Q3 2021 CoStar Group Inc Earnings Call
Stomach.
And that's where the 10% revenue growth in the third quarter and 12% revenue growth in September.
Net bookings of 47 million for the third quarter include the strongest sales quarter in the history of Costar, which were only dampened by a soft sales quarter for apartments Dot com.
Adjusted EBITDA of $144 million exceeded the high end of our guidance range coming in $10 million ahead of the third quarter consensus estimates.
Our marketplaces continue to deliver exceptional value to our customers as traffic to our sites increased 25% year over year.
Our marketing campaigns generated over $4 6 billion impressions in the third quarter across apartments Dot com Loopnet and Tenex.
We are welcoming our newest marketplace Bureau loco, the French commercial marketplace. We acquired on October one to our fast growing network of property marketplaces.
The U S apartment market is experiencing the highest unit absorption rate in decades, causing the lowest vacancy rate in decades, and the highest rent growth in decades, the absorption rate vacancy rate in the rental growth are well outside one to two standard deviations to normal ranges in the past 20 years.
The rate of change is stunning and the market stats are best described as Whipsawing are extremely volatile.
The pandemic initially caused a sharp drop in occupancy high move volumes and slight rent declines.
With the availability of vaccine absorption shot through the roof and occupancy levels and rent growth soared. When you see it on the chart the slope of the curve is unprecedented.
For investment grade rate properties, 50 units or more in the United States. The average occupancy range over the last 20 years has been.
Average occupancy rate has been 93%.
Jon Stern deviation to the low side of 92, 3% in one standard deviation of the high is 93, 7%.
That's a very tight range.
<unk> managed the range tightly to optimize for total revenue by moving unit rents using automated yield management systems.
Last year occupancy rates occupancy fell below the 20 year.
Standard deviation low to 92% currently.
Currently at 95% the vacancy rate and the occupancy rate is way above the top end of the standard deviation higher the past 20 years, 95% overall is a very high number.
The 20 year average annual net absorption of apartment units is 218000.
This year the annual absorption rate tripled that average was 658000 units absorbed.
Annual apartment rent growth was 12, 4%, which is the highest it's been at any point in the past 20 years.
The 20 year average is one six that number at only 2%.
The 20 year average rent for an apartment has been $1250 per month, but today that numbers climbed to 1676 per month.
The Sky high rents are good for owners, but make for major housing crisis.
Investors in apartments, or being richly rewarded with the average sales price of an apartment unit at $248000, a door, which is 82% above the 20 year average.
What does this all mean for apartments dot com.
Our clients are doing very well.
Very very well, but it also means that tens of thousands of large investment grade apartment buildings in the United States are now basically fully leased.
12, 5% of the U S investment grade apartment communities are now 99% leased or more.
This is unprecedented.
Likely heard anecdotal stories of every major apartment building in some neighborhood, having long waiting lists.
When a community becomes 99% leased they may love apartments, Dot com, but decided they can lower their advertising level us they want to continue to presence on our marketplace, but they do not need hundreds of leads a month with zero or one apartments available.
Our renewal rates, our renewal rates have remained high during this period, but thousands of communities that are essentially full have reduced their spend with apartments. During this high occupancy market condition. Some may have reduced their spend by 50% or more.
That's atypical.
I believe this is a market anomaly that will resolve back to normal occupancy ranges within a few quarters for.
From Economics, 101, where an apartment community is fully leased it is under priced its apartments and optimally full apartment community is about 93% leased overtime. The automated yield management systems will keep pushing rents until occupancy falls back to 93%.
As well as the current levels.
We will draw additional supply, which we're already seeing high levels of supply.
New supply I believe the yield management systems were either maxed out by the implied rate of increase necessary to optimize occupancy or the property managers took the systems offline because they felt the potential rate of rent increases necessary to maintain optimal occupancy where outside of acceptable social norm.
For rent increases.
One of the primary independent variables and many yield management systems as the number of leads coming into leasing office more leads means more competition for available units more competition means the owner can raise rents.
We believe that apartments dot com is the primary source of these high value leaves are driving higher rents for the owners more leads to appoint are good so.
So despite these wild unprecedented gyrations in the market, we believe that the demand for apartments dot com is stronger than ever and.
In the year to come we believe there'll be unusually high unit turnover and clients will want a steady lead flow during this great migration and.
In August we surveyed more than 20000 renters about they're moving intentions as a result of that survey, we expect apartment market will experience increased turnover more out of market moves and lower renewals as we head into 2021 and 2022.
When asked when do you think you will next move into a new residents.
53% of survey respondents said they would move by winter when asked what do you plan to do in your current lease expires only 24% of renters expect to renew within the same community down from 47% pre COVID-19.
This all makes sense given the huge affordability changes and changing work from home policies.
Last month, the National apartment Association held its first in person meeting post pandemic and I was able to meet with a number of clients.
One conversation stands out to me.
As we conclude our meeting with our largest client the senior member of that team stay that he wanted to make an important statement.
He thanked us profusely for being the single most important partner to us firm.
Turning to him we were the single greatest source of leads for us communities and help them have an amazingly successful year.
He stressed how much you valued our relationship and how much he appreciates the great work, we're doing for them.
I've had thousands of client meetings over the last 35 years.
His comments were unprecedented in their positivity over the past five years. This client has tripled their annual investment with us and become well more than twice the size of our largest costar clients yet while it's thanking him profusely. His firm is reducing their spending level with us over the past few months by about 5% because.
Many of his committees were so full.
Despite these micro market gyrations I believe we have a fantastic relationship with this client and our relationship with them over the intermediate and long term will grow and flourish I believe they will but continue to grow their investment apartments dot com in the years to come long past this current market condition.
Well apartments Dot com sales were soft this quarter.
During this unprecedented high leasing environment are highly leased environment. The strength of our platform remains incredibly strong leads were up 39% year over year in the third quarter and visits were up 17%. This was partially driven by our biggest marketing quarter of the year or Redeveloped, where we delivered three 5%.
Media impressions in the quarter.
As we've discussed here and on our second quarter call in July the increase in our site traffic combined with a largely flat pricing has meant a windfall value to our clients in terms of effective cost per lead.
The average cost per lead has decreased about 35% in two years from $9 55.
$9 55.
In 2019 to $6 24 and 2021.
To address this imbalance, we began rolling out a new rate card for apartments in September the rate card further segments of prices with larger communities, who are receiving more value commensurately paying higher rates.
In September we began testing a new pricing with 150 clients representing about 700 properties.
The average initial price increases were 7% went smoothly.
And formally pulled the apartments sales leadership team and they were not aware of any related cancels. Some of discount eliminations are resulting in more significant revenue growth, though and we would expect to see more of that going forward. For example in September a Florida client with a 380 unit property with a gold at $759.
And they renewed and they're now paying $1399 for an increase of 84% of.
Texas client with a 424 unit property with a platinum AD was paying $1349 and they renewed and are now paying $17 99 for an increase of 33%.
We will continue to scale, our right pricing campaign and though it it has not had an impact on this quarter. We believe that it will have impact in out quarters, given the value of our client relationships and the extreme volatility of the current multifamily markets, we're moving cautiously.
To protect the long term value of our franchise.
Despite all the sales successes, we've had over the last five years. There are many more prospects out there today than we have clients. So far are estimated penetration of $5 to 100 unit buildings is less than 4%.
And then the 100 plus unit buildings, our penetration rate is only about 50%. We believe that we have many many years of growth ahead for apartments Dot com just through new client acquisition.
Overall, we continue to believe the U S apartment market is a $6 billion to $8 billion revenue opportunity for apartments Dot com.
Costar had a strongest new bookings quarter of all time in the third quarter with net bookings up 57% sequentially and up over 500% year over year.
Our record performance was driven by multiple factors, including the growing success of our upsell program high renewal rates, new products and information capabilities. The return of annual price increase for renewals and continued economic recovery.
Based on our sales success in the third quarter, we now expect revenue growth for Costar of 13% in the third quarter returning to our long term historical revenue growth rate.
Historically, we sold multiple versions of the Costar product across two dimensions separate functionality modules for basic property information comparable sales data intent information.
And separate geographic coverage for local regional state National and global coverage.
About 18000 of our 30000 Costar clients had a version that was less than the full costar offering. So they were able to take they were not able to take full advantage of the costar product capability.
On July 1st we started selling only a single comprehensive global integrate Costar platform and began a 12 to 18 months process of upgrading those 18000 accounts.
This is a win win and which clients get access to costars unmatched breadth and depth of information and analytics on commercial real estate globally, while we streamline product development marketing and support.
Since the start of the program in July one we've upgraded about 3000 or 18% of those 18000 eligible accounts generating $7 million in annual sales.
This strong starting point.
We remain confident that the up sell process will generate $30 million to $40 million of incremental annual revenue.
Of the almost 1300 clients, we survey in the third quarter, who upgrade or had a conversation of upgrading about two thirds gave us a net promoter score of nine or 10.
We think the favorable reactions from clients reflect the higher value. They are receiving from the incremental capabilities of Costar single integrated platform.
Again, the Costar sales team delivered their best quarter of net new business generation ever 8% higher than the extraordinary fourth quarter of 2017 back when <unk> filed for chapter seven bankruptcy and 27% higher than the first quarter of 2018, when we sunset at Loopnet premium searcher.
On a per rep net sales level. The team is one five times more productive than pre pandemic and these performance results are not just tied to our initiatives and pricing actions, we signed up nearly 20% more new customer agreements in Q3 2021 versus the quarterly pre pandemic average in 2019.
Yeah.
In the first quarter 2021, we integrated commercial mortgage backed security loan information to Costar CMS data, providing our customers valuable insights into more than $1 trillion of outstanding commercial loans made over 100000 commercial properties are.
Our clients have taken advantage of that highly detailed loan financial data with approximately 60000 unique users collectively accessing that data over 800000 times year to date.
Next month, we plan to launch <unk> analytics, which aggregates the MBS loan and property data.
Across over a thousand markets by property type representing over $3 million Costar properties.
In addition analytics will also release prepayment information historical loan commentary and status and information on 150000 disposed loans, we estimate the <unk> data generated over $3 million of net new annualized revenue in the third quarter.
Costar lender, new analytic tool that helps lenders with the underwriting monitoring and regulatory reporting of commercial real estate loans is progressing on plan. We are walking clients through the system and their feedback has been very positive. We are on schedule for lease in the first quarter of 2022.
First lender release will focus on portfolio risk analytics and surveillance to help lenders meet regulatory and accounting requirements, along with the loan screening tool for originators underwriters sub.
Subsequent releases will focus more on loan origination and underwriting as we broaden the solution to cover the entire lending cycle.
These lender tools are specialized high value applications and so it will be priced at a premium to our standard costar offering.
As such we estimate they represent a potential incremental annual revenue opportunity of over $300 million.
In mid October Costar further broadened its international coverage with the launch of the Montreal market, the 18th largest city in North America by population.
<unk> is the sixth market for Costar in Canada since launch of Toronto in 2014.
Costar currently tracks about 33000 properties monthly out with about 238000 properties in Canada overall.
Last Friday marked the two year anniversary of the great acquisition of STR.
The uneven recovery of the hospitality industry continued in the third quarter, but str's revenue continued to grow at an impressive 13% year over year.
There are quarterly renewal rate on our business remains strong at 94%.
An encouraging sign of the recovery of the health of the industry STR continues to add to the number of hotels that provide data to us in August. This number reached 70000 hotels, which is an all time high.
Separately, we are seeing good progress in P&L, new contributors to P&L and forecast and it's quite impressive.
Back on April 1st Costar suite subscribers received access to highly detailed data on 90000, new and enhanced hotel properties in mid September we reached another milestone with accumulative 1 million property views that data by Costar subscribers, while still early the Costar sales force campaigns targeting high quality high.
<unk> leads have generated over $2 million in new annualized revenue.
Our loopnet marketplace has delivered another strong performance in the third quarter with revenue growth of 17% growth in revenue from our premium Diamond platinum and gold signature ads was 52%.
Up 52% in the third quarter with a number of ads as well as the average price per AD, both growing by strong double digit amounts.
Renewal rates remained very strong reaching an all time high on a rolling 12 month basis in the third quarter, which demonstrates the recognition by our customers the value and effectiveness of Loopnet advertising.
Our Loopnet marketing campaign was in full swing in the third quarter as expected delivered $2 2 billion media impressions in 2021 across TV streaming and social channels. Our inaugural campaign titled Space for Dreams featured prominently on major sports events Primetime television streaming services and a wide variety of digital.
Channels.
Campaign is targeting tenants, who can search and find great spaces on loopnet.
In the third quarter Loopnet marketplaces grew traffic almost 20% year over year and delivered a new quarterly high of almost 11 million unique visitors on average monthly basis.
And in fact, our site traffic is now more than 40% above the pre pandemic levels.
Office vacancy remained remains very elevated by historic standards. We believe that Loopnet is uniquely positioned as the ideal marketplace for brokers and owners to market to help fill those painful current and potential vacancies.
We continue to make progress expanding our direct sales channel for Loopnet, new hires and training new hires and training were launched in the third quarter and we currently have 32 salespeople dedicated to selling only loopnet. Our goal is to have 50 dedicated loopnet sellers by the end of the year or more and continue to hire aggressively throughout 2000.
'twenty two.
Our Costar info sales team will continue to sell both costar.
Strong double digit digit growth for many years to come.
Our residential business delivered strong <unk> results with our home snap product revenue growing almost 40% year over year and SaaS revenue growing almost 45%.
Holmes snap pro registered users grew 15% to 777000.
Total agent subscribers to homes that pro plus grew 53% to over 67000 at the end of the third quarter.
At the end of the second quarter, we repurposed approximately 60 salespeople from homes Dot com to home snap.
Upon completion of their train the group went into production in mid July.
The results have been outstanding and their short time, selling home snap homes dotcom transplants have generated over $5 million in annualized revenue.
The average monthly reoccurring revenue generated by these new salespeople at homes Nap is about 70% higher than when they were selling at homes Dot com.
Throughout <unk>, we eliminated or winding down the vast majority of the products and banner ads sold through the homes Dotcom website, we refocused the homes dot com team to improve and optimize the homes dot com site and implement a new experience for agents and consumers using the platform.
For the first time ever consumers can come to homes dot com or a major real estate portal and connect directly to the listing agent consistent with our your listing your lead philosophy.
Consumers are no longer served up buyer agents, who know nothing about the property or the buyer and Thats and thats been a major pain point for age consumers with other competing residential sites. So we're doing something completely different and hopefully it'll be a much better experience for the agents.
The buyers.
Now in addition.
We are increasing the content homes dot com to give consumers expanded options to find a place to live starting in August apartments Dot com listings are now appearing on the homes Dot com site.
Adding over 800000 apartment availabilities for consumers to choose from.
This added content not only improves traffic to homes dot com, but it is expected to add millions of unique monthly visitors to apartments dot com benefiting both of these marketplaces.
The response to these changes has been very encouraging so far properly has generated sent directly listing agent we're up over 60% since we acquired homes dot com compared to the same period last year.
Two weeks ago, we announced a very important new partnership with the real estate Board of New York or revenue to create city snap the first ever consumer facing search website and mobile App for New York city's.
Residential listing service are connected to that unique feed of data that the agents maintain.
City Snap will provide complete accurate real time residential listing data agents building owners and most importantly, homebuyers and tenants the new site and App will go live in the middle of 2022.
City Snapple offer consumers and brokers multiple advantages you'll be free to list on citizen App. So that means we have all of the listings not just the paid listings well connects potential buyers and renters with listing agent consistent with our your listing your lead philosophy MMA collaboration possible through access to home snaps.
<unk> tools.
The thing that makes city snap partnership Revolutionary However, as promoted listings, where you can find promoted listings on the internet for just about any other product these days, including apartments on apartments Dot com and commercial progress of Loopnet, you don't see that for residential homes in the U S.
Until now as far as our partnership with the real estate for New York, We will be able to offer promoted listings on say snap so agents and agents and consumers will be able to buy preferred placement and features to increase our market exposure.
In a few weeks, we'll be attending the National Association of Realtors Conference. The annual NRA NAR conference as the industry's largest trade show drawing thousands of residential property professionals from across the country.
As we did with our customers and the apartments industry, we want our presence at this show to be assigned to residential real estate brokers and agents. So we intend to partner with them and support them as opposed to trying to dis intermediate them. We believe we can build a profitable successful business without this in mediating our clients.
We plan to use our technology and services to help them strengthen their relationships with their clients and sell more properties.
Less than 10 years ago, we had literally almost no presence traffic or revenue and online marketplaces.
Since that time, we've grown to be the leader in digital real estate marketplaces with approximately 90 million unique visitors per month, and we're generating nearly a billion dollars and run rate revenue in the third quarter for a 10 year compound annual revenue growth rate of 55%.
We have successfully demonstrated our ability to generate leading market place positions by curate the best content offering a great user experience and bring effective market strategies to bear.
Our <unk> business in Spain, which we purchased in 2015 had no marketplace exposure back down and had one site traffic of much larger competitors within five years, we've grown our listing content by 'twenty two times and achieved the top position among decade commercial property portals in Spain with about <unk>.
70% of our traffic coming organically.
<unk> in the U K has grown listing content eight times in three years and increase the number of unique visitors to our site by over four times. During this time reality share of commercial property site traffic has increased from 5% to almost 60%.
We are excited to continue to expand our international marketplace capabilities with the acquisition of <unk>, one of the largest specialized property portals for buying and leasing commercial real estate in France.
Launched in 2008, there are local provides a subscription based commercial property listing.
A listing advertising platform with a client base that includes over 90% of France is tough commercial property agents and brokers traffic to the company's website Bureau logo has grown by 30% a compound annual basis since the beginning of 2018.
<unk> has over 60000 for sale and lease listings and over 425000 visits to its website each month.
This acquisition is an important one for our international expansion strategy is France is the sixth largest economy in the world and as total real estate valued at an estimated $7 trillion.
<unk> has built a leading commercial property specific platform with national coverage, Great Pant brand recognition and excellent reputation among its clients.
Finally, <unk> revenue grew 20% I'm, sorry, 27% year over year in the third quarter of 2021, we saw a 19% increase in average deal size.
And a 32% increase in transaction volume unique.
Unique visitors to the <unk> site grew 230% year over year.
The average number of bidders per asset in the third quarter was $3 six versus two 8% a year ago.
The synergistic network effect of improving supply and demand is reflected in <unk> trade rate, which is the total assets sold as a percentage of the total assets brought to the platform.
Third quarter 'twenty, one 2021 trade rate remained strong at 71%, which we believe is about twice the average trade rate for offline traditional property sales.
On the supply side, the dollar value of assets brought the tax platform year to date grew 37% from $1 7 billion in 2020 to $2 4 billion in 2021.
Total gross merchandise value sold in the third quarter increased 92% year over year.
83% of the assets by dollar value, we closed in the third quarter of 2021, we're performing assets sold by institutional and private client groups.
In the third quarter of last year that figure was only 65%, reflecting the ongoing transformation of <unk> from a distressed asset platform into a market rate commercial property sales platform.
<unk> is still very capable assigned distressed though.
And with office vacancy rates at the highest level in decades, and only 36% of the leased space occupied we currently have an absurdly high functional vacancy rate of 70% in the office World.
The Castle security access data also shows that only we're only seeing about a 100 basis point improvement per month and the percent of swipe cards being used if this issue results in a significant number of distressed properties coming to market Tenex could experience a major windfall signed these distressed proper.
<unk>.
In the quarters to come or years to come.
We believe that the strong performance numbers prove that <unk> value proposition of better speed certainty exposure cost and control than using a traditional property sales process increasingly resonate with brokers buying or selling commercial real estate properties.
So at this point.
I'm going to turn the call over to our Chief Financial Officer, Scott Wheeler.
Sure some riveting numbers with you.
Product.
Do you love the revenue numbers.
When you go to that Charlie Brown show.
The teacher all yours.
Walt Walt one number number one worldwide number number when you listen to me I hear so I can tell anyway.
Thank you Andy for your introduction great.
Great to have another strong financial quarter in the books and of course to see all of the increasing number of product content and marketing investments.
You can hear from an A&D set are delivering such great value to all of our clients.
So it is clear that over the past few years, we have established both costar and multifamily as business.
Mrs that are operating within the massive addressable market and each of them have multibillion dollar revenue potential.
Now similarly, our loopnet marketplace and now our residential business also both operate in massive addressable market and each have multibillion dollar revenue potential.
This quarter, we revised how we report our disaggregated revenue increase the visibility to these billion dollar plus potential business areas Costar multifamily loopnet and residential.
Each of whose revenue will now be reported individually.
Each of the sectors include both domestic and international revenue where applicable.
So the revenue sector that was formerly known as commercial property and land has left the Costar group and it's now working full time from home on a lovely beach somewhere so we had to say farewell to commercial property and land and thank them for this sector is solid five years of performance and exceptional service.
So in its place we now have a new and I must say, a very creatively titled sector that I personally named called other marketplaces.
No I haven't spent a dime of our precious marketing spend to come up with that one.
But.
It does include Tenex, our lands and our business for sale marketplace.
So hopefully I'll remember to provide the relevant comparisons to all of you this quarter for the old grouping, while we transition to the new revenue sector information.
It will help everyone come along with the transition so I'm sure if I missed something you'll probably ask.
So in the third quarter revenue of $499 million was near the high end of our guidance range Costar in residential both outperformed in terms of revenue in the quarter, partially offset by the lower revenue than we expected in multifamily.
Organic revenue growth third quarter, 2021 was 12% which was in line with our expectations.
Costar revenue increased 10% year over year in the third quarter ahead of our guidance, marking the highest costar growth quarter since before the pandemic.
Costar is definitely on a roll.
The strong sales performance by our Costar sales force that Andy mentioned is expected to accelerate the costar revenue growth rate in the fourth quarter to 13%.
Now prior to the 2020 downturn Costar revenue growth has been between 12% and 14% on both the 10 and a five year compounded annual basis. So.
So we're now firmly back in our Costar comfort zone, and we expect to stay there for the foreseeable future.
Keep in mind that we only recently initiated renewal pricing increases, which we expect will provide additional tailwind for costar revenue growth throughout next year.
Information services revenue grew 8% in the third quarter of 2021 is our subscription revenue continues to grow in STR and real estate manager.
One time report purchases and other transaction revenues were slightly behind expectations.
We expect lower transaction revenues in the future as we are now selling costar subscriptions to hospitality companies. Following the integration of TR hospitality data that we completed earlier this year.
So over time this is expected to eliminate the need for these customers to purchase onetime report products.
This is of course part of the subscription model strategy that we employ and we pursue with all of our acquired businesses.
Accordingly, we anticipate information services revenue to grow approximately 9% for the full year of 2021.
Growth in multifamily revenue was 10% slightly below our expectation for the reasons that Andy mentioned.
Approximately half of the revenue growth year over year in the third quarters from new properties advertising with us and the other half from growth in the average rate per property.
As we continue to ramp up our new price program in the fourth quarter and beyond and considering the latest multifamily market trends that Andy discussed we expect the year over year revenue growth rate for multifamily has to be in the mid single digits in the fourth quarter of 2021.
Now for comparison purpose to our sector guidance at the end of the second quarter, the old commercial property and land group of marketplaces delivered 53% year over year revenue growth in the third quarter with all the businesses in this sector are performing at or ahead of our expectations.
Our loopnet marketplace revenue sector includes the loopnet marketplace as well as the international commercial property marketplaces. These are <unk> in Spain, <unk> in the U K and now Bureau loco in France.
Additional bureau loco into our financial results does not have a material impact material impact on the quarter on the loopnet marketplace sector.
The Loopnet revenue increased 70, 17% in the third quarter marketing, the 12th straight quarter of double digit revenue growth.
Signature ads, which grew 50% plus year over year are up both in volume by 20% and revenue per property by 30%.
Once again, the Costar Loopnet sales team knocked it out of the park for the quarter. They sold over 90% of our output coming from Costar and less than 10% went to Loopnet. Now. This is a great news overall of course and even with this trend heavily weighted to costar sales more so than last quarter, we still expect loopnet revenue growth of 14% in the fourth quarter and 16.
<unk> percent growth for the full year of 2021.
Revenue from our residential business was $25 million in the third quarter with homes now providing the vast majority of the revenue as we wind down the legacy homes Dot com products.
Home snap pro forma revenue growth was nearly 40% for the third quarter of 2021.
We expect residential revenue of $20 million in the fourth quarter with home snap revenue growth exceeding 50%, which is higher than our previous forecast the.
The new direct sales force and home snap is delivering great momentum during what is typically expected to be a slower time of the year.
We're successfully winding down homes Dot com legacy revenue ahead of schedule and don't expect a material contribution from these products in the fourth quarter of this year.
Because of this faster elimination of the homes Dotcom legacy revenue fourth quarter 2021 revenue for residential in total is slightly lower than what was included in our prior forecast.
For the full year 2021, and continuing revenue in our residential business is expected to be a little over $60 million, which excludes the discontinued homes dot com revenue.
Revenue for other marketplaces, our newest member of the revenue reporting family.
<unk> <unk>, along with our land business for sale marketplace.
Approximately half of the revenue in the second half of 2021 and other marketplaces is from Tenex.
Because <unk> revenue is transactional and recognized when the closings occur for properties that are sold through the platform. The other marketplaces revenue doesn't behave in that same friendly linear fashion as our businesses that are fully subscription base in other words, we expect a few more ups and downs between quarters depending.
Depending on the property sale timing.
Other marketplaces third quarter 2021 revenue grew 21% with all businesses delivering double digit growth.
There is uncertainty in the timing of when some assets will close in the fourth quarter for <unk>, which caused a modest reduction in our fourth quarter revenue outlook.
Land businesses for sale marketplaces are expected to deliver strong double digit growth in the fourth quarter.
The total revenue is expected in the $32 million to $33 million range for other marketplaces in the fourth quarter of 2021.
Our gross.
Margin came in at 81% in the third quarter consistent with the prior two quarters and a trend we expect to continue through the end of the year.
Net income was $64 million in the third quarter of 2021 and our.
Effective tax rate was 23%, which was in line with the expectations. We provided in our last call.
Adjusted EBITDA was $144 million in the third quarter up 8% from prior year and 9 million above the high end of our guidance range.
<unk> is a combination of slower ramp ups in hiring and slightly lower marketing costs in the quarter.
Adjusted EBITDA margin was 29% 200 basis points above our third quarter forecast.
Cash and investments approximated $3 8 billion at the end of the third quarter an.
An increase of $87 million from the end of the second quarter of 2021.
Looking at some of our performance metrics, our sales force approximated 850 at the end of the third quarter of 2021, which is a slight increase from the third quarter and the prior year and down around 55 people from the second quarter of 2021 the.
The sequential reduction in sales head count is primarily the result of the integration of homes Dot com and the reduction of the sales force that was not repurposed to sell homes now in multifamily.
Loopnet and Tenex sellers increased while multifamily sellers decreased modestly during the quarter.
Contract renewal rates were 92% for the third quarter in line with the second quarter.
And a 300 basis point increase versus the third quarter last year.
Renewal rates for customers who've been subscribers for five years or longer was 97% consistent with the second quarter of this year and 250 basis points above the third quarter of last year.
Subscription revenue on annual contracts accounted for 76% of overall revenue a 1% decrease from the previous quarter because of the homes Dot Com acquisition.
I'll now talk through our outlook for the full year and fourth quarter of 2021.
Full year revenue for the year is now expected in a range of a $1 billion $935 million to $1 billion $940 million for 2021, which represents a narrowing of our guidance range along with approximately an $8 million reduction at the midpoint.
This reduction reflects the more cautious approach to our forecasting to the Tenex property sale timing.
The net impact of Costar strength against lower multifamily revenue growth and the accelerated elimination of homes Dot com revenue in the fourth quarter.
This full year range implies a fourth quarter revenue range of 498 million to $503 million, representing revenue growth of 13% year over year at the midpoint of the range.
We are increasing our adjusted EBITDA outlook for the full year by approximately $8 million at the midpoint of the range. We now expect adjusted EBITDA to range from $615 million to $620 million, which incorporates the outperformance in the third quarter, along with continued cost favorability in the fourth quarter of this year.
Fourth quarter adjusted EBITDA is expected in the range of $1 $61 million to $166 million for an adjusted EBITDA margin of around 32%.
So that about wraps it up for me today I will now turn the call back over to Bill and our friendly moderator to open up the line for questions.
Thank you Scott.
<unk> would you please give instructions and assemble the roster for the Q&A portion of the call analysts. Please limit yourself to one really good question. Thank you.
Thank you Anne.
A reminder to ask a question you will need the Green Star one on your telephone to withdraw your question press.
Please standby BELBUCA, Paul Q&A roster.
And for our first question he had Pete Christiansen from Citi. Your line is open.
Good evening, Thanks for the question.
Thanks, guys for the added transparency disclosures on the revenue side really appreciate.
I think I have to ask this question I know.
We are in.
At the end of October here, but Andy I guess as you look forward to 2022.
Just wondering if you had a sense.
On spending as you.
Think about ramping up the residential effort.
Any sense of.
How that will play and whether there's any connection there with.
Some of the revenue.
Weakness that we're seeing in the apartments, the idea of the opportunity to pivot more more spending dollars from apartments over to Reza.
Thank you.
Yes so.
At this point, what we're focused on with residential is.
Growing our selling operation of harm snap.
So home snap, we're having great success there as you can see from these numbers.
Good strong.
SaaS revenue subscription revenue the concierge product.
You know, we're accelerating that growth rate dramatically. We believe there is additional room to accelerate that growth rate of harm snap.
So the humps not pro product doesn't have a sales force right now.
That product reminds me an awful lot of what Loopnet looked like over the last 10 to 15 years.
It was being sold at the.
A $50 a month subscription level.
Think it would be healthy for us to be growing.
The community of residential agents that regularly connect and log into home snap and turned to <unk> to us.
As an important marketing tool for them and information tool for them. So that's our primary focus and that does not involve large scale.
Our consumer marketing initiatives.
Initiatives Thats really about salespeople in software.
And.
Secondarily, what we're focused on doing is dialing in exactly the right formula for homes Dot com and the right relationship between the professional community homes Nap and the <unk>.
Consumer the buyers who are going to be on homes dot com and making sure that we're.
That design the right tools there for them.
So until we have finished that software finish those designs.
Fully flushed out where these two products are going which we're working very hard on right. Now we are and it's premature to be looking at dramatic spending initiatives beyond adding salespeople to homes dot com and a little bit of software initiatives and the like so it's still open now.
Could we dialed back some of the spending on apartments dot com with so many apartment communities are full probably and we've already had those discussions not not huge and not something that is necessary to free up some initiative over on the residential side.
So.
Alright.
That's in rehab Jackson Ader from Jpmorgan Jackson Your line is open.
Oh, great. Thanks, guys I'm on for Sterling Auty Tonight.
The question really is about timing timing of two things expectations on maybe the timing for the multifamily business to begin to rebound and then.
Andy when you mentioned.
That's a windfall for chronic.
With some of the.
The distressed assets, maybe coming onto the market.
Non one mob when or if that timing might come to fruition.
Sure so.
There are.
Two primary factors with apartments Dot Com I think I've mentioned one is.
This unusual volatility the spike in occupancy levels that's unprecedented.
I am sort of predicting something that hasn't happened before.
I believe it begins to reconcile in the next two quarters.
It could be it could be 1% to four quarters, but I do not believe that sophisticated operators of apartment communities are going to leave their occupancy levels. So high.
And Miss an opportunity to churn rents as well as.
You just naturally going to have so much musical chairs and churn going on because of these pricing changes in work from home changes. So I think it will break pretty quickly the second major factor is.
The fact that we are delivering significantly more economic value to our customers than we've ever delivered before.
And I believe there is an opportunity to recognize that we trialed some of that in September.
And we will continue to ramp that up into the fourth quarter and first quarter.
And the second quarter.
So I think youre probably.
Not looking for any.
Dramatic changes in the fourth quarter this year, but I think you will move into a.
Our strong 2022, and again I want to stress that the product itself is as strong as it's ever been and we've actually been a part of probably helping the industry to achieve the highest rents they've ever achieved I wish we had.
The options on rental levels.
But we don't.
<unk>.
And I guess the second question was when would we expect to see.
A tax benefit from distressed levels in office well.
It's not a it's not something we can predict the exact data something like that is just my.
My sense is as I walk through all of these office buildings and I don't see a human being.
But that Theres, a potential problem, there and so at some point rash.
Irrational Cfos will begin to rightsize some of these properties.
I do believe that work from home as it.
It is not an effective.
Long term solutions I think that'll that'll mitigate to some degree in the market I'm seeing all kinds of examples of businesses.
Running into trouble because they are not.
Operating at the same productivity levels when the work from home model, but.
I think that.
I think it could be a 2022 thing I can't believe there won't be some distress somewhere especially.
Sort of second generation office buildings.
I have a tougher time.
But <unk> is really good at selling finding the biggest thought audience possible to find that buyer for some real oddball stuff and some on some high quality stuff. So.
Would think 2022, but I'd be surprised if there's not some sort of something come in there. So these two facts of this sort of.
Effective 70% vacancy rate is potentially a tailwind behind loopnet and <unk>.
<unk>.
For our next question, we have David Chu from Bank of America, David Your line is open.
Hi, Thank you so should <unk> be the trough in multifamily revenue given that you get some pricing benefit and then occupancy rates can't really go higher than that.
Makes sense.
Yeah.
That likely makes sense and yes, it'd be really odd if occupancy once rates went higher yeah.
Much room left there that'd be strife.
[laughter].
Yes.
Okay. So I think Thats a fair assessment.
The next question, we have George Tong from Goldman Sachs. Your line is open.
Hi, Thanks, good afternoon.
So apartment vacancy rates have reached the lowest level in recent history, and you mentioned that that should normalize in Q quarters as well.
Yield management systems with shrimp.
What's the likelihood that this could be the new norm over the medium term as the economic recovery continues to take hold and how.
How receptive have customers been to some of your pricing and lead management initiatives to try to.
In the draft.
The prevailing dynamics.
So I think that I do not believe it is the new norm.
Have 99% leased communities I do not believe it's sort of like unemployment like if you get to 1% unemployment you have a very unhealthy economic situations. If you get less than X number of days of supply of housing you get to a very you get to a frozen market. So I believe that.
It remains an owner's interest to have enough vacancy that theyre sort of testing they've had churn in there and that they're testing the upper limits of their pricing.
For these folks.
With fixed mortgages moving these rents up is extremely attractive NOI goes up at a much higher rate than their rental rate does so you move you.
You can move 10% up on your rental rate you might be moving up 40% on your NOI and cap rates of three 5%.
Folks are motivated to push rents they may push rents and sell the asset right.
But I don't think it's a new normal.
And.
Second.
Secondarily the reception we've received to the pricing changes has been very positive again I uphold.
I met for a couple of hours.
Recently with some of the senior sales leadership on the apartments side and asked had anybody canceled and.
And then answer I get back without.
Doing a deep dive audit was no and then secondarily over overall people were fine with it and I remember these people are pushing these pricing increases too.
Not that we are increasing their price we are reducing the rate at which we reduce their cost per lead at a time in which they're getting tremendous value from these more and more efficient lower cost leads.
I think it's possible that we're giving some of these communities leases for as low as $30 at least when they have historically paid potentially 300 $700 per lease.
So I think.
It's a fairly straightforward conversation.
We're delivering value and.
And I think folks want us to continue to delivering that kind of value. So it's a.
Sending people to respond to now I'd be disappointed if some owners property managers somewhere didn't bring out their procurement officer and try to beat us up.
So expect that to happen, but no cancellations so far is pretty good.
Very helpful. Thank you.
Our next question, we have Ryan Tomasello from T B W.
Ryan Your line is open.
Good evening, thanks for taking the question.
It is clear that apartments will continue to be a bit of a drag on growth heading into next year, depending on how these on.
Unprecedented occupancy levels of all but I wanted to give you an opportunity to walk through some of the bright spot tailwind for the business in 2022, and where you think there is room for growth acceleration for.
For example at Loopnet sales force is ramping residential where you're making investments and also costar suite with these new product enhancements on the Epsilon.
Without tipping your hand on guidance, how are you thinking about the organic growth.
Power for the business progressing through 2022 and even beyond.
If you are willing to get out that my Crystal ball.
Sure so.
So first of all like.
Bright spots.
And just the multifamily in apartments Dot com.
It's important to keep looking at those penetration rates overall, so there's two factors what's your.
What's your revenue is per unit with your existing customers and then also your ability to add new customers. So we still remain.
At very low penetration rates, we are proving our ability to sell not only at the 120 150 unit communities, but we are proving our ability to sell successfully at the 75 unit community. The fifth unit community <unk> community 10 unit community for unit community. So it's all Greenfield.
For apartments Dot com, we have we can.
Double triple quadruple grow tenfold the number of communities participating with us through time. So that's an important growth driver that remains here in 2020 two and finally, we remain very focused on.
So.
And then the other thing is that.
These pricing initiatives and right sizing also I believe could generate.
That may well generate.
Some good momentum moving into the middle.
2020, due for apartments Com Loopnet is as I said doing really well you see in the traffic numbers I really do believe that.
Digital marketing is the.
The new norm and commercial real estate and I believe we have an extraordinary opportunity there because of our.
Incredible share of traffic and eyeballs in that industry. I think there are a lot of folks in commercial real estate, who are still operating on 1985 marketing paradigm is largely based on print or digital substance of print and.
That theres going to be more and more awareness and awakening there.
I'm thrilled with what's happening in home snap everyone was looking for us to go out and spend a trillion bucks on marketing and do.
Sort of exactly what our EEA group is doing or what right move is doing.
We will develop and pace something like that but.
We have a great product there at home snap that residential agents like and it hasnt been widely marketed or sold to that community and we're pretty good at doing that so I think theres a lot of.
Revenue that can be built there and thats great revenue because it strategic revenue that builds the base platform that's unique to us.
To be able to also be a leading player in the consumer marketplaces Costar you you heard.
Our discussion of you heard our discussion of all of these new sort of initiatives beyond that.
The upsell process, but just the lender STR that sort of progression of new features.
It's going to be.
I am blown away by how well our salespeople are doing on that side, just the individual productivity rates I'm seeing are unprecedented and the.
The whole reason, we're doing this upsell initiative.
The whole reason, we've been launching a successful upsell initiative is to prep the field for the next revenue growth initiative, which is.
Unlocking the value of cross border information with our with our gradual expansion into Europe continued expansion in Canada, and the fact that the vast majority of investing of institutional grade assets crosses borders we want to.
Be able to provide solutions, there and then actually drive revenue for our shareholders there as well so no shortage of stuff going on.
Across all these businesses, we've got we're going to get some market anomalies, some odd things happening here and there a black Swan event here or there, but a lot of tailwind overall.
And thank you Mark Schwartz and drew Davidson for just killing it in your sales team there in Costar.
Okay.
Our next question, we have John comp now.
Even incorporated John your line's open.
Hey, guys good afternoon.
Good afternoon.
Robin why partnership and city snap I mean, obviously stood easy kind of dominate that market in recent years, we've heard a lot of pushback on the kind of de listing fees I think they started with a freemium model, but the pricing has gone from I think it was $1 56 per day and that's happened in a handful of years, but Andy I think you said this is going to be free to.
So I'm just curious about city snaps kind of approach to pricing.
Or are we basically thinking about this more of a like a strategic move for you guys, maybe something you can build off.
Sure.
Sure.
So remember city snap is home snaps.
And there are over a million agents and those agents when they start using city snap when the MLS buys it for them it might be free it may not be.
But when that when they subscribe to the enhanced.
Functionality of the product they may begin spending.
50, $50 a month with us similar to what we used to get for Loopnet than if they start using us for concierge marketing services. They might spend 500 Bucks a month with a 600 Bucks a month Lewis and when you start thinking about 1 million agents spending 506 hundred Bucks. A month, then you start to get to an interesting number.
<unk>.
Because that's not a year that's a month 500 Bucks a month, so we're selling a lot of that right now and that's going well so.
We don't really have to do anything like what Streeteasy is doing which is so unpopular in order to be financially successful.
Yes, I'm aware that like folks are pretty annoyed at Streeteasy and the fact that you know the prices are going up so rapidly. It's all paid list and some of the functionality where.
They're using other people's listings to try to get brokers fees for agent fees for other People's like we have to pay to not have a different agents name on your listing is kind of black.
Blackmails too strong a word for it but it's zillow mail or something I don't know it.
It's a little offensive to the industry, which is why youre seeing stuff like such an unprecedented thing that's never happened before it but.
There's never been an MLS before in New York City.
This is the first time the agents have all gotten together and actually created something together.
<unk>.
And we're honored to have the chance to try to serve that initially the fees are on home snap pro plus which is sort of say snap pro plus and.
The concierge marketing products and then ultimately over time it will be.
Marketing revenue very similar to what we do with apartments Dot Com Loopnet RBA group. These are marketing solutions that allow almost all the brokers to participate not just a small selection of them.
We do that allows them to participate in a way in which they feel that where their ally not their disintermediation enemy. So.
There's a whole bunch of ways. We can do this now we don't we don't.
Minimise the challenge of building, an audience and a but.
We obviously have experience in building audiences and.
We we like taking on these challenges I'm not sure if I answered your question, but.
That was that don't exist.
Sure.
Our next question, we have Andrew Jeffrey from Tree Securities Andrey Your line is open.
Thank you I appreciate it good afternoon, guys, Andy I, just want to understand the dynamic.
Family pricing and I appreciate the.
Yes.
Fact that youre lowering.
Apartment owners and managers.
Cost to generate leads and thats. The key can we think about.
Perhaps because of the value proposition.
A period at some point in the next 12 to 18 months as vacancies normalized where.
We see demand increase on top of.
The pricing increases you put in place I mean.
In other words I wouldn't expect prices to revert right. So you could get some leverage coming out of this timing uncertain.
Oh absolutely.
So.
The value proposition, we delivered is really incredible so when we bought apartments dot com <unk>.
Five six years ago, they were generating I believe sub 20 leads per property per month, maybe 10 to 15 were not generating 175 leads per month, the pricing as it moved anything like that.
And so re rationalize in that pricing to effectively slow the rate at which we bring the cost per lead down.
Is separate from what's going on these super high occupancy levels. So we might see revenue growth associated with more.
A more rational pricing of lead delivery.
Recognizing that some communities pull many more leads some communities need less but we may see pricing revenue acceleration from that and then you may see a return to people needing to move up our tier levels to drive more listings.
See vacancies as people move back and forth and played musical chairs and rentals with all this work from home stuff and as well as <unk>.
Potential changes in the economy and then also changes.
Changes and then get higher rent growth. So if these folks pull another if our if our clients pull another 10% rent increase.
You know.
They may see.
Occupancy levels fall.
Still at high levels, but our lease will become worth 10% more than they were before and again from an NOI perspective, our leads become worth.
30, 40% more right so.
I think youre right it can be a double whammy, but.
Mr Wheeler here.
Has to play the role of E. R M.
I see it before is that we're going to talk about it but.
There are some positives.
Mentioned, the renewal pricing increases in your comments, but we're selling new ads under our new pricing structures that are.
Being sold for 15% to 20%.
Price is higher than we were selling them for in July and we get hundreds of properties that are coming in paying those prices so to your point Andrew.
We've typically seen 10% volume growth over the years and we have plenty of room to penetrate with volume growth. So if you add a nice volume growth kicker on top of 15%.
New price card.
Yes.
That's interesting.
Coming from EUR right.
The New York.
In New York.
Over the last day or.
Leslie.
Our next question, we have Mario content that Keith from Jefferies. Mario Your line is open.
Hi, guys. Thank you for the time.
Just given all the dry powder that you guys are still holding.
I'm just wondering how would you think about the potential timing and maybe even sizing of deals over the next 12 months or maybe even asked a different way.
If your current pipeline.
What's in your current pipeline could you just give us a sense for how many deals you think you can close that are maybe more tuck in in nature and are there any chunkier deals out there that maybe we're not seeing in the.
The private market.
Sure.
I appreciate the question.
And as you know, we're not going to tell you anything that really identifies anything I can tell you anecdotally.
15 minutes before this call.
Hi.
Picks up the phone and called Martin Johnson, our head.
M&A and.
Update them on four or five thoughts, we had a relatively small companies, but it could be nice tuck ins that are strategic.
There is always a big pipeline of strategic things. There are some that are a little bit bigger there is some I think that will get it.
I think it's pretty straightforward and positive that we're working on.
That has nuances that are challenging but it could be interesting.
We.
Just turned down a pretty significant deal because after due diligence because we felt it was.
Ultimately not the right value and.
And had too much hair on it.
And but I think it's more of a right now what we're looking at is more.
Deals that sort of enhance the sort of general initiatives you are well aware of.
Not looking at anything right now that really jumps us out of the things you're familiar with the general strategic themes that our investors are well aware of but there are a lot of things that can help us strengthen.
What we're already doing.
Yeah.
The next question, we have Jeff Mueller from Robert Baird, Jeff Your line is open.
Yes, thank you for apartments Dot com.
Can you give us some perspective on how the business is performing.
Metro areas that are closer to the median for vacancy rate.
Talking relative to the historical median or within one standard deviation or something to the extent to which they are they are out there and then historically.
It has the business been too.
New apartment construction I recognize that there's a interplay with occupancy rate, but just in terms of the need to advertise.
The lease up of new builds.
And any update on those trends or sensitivity.
Sure so.
Uh huh.
So just keep in mind, one thing as you consider what's going on here.
If you ever think about the unemployment new job creation numbers, you might people might be expecting 280000, new jobs. This month.
People forget that that is a 505 million jobs lost and $5 2 million jobs gains. So as you know in the 200000 is.
And that's the same thing here.
The.
You might have a.
A relatively small movement in people downgrading.
Which causes a softness in the apartments sales because they're so occupied the under construction side of the business is solid and cranking and we are at a.
At a near all time high of supply in those communities.
I mean <unk>.
Typically look to apartments dot com to fill up their communities when they hit the market fully vacant.
So that business as good as it's ever been and it does it take.
A nobel laureate economist to know that with rents climbed 12%.
And <unk>.
Cap rates going down to three point whatever percent.
There youre going to see more supply, especially in apartments as an inflation hedge.
So.
I think you're going to see a lot of activity in land and I think youre going to see a lot of activity with people, bringing apartments to market as quickly as they possibly can.
So I think that business is going great in terms of.
In terms of.
Anecdotally one market versus another you know these different markets or gyrating doing these.
Spikes in occupancy is slightly different patterns. So the beginning early stage a pandemic you saw spikes in say like a secondary tertiary cities like enrichment or San Diego and you saw vacancies.
Rise in markets like New York that you see New York shoot.
<unk> and <unk> and occupancy levels down in Vegas, because they're all moving around.
We're pretty good volatility so we don't have.
We arent really identifying clear cut different trends from one market to another just generally the overall theme is demand for apartments right now is at an unprecedented high.
And the supply side too, but demand is super high and.
It's across the country.
Our next question, we have Keith <unk> Shelton from William Blair. Your line is open.
Hi, Thanks for fitting me in here.
On the international data opportunity how important are these commercial marketplaces rail.
<unk> now the recent one in France.
To your overall data gathering capabilities in these markets to pull back into the global Costar data platform and then how are you thinking about continuing to expand commercial marketplaces in other countries and I guess into regions like APAC could you do that with existing assets or will you likely continue to do small.
<unk> acquisition like like Bureau locale.
Yes, we would see going backwards there.
We would.
As we've been for many many years, we would always be open to looking at good strong players who have.
Our part of the data clearinghouse for the market.
These are these are sort of good great raw material companies to help build a larger platform with so.
Deals like very loco, we would we would keep looking for those and they're out there around the world. So we keep track of them.
Now in terms of how important are these sites well.
They're very valuable I mean, we can go into a market without them like you can see us, creating a marketplace in Spain successfully but we like to accelerate that growth and.
<unk> marketplaces generate a lot of high quality data users actually electronically submit a lot of that data.
It is well within our wheelhouse when we pick up like.
Youre a loco in Paris.
We can I think we have a good skill set in growing their traffic coming up with more pricing.
A more more value propositions for their advertisers more pricing opportunities for revenue driving for us we.
We usually have the ability to improve their imagery some of their marketing.
Strategies for their clients.
But.
We can take the data coming off of Bureau logo and we have already identified.
Maybe eight or nine other sources of data that we connect and with that data and build a very robust information tool for the professional community for the investing community and the marketplace is just something special that gives you a unique data.
And.
The more people shopping on that marketplace. The more people want to give you a day and the more people will give you a day or the more people want to shop on that marketplace and that virtuous circle feeds our information platforms. I also remember one of the things. We're doing here is we are.
We believe that just like the phenomenon, we experienced the United States. When you are selling data in couple of cities in the United States. Your data is valuable but not wildly valuable once you are selling a footprint of almost the whole United States. The people to find your data who really operate a national level that world grows and your datacom.
<unk> dramatically more valuable.
Showing that same effect in Europe right now we're only.
We're providing solutions and a couple of markets, we think that once we're providing solutions across the major economies, which we're really working making good progress on right now with Germany, France, the United Kingdom, Spain.
And others.
That your value proposition will grow and you'll see more profitability in Europe more revenue growth in Europe, and then globally.
We also think we are focused on bringing loopnet internationally.
We believe that.
That's a really good product the way it presents the properties is.
Appealing and has international appeal.
Sure.
I just came back from two days in Paris discussing.
In excruciating detail, how the model has changed slightly in various markets and how you are disconnected listings for properties et cetera, et cetera, we can incorporate that into loopnet.
Think that Loopnet.
Starts off with a significant advantage in that I think Google It takes us a whole bunch of positive signals from Loopnet I can see that in some markets, where we don't we barely have any properties in a market outside the United States in Loopnet performs exceptionally well just because it's so successful in the United States. So we are.
We're interested in.
Having both the local marketplaces like their local <unk> reality, but also have the international market with Loopnet in particular, given the fact that a lot of the appeal of the international marketing platform like Loopnet.
As cross border sales, which are big and our people can invest in a triple net easily across the border and they do so loopnet will do really well with the for sale side as it did in the United States as it grew out there and then I'm also interested in having tenex chase that growth of Loopnet.
Again because.
I believe that Ah.
Very high percentage of these ultimately successful bidders at 10 X are actually international audience.
So probably more than you were asking for it but a couple of thoughts.
Really helpful. Thank you.
[laughter].
Sure.
Alright, our next question we have my yeah.
Tandon from Needham Your line is open.
Thank you good evening I'll keep it brief and thank you for fitting me in here.
Scott I was going to ask you maybe around margin as you think about the roadmap to 40% by 2023.
The softness on the multifamily side I get it it might be temporary and then maybe some of the timing issue that Andy talked about on the <unk> impact does that in any way change your investment programs as you try to get to that target model or does that remain sort of status quo.
Yeah, I don't think we have really any reason to make major changes in the investment model now I think margins have performed very well certainly in an apartments. This year.
As we focus some investments in other places, but they've been running up on top of the strong marketing they've had like Andy said, we will look at that the levels of spending there and where they are most effective going forward I think the margin profiles are strong the leverage we're getting is strong on growth across all the platforms and so I think as we will balance that into the <unk>.
<unk> will see continued.
Funds come available that we can reinvest in the most attractive opportunities and still give great margins compared to obviously many others in the market that don't like to deliver margins. We still think that's an important part of our.
Our part of our value proposition so.
No real change in speed of course, there and.
Appreciate you hanging with US my onto the last question of the night.
Well I think with that we're going to.
Wind up the call. Thank you for all the good questions.
So we appreciate you joining us for our third quarter call today, and as we move towards the end of 2021 can't believe that we're actually doing that but here we are we're.
We are working towards two important short term milestones one is the goal of reaching $1 billion of annualized revenue run rate in our marketplaces by the end of the year and the second is we look forward to crossing the $2 billion revenue run rate for the company overall solidly and cleanly and.
So we think the strength of our franchise is clear and the amazing traffic growth lead growth and high renewal rates for showing right now and the successes we're showing with.
So many of our product areas and the strong sales growth. We remained focused on growing the core businesses, while working to triple our addressable market opportunity through investments in residential and international expansion. So we look forward to meeting with you again for our fourth quarter call on February 20 to hang in there I know, it's a little bit longer.
And the normal quarterly interval, but we'll be there and until then stay safe and thank you very much for participating.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].