, 20% of that customer base is not on the full suite.

And.

And I think that typically it is a doubling.

As they go into the full suite.

And anytime you do something later definitely is time for us to do this and I think it's an opportunity that.

And reflection, maybe we shut down last year, but now as we bring and the C MBS and the international and the STR and we and we think we have another three or four innovations coming and they're equally powerful as we keep doing this we need to.

It's time to leave behind these these partial solutions. It just doesn't represent our brand well and we can it actually saves us money to stop supporting these.

These lesser modules and.

So I think.

It's.

And the tens of millions of revenue and potential revenue comfortably and I think more importantly, I think when it's done and I think the customers happier and I think day, they appreciate and much more powerful product and just half of it is they just don't know what they don't have.

Your next question is from the line of Brett Huff with Stephens. Please go ahead.

Good evening guys.

Good evening Robert.

My one question is Scott you mentioned the TTM retention rate I think you said it was 90 this quarter versus 89 last quarter.

A question that we've gotten a lot and we've obviously paid a lot of attention to that could you unpack that a little more is that.

Is that small brokers not maybe going out of business as much as we thought is it large.

<unk> spending more is there a is there a lever and there that could give us more comfort and the resilience of that and the face of what could be a pretty tough CRE market. Thank you.

Yeah sure Brett.

The concerns as we went through the.

First and second quarter downturn.

What where would where would these renewal rates bottom out and if you recall they went from 90% to down into the low eighty's and the last recession and so we've watched closely really by customer type and by customer size large customers. All stayed with US there was really no increase at all and drop drop off rates.

For many one that was five or six brokers are more ore and the owner categories. It was a small brokers that dropped out over the summertime, which also led to a little bit of increase and our bad debt. We saw in the later part of the year that certainly has trickled off and stabilized we're seeing all the property are all customer types as well as customer sizes now are.

Back to held for sale.

The renewal rates that we're seeing at the beginning of the year at the end of last year. So it feels like those that we are going to drop out of dropped out and the rest of our operating statement and a stable way and our sales are picking up so momentum is good direction of travel is good and.

And we think that that will continue into 2021.

Your next question is from the line of Mario Kart lawsuit with Jefferies. Please go ahead.

Hi, Thank you.

Maybe you can continue with that thought.

And on retention and can actually maybe let me talk more about your sales cycle.

During Q2 last year that was more or less frozen.

Decision, making basically stop and and just wanted to see do you think some of the success and the back half of the year was.

Just some some of that Q2 being pushed to the right.

Or is this more or less sustainable going into 'twenty and 'twenty, one and even maybe with a ramping in GDP and economic activity in 2021.

Is there a lot of room for you guys to beat your guide based on that.

And so.

And when we when we saw the response and in mid 2020, especially in the marketplaces with the.

Online traffic going to record levels and then the sales accelerating.

We assumed that one there's clearly a pandemic effect and there and then there is I think a continued longer term adoption that will that will stick from that and that experience.

Both from a customer perspective, and our sales effectiveness perspective.

So certainly theres more online eyeballs and theres more effectiveness of the online advertising and and the effectiveness of our media.

And that our customers can use to tour properties.

<unk> are a big hit and the year on the other side our sales effectiveness in our apartments Dot Com sales force.

Abel able to effectively and professionally connect with our customers and prospects through zoom and remote working actually produced thousands of more effective customer meetings and maintain the same high NPS scores throughout the year, allowing them to generate more sales per person and they have ever before so we don't see either.

Those trends backing down either as we come out at the end of this year or going into next year and.

And with the momentum we have building our mid market sales force, which we will increase the growth, we're starting to see and the Io property space.

And then the translation of those same effects into Loopnet as we build our separate sales force and the Loopnet marketplace.

We're going to see that same strength and that same momentum building throughout the year and and we will still have the costar sales force selling the loopnet marketplace products as well until that Loopnet forces built up to full speed. So I think we have a lot of momentum behind us add a good bit of marketing to loopnet and the future is certainly bright with our.

Our sales efforts as I see them.

And Nathan it doesn't make it we'll take it out with 10 ex.

Okay and exit of Delta.

Excellent.

And your final question comes from the line of Stephen Sheldon with William Blair. Please go ahead.

Alright, Thanks, Brad and <unk>.

You talked about not investing heavily yet on the supply side.

Have you seen any momentum on the supply side, I guess and the second half of 2020 with momentum you had bringing in more bidders and.

And then related to <unk> and any update on what you've seen in terms of distressed property sales and have you assumed any pickup and distress activity and the 2021 guidance or would that be potential upside.

Okay. So starting with the second question first we have not assumed any pickup in distressed debt may be possible that that will happen.

Especially as.

And there is a return to normalcy, some folks will at that point and calculate it just doesn't work anymore. They're property income she doesn't work anymore or their LTE LTV doesn't work anymore. So I think there could be but it's not and our forecast.

We actually so we closed that in June.

Yes, yes, it's July so it hasnt been long.

And so we really jumped into this both feet and we're really just on the demand side because that's the first component you got to build.

And it's really a bit early.

And to really expect any movement on the supply side, because we are just now beginning to turn and results I was wandering through my neighborhood. The other day I saw two guys.

And drinking a lot of beers and chipping golf balls and their frontline has stopped and say a lot of them with chat for a little bit.

Determined the guy and <unk>.

<unk> brought for multifamily properties to <unk> that he didn't expect to sell it and it was really kind of blown away. They sold with a number of bidders and I love. The fact that a neighbor was surprised with how many bidders we had.

I think he or she was visiting a neighbor but.

And that story gets around he's going to tell people is with a big brokerage firm that'll get around but some of the and.

But thats slower than some of the investments, we're making and marketing.

In 2021, I think absolutely it will drive the supply side, so the broad media campaigns.

Campaigns about.

And the value of <unk>.

Don auction at 10 actually don't sell at 10 exit.

And that will reach a lot of the supply side, our performance numbers that we can use as.

Sales demonstrations are fantastic and those will be very compelling also the gamification of the product, where we hope to bring in.

Hundreds of thousands of players on the supply side and educate them and the platform, while they're having fun and winning surprises I think that will drive the supply side, we're educating Lisa ruggles massive team in Richmond, Virginia to educate the people they talked to all the time when they first bring a property.

To market and Theyre going to educate them about the opportunities on 10 ex that should drive the supply side and then as we grow the number of salespeople that will grow the supply side. So I think that by and I hope that by the end of 'twenty and 'twenty. One we can report really good progress on both the number of bidders showing up to each.

Property and the number of total property as go into market and the trade rate and if those things are all coming together there is the potential for a very significant network effect and that's because.

And the results we get from aggregating a huge community of buyers to an online marketplace is and almost all cases vastly superior to and offline anecdotal email blast kind of.

Net.

Non scale marketplace. So.

I like where it's going and I hope, we can show real progress and the supply side and demand side next year.

And that's what we're working towards now, but I'm really pleased with what we've done since just July close and so and I think the head of 10 X is on its way over after the call to work on some more stuff with us.

Well I think that is probably the last call answer we have our question. We have is correct.

And so I think we can wrap up the call and we certainly as Scott and I appreciate it Scott and Bill and I. Certainly appreciate you joining us for this fourth quarter year end earnings call and we look forward to updating you on more interesting developments and earning calls and the near future.

And I apologize for our for business today, there are a few more extra things going on.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect your lines.

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