Q4 2021 CoStar Group Inc Earnings Call
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Yes.
Good day, Thank you for standing by and welcome to the fourth quarter 2021, Costar Group earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad.
Please be advised that this conference is being recorded.
You require any further assistance please press star zero.
I would now like to hand, the conference over to Bill Warmington, Vice President of Investor Relations. Thank you. Please go ahead.
Thank you Hello, good evening and thank you all for joining us to discuss the fourth quarter and full year 2021 results of the Costar group.
Before I turn the call over to Andy Florance, Costar group, CEO , and founder and Scott Wheeler, Our CFO I would like to review our Safe Harbor statement.
Certain portions of the discussion today may contain forward looking statements, including the company's financial outlook and expectations for the first quarter and full year 2022 based on current beliefs and assumptions.
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 in Costar group's 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. The date of this call Costar assumes no obligation to update these statements whether as a result of new information future events or otherwise reconciliation to the most directly comparable GAAP measures of the non-GAAP financial measures discussed.
Just on this call, including EBITDA adjusted EBITDA non-GAAP net income and forward looking non-GAAP guidance are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at Costar group 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 Andy Florance. Thank you Bill good evening, everyone and thank you for joining us for Costar group's.
First quarter 2021 earnings call.
Total revenue for the full year 2021 was 194 billion, which is a 17% year over year growth rate and above the high end of our guidance range given in late October .
Fourth quarter revenue grew 14% year over year to $507 million crossing through an important milestone of $2 billion run rate for the first time.
December 2021 was our best sales month ever Novell.
November December and January with three of our strongest sales months ever.
Net bookings of $67 million in the fourth quarter of 2021 were a new all time high for us up 37% year over year and 43% sequentially.
Our trailing 12 month bookings in the fourth quarter was $217 million growing 18% year over year.
This is a significant acceleration from the trailing 12 month bookings growth of 6% year over year in the third quarter of 2021.
Our profit performance in 2021 was also very strong adjusted.
Adjusted EBITDA for the full year was $647 million, an increase of 17% and 27% above the high end of our guidance.
21, 2021 was a solid year of growth and expansion for Costar group, we've made significant investments in the costar product in our unified platform overcame significant overheated apartment challenge market apartment market challenges apartments dot com and.
And we expanded our loopnet and <unk> businesses and established a solid foundation and the residential property sector.
Our addressable market continues to grow every year in our estimation now approaching 100 billion Tam globally, a couple of weeks ago I ran across our Tam estimate from the year 'twenty.
2003, and that indicated global Tam of $1 6 billion at that point, our total revenue was under $75 million.
The difference we've seen in 20 years as our revenue is now bigger than we estimated the total Tam global to be into 2003.
It took US 16 years to go from zero to $100 million revenue run rate in 2003, another 14 years to get to 1 billion annualized revenue in 2017, and only four years to suppress surpassed $2 billion revenue run rate.
5 billion here, we come.
Costar revenue was $723 million for the full year 2021 up 9% coasts.
Costar is year over year revenue growth accelerated throughout 2021, we started the year with a 4% year over year growth in the first quarter 2021, and it climbed until we exited at 13% in the fourth quarter. The strength is coming from a combination of record sales rep productivity continued product upgrade.
<unk> price escalations on subscription renewals and strong renewal rates.
Net bookings in the fourth quarter of 2021 grew three X versus the fourth quarter of 2020 and matched our all time high quarter.
The third quarter of 2021.
The series sales team is firing on all cylinders delivering all time high productivity in 2021 up almost 40% versus 2020.
In 2021, we began upgrading the 18000 accounts, who are using subsets of costars full product offering.
This program is very popular with our customers and by the end of January we have converted about 5700 counts to the full global Costar product. Our original estimate was that the upgrade program would contribute $30 million to $40 million incremental revenue over 12 months to 18 months period.
The adoption rate, however has been stronger than we expected. So we're expanding the number of accounts to upgrade to include appraisers owners government agencies and many others.
This raises the number of Upgradable accounts from 18000 to 21000.
As a result, we believe our original estimate that the upgrade opportunity would generate $30 million to $40 million is likely not to exceed $50 million.
After having suspended price increases on costar subscription renewals during the pandemic.
<unk> restarted normal renewal rate increases in the third quarter of this year.
Even at these higher price points from annual renewals and upgrades clients continue to see strong costar product.
And we see that in multiple metrics are accelerating revenue growth. For example is coming from a combination of both volume and price.
Finding that as we upgrade accounts were often increasing their number of users and our user count is now over 170000 subscribers.
In addition, our renewal rate for Costar remains very strong 94% in the fourth quarter of 2021, well above the historic average of 92, 4%.
Our sales team has put a significant effort into strengthening our relationships with our clients, we see that effort pay off as our net promoter score has been increasing and as it does so does our renewal rate.
We believe that the launch of our new lender product on February 8th sets up another long term growth driver for Costar.
Feedback, while the pricing beta has been extremely positive.
Truly revolutionary product that reverses a traditional flow of data and the industry in the past most lenders pull data manually from multiple sources Costar lender in contrast automatically connect their loan portfolio to costars industry, leading research market analytics, and our proprietary compass credit default model.
The compass credit default model is the most mature in the industry.
And this makes this solution unique is the best source for portfolio surveillance concentration risk stress testing.
Current expected credit loss seasonal supporting loan originations and underwriting. So we're very excited about this new product.
We have a dedicated and trained sales team that will be focused on upgrading costars over 1000 existing lender clients and engaging 6000 other prospective lenders across the industry.
With FASB second round effective date for seasonal fast approaching in January of 2023, we feel our solution is well timed.
Literally thousands of institutions in the U S without an answer for Cecil in place with this deadline approaching.
Because costar offers lenders a range of solutions it positions us favorably versus the competition.
We continue to invest in long term growth opportunities for Costar and that includes international expansion to support our growth across central Europe , we've begun hiring managers and teams or photographers for Spain, France and Germany.
These teams will be supporting both our costar market Costar and marketplace assets as we begin the process of deepening our industry data and the largest European markets or.
Overall, I feel very good about our growth momentum for Costar and expected revenue growth in 2022 to move above the historical 12% to 14% growth range to around 15% year over year.
I believe Costar has a $10 billion global market opportunity and which we are less than 10% penetrated today.
The apartments com sales bookings rebounded sharply in the fourth quarter climbing 20 million over the third quarter, driven by improved sales execution and price realization in the face of a continued ultra low vacancy market.
Apartments dot com generated $675 million of revenue in 2021 up 13% year over year.
Revenue growth in the fourth quarter was 6% in line with our guidance of mid single digits growth.
2021 was a good year for apartments Dot Com franchise average monthly unique visitors in the fourth quarter of 2021.
We're $25 million up 17% year over year that is two five times rent pass average monthly unique visitors in the fourth quarter of 'twenty 110 times apartment lists 17% higher than those rental network and 11 times the jumper.
<unk> delivered by apartments Dot Com grew 46% in 'twenty, one and 27% in the fourth quarter.
To keep this marketing momentum going in the first quarter of 'twenty, two we will be releasing a new AD campaign, featuring goldbloom and five new TV spots and eight new social video campaigns.
When you see these new campaigns I think youll. These new spots I think you'll agree with me that as some of the best work. Our team has produced to date and look forward to having them out there.
2021 was a great year for our multifamily customers with record rent growth of 11, 3% and a vacancy rate of only four 6% the lowest ever recorded.
'twenty two is expected to have rent growth of six 5%, which would be the second best year on record with higher but still very low vacancy.
The strong industry backdrop for apartment owners combined with a superior advertising valued demonstrates our site traffic and leads.
<unk> departments dot com to execute on our new pricing strategy.
As a result cost per lead has begun to improve and we saw a significant.
<unk> net bookings in the fourth quarter of 'twenty, one over the third quarter of 'twenty one.
Client losses have been minimal.
The strong net bookings momentum combined with modest improvements in the macro backdrop gives us confidence that multifamily will be able to return to double digit organic revenue growth in the second half of 'twenty two.
We estimate multifamily is a $7 billion revenue opportunity for us in the U S and we believe that apartments dot com is well positioned to pursue that opportunity through unit penetration and demonstrated pricing power.
21 was a very successful year for the Loopnet franchise full year revenue of $208 million in 'twenty, one grew 15%.
The space for Dreams campaign delivered $2 2 billion media impressions in 'twenty one.
Unique visitors globally grew 22% year over year in the fourth quarter of 'twenty, one and a loopnet CRE network traffic was 10 times the level of the network nearest competitor.
Signature AD growth continue to be very strong up 21% year over year in the fourth quarter of 'twenty one.
We continue to focus on expanding our sales distribution strength and are currently very close to our year end 'twenty, one sales head count goal of 50 and continuing to aggressively recruit salespeople for Loopnet.
And 'twenty two we plan to continue this space for dreams campaign support in the industry and driving exposure for our advertisers.
We expect Loopnet revenue growth continue in that 10% range for the first half of 'twenty two while we continue to build out a dedicated loopnet sales team.
Feel confident that we have never had stronger leadership at better product road map more innovative marketing stronger technology and better traffic than we have now.
That's why I believe that Loopnet is well positioned for strong growth going forward.
We remain excited that Loopnet has the industry leading position in what we believe is in the early days of a $4 billion to $5 billion revenue opportunity.
<unk> had a strong year in 2021, the division's first full calendar year as part of Costar group.
<unk> sold $2 2 billion in gross merchandise value in 2021 up 47% year over year in the company's best since 2016.
In the fourth quarter of 'twenty, one tenex sold $727 million in gross merchandise value up 39% year over year.
The Companys best quarter since the fourth quarter of 2015.
Full year 'twenty, one revenue of $57 million grew 7% year over year.
While total sales in the platform is climbing it does not translate as quickly to revenue because we've lowered our fees to drive more high margin volume and to play an industry role at greater scale.
We're investing in significant site in process automation to create to be able to process. These higher volumes at high margins.
<unk> continues to sell more and close more trade rate, which is total assets sold as a percentage of the total assets brought to the platform has improved from 54% in 2019% to 66% in 'twenty and 73% in 'twenty one.
And this has happened while we have been expanding the buyer base significantly.
We estimate that <unk> is a $4 billion revenue opportunity to pursue that path Tam we're aggressively growing <unk> sales team currently up to 54 people.
These new salespeople have been incredibly productive in the first quarter 'twenty one.
New sales reps didn't add any new deal ended at any deals in the quarter and the second quarter. They delivered 5% of the deals in the third they delivered 20% in the fourth they delivered almost a third of the deals.
In addition, the research team in Richmond, which is in constant contact with brokers and principals, who can benefit from 10 X has begun to contribute deals to the tenex pipeline.
We've opened round one of the battle of bids 2022, a gamification of the Tenex bidding process in which people can get the price at which the real estate property will be sold with a chance to win up to $3 million in cash prizes.
Our goal is to drive broad brand awareness and platform participation. We think we've created a really fun gamification of the series sales process. It will bring the <unk> story alive and engage tens of thousands of key prospects.
'twenty one was our first full year in the residential property sector, we generated $75 million of revenue home snap revenue grew 52% year over year on a pro forma basis in 'twenty, one driven by our larger direct sales force of 60 people.
In the fourth quarter of 'twenty, one home snap grew registered users by 12% year over year to <unk>.
786000 agents.
And as home snap pro plus paying subscribers.
Grew 29% year over year to 68000.
Our acquisition of Homestar Com in May of 'twenty, one was very popular with agents as we implemented a your listing your lead product approach and doubled the site traffic year over year in the fourth quarter of 'twenty one.
That's right we doubled the site traffic in the fourth quarter of 2021.
Yes.
Sounds familiar.
Our strategy for transforming this massive tam into revenue involves three phases grow monetize and scale by grow I mean, first we're going to focus on increasing traffic and engaging buyers and sellers on our platform by monetize I mean, we'll begin to introduce paid ads, which increased visibility for the clients and provide.
<unk> product features and by scale I mean, moving into the phase, where we stratify AD offerings to provide additional flexibility for agents and continue introducing more product features.
Phase one growing traffic is our focus today, we have a track record of success in building organic SCO in our marketplaces, including apartments Dot Com Loopnet, Rialto, <unk> and lands of America and more.
How do we do it by building easy to use technology with sound SCO structures and with features and content to people value.
For homes Dot com that means building assistant that breaks down the wall between real estate agents and homebuyers.
93% of homebuyers shop for their home and the Internet and 90% of homebuyers using agent to help find a home.
Agents and buyers need to share information and feedback about home listings, but thats difficult today, because they operate in two separate essentially closed and disconnected systems.
<unk> agents use their local MLS, which buyers have limited or no access to buyers who use various real estate portals, but those portals are generally trying to get those buyers to use the portals small group of agents. So they're not effectively opened buyer agent collaboration tools across the industry.
In fact and in essence, the structure was designed specifically to prevent transparency and collaboration.
After watching hundreds of hours of interviews focus groups I can tell you that the thing that customers consumers and agents want that theyre not getting and then where we can provide is collaboration.
Home snap is going to change that by enabling agents and buyers to share listings and feedback, but theres listings by empowering agents with professional collaboration tools.
Think it's possible to bring millions of buyers into our platform.
The other takeaway from our interviews with consumers and agents as they want to be able to research the neighborhoods and parks that are important to them. When they are considering a new home, we will be creating powerful and professionally produced rich media and content of neighborhoods parks and condo buildings across the United States.
The other thing at homes Dotcom will do is support your listing your lead by enabling potential homebuyers to easily contact a listing agent at no cost that agent. We believe that some of these free leads to listing agents will increase the usage of homes dot com at home staffed by all agents and provide a dramatically better user experience.
For buyers out there shopping.
We expect phase one of the product will be ready to go at the end of 'twenty two.
With a full launch in the first quarter 'twenty three that said you won't need to wait until end of 'twenty two to see our residential strategy in action you will see a microcosm of our residential strategy when we launch city snap in New York in July .
In October we announced a partnership with the real estate Board of New York to create the first ever consuming facing consumer facing search website and mobile App for New York City's residential listing service similar to homes Dotcom City Snapple connect potential buyers and renters with listing agents consistent with our your list.
Your lead philosophy, and make collaboration possible through access to home snaps suite of tools.
Will also feature promoted listings for residential real estate for the first time similar to what we do with apartments Dot com and many other real estate portals and other countries do.
We believe that residential is a huge opportunity for Costar group. So in large in fact that we believe our residential revenue will one day eclipsed the revenue we generate in the commercial property sector, we estimate U S opportunity for residential is 72 billion in the global opportunity.
Is.
210 billion not $200 210 billion three times the U S opportunity.
We believe that we can grow our residential revenue to $1 billion over the next five to seven years as part of our new long term revenue goal of $5 billion in revenue by the end of 2007.
That scale, we would expect our adjusted EBITDA margins to be at or above our five year target of 40% based on the success of similar residential marketplace businesses around the world.
In order to achieve this goal we plan to increase our level of investment in the residential business by approximately $200 million in 'twenty two.
The majority of this investment was funded by the significant cash generation of our existing business as we still expect to generate over $605 million and adjusted EBITDA 22 net of that residential investment.
I'm excited to make I am excited to make significant progress this year and believe we have a unique opportunity to add another $1 billion revenue platform plus to our portfolio.
In December we announced plans to build a two building 750000 square foot corporate campus by the James River in Richmond, Virginia to complete be completed by 'twenty four.
Richmond is a vibrant growing affordable city with a great quality of life and 10 colleges and universities in the area. They are both our research partners and our talent pool theater.
At Costar group and in Richmond, we are proud to employ amazing people, who create and provide the best products information analytics and marketplaces that power in the real estate industry.
We strive to set the standard for accuracy and precision in everything we do because our clients rely on this data to conduct hundreds of billions of dollars and transactions.
This type of exacting standard requires discipline and determination commitment and people of Costar group take great pride in our ability to deliver at this level, we provide our people with world class industry training enable them to advanced professionally enjoyed long rewarding careers with Costar group It does.
Involved in measuring our performance in our work and having kpis like any organization should have.
Like any company, we have people, who decided demands of our environment is not for them and Thats fine.
For most who choose to leave they are able to leverage the Costar group fundamental training and go on to enjoy productive careers in commercial real estate and other industries or continue their education.
The real estate industry attrition rate in 'twenty, one was 32, 8%, but our attrition was slightly higher at 36, 6%.
About 300 basis points or so.
The key difference between Costar group and the rest of the industry is that we achieved a 99% employee vaccination rate and our employees have returned to working safely back in the office.
As you know that's very rare.
Our staff is more productive back in the office collaboration innovation is stronger and training is much more effective.
We do have a tiny vocal minority of disgruntled former employees, who do not want to return to work, but despite that.
We would take the same responsible long viewed direction again.
Now that we're back in the office, our attrition rate has returned to normal and over the past few months has in fact sell below the industry average.
As hard as it was to return to the office, we're glad we've done it and feel for the companies that still have to cross that challenging bridge.
We continue to believe that Richmond is a great center of excellence from which to grow our talented employee base that is supporting the real estate industry around the U S and across the world.
Earlier today, we published our first sustainability report, which you can find on the Investor Relations section of the Costar Group website, it's a very exciting piece.
Thank you Bill.
At Costar group, we're committed to supporting ESG principles, both inside and outside of our company inside Costar group, we have quietly been a leader in sustainability for decades, converting our fleet of nearly 200 research vehicles from gasoline to hybrid and then eventually to electric we select LEED certified or energy Star rated buildings for MAU.
Of our 800, I'm, sorry, our 80 plus offices and.
And reducing total annual datacenter energy consumption, despite significant company growth.
Sorry at Costar group, we help millions of consumers and real estate professionals achieve their sustainability goals, we pioneered creating transparency around building energy consumption. When we were the first to widely published building right energy ratings.
The Costar information analytics product provides all subscribers with data and green rated buildings. So they can identify locations that are energy star bream and LEED certified.
In addition, we funded the journal of sustainable real estate to support academics, who study the value of building and investing in sustainable real estate my colleagues and I have authored academic articles analyzing financial benefits from building and leasing and sustainable buildings and those papers have been recognized with best paper Awards.
The United Nations estimates that buildings in construction account for 36% of global final energy use and 39% of energy related carbon dioxide emissions. We believe Costar group as part of the solution to that problem and we're focused on that our apartments dotcom homes Dot com Loopnet lands marketplaces enabled.
People all of the world to digitally visit properties for lease or sale without the environmental impact of physically driving to them.
Sure.
As you are aware of the economic recovery persists, but concerns about the virus inflation the prospect of rising interest rates way on the near term outlook supply chain constraints and labor shortages are also prevalent which is further challenging business operations driving cost and prices higher as.
As a result consumers are facing decades high inflation, which is weighing on sentiment and potential spending.
But in an inflationary environment real estate can be a safe Haven.
In hospitality and hospitality leisure demand continues to drive the U S hotel recovery key metrics, including rooms sold occupancy ADR and revpar all at either at or slightly above pre pandemic levels, which is great news business travel. Meanwhile, remains constrained as conferences are half.
Or by the latest by your answer the Corona virus transaction volume at the year at record levels, a signal of investors long term optimism for hospitality is recovery in retail strong consumer spending continues to support a resurgent retail environment.
Foot traffic in physical locations has rebounded, especially in open air shopping centers.
Surprising retailers have responded to the increase in consumer spending in leasing volume is back to pre pandemic levels.
Notably store openings outpace store closures, helping to drive net absorption to its highest level since 2017 as a result rents grew by two 8% the strongest pace seen in over a decade.
Winds for this sector do remain including waning fiscal support and higher inflation supply chain disruption labor shortages as well as an overhang of retail supply in certain segments.
And industrial that sector continues to benefit from the boom in consumer spending and a heightened need for enhanced supply chain networks.
Expansions among e-commerce , and big box logistics firms continue to fuel record leasing activity, which is up 60% from pre pandemic levels.
Despite a record amount of speculative supply under construction, there's little risk of overbuilding, given such strong demand vacancy hit a record low of four 2% propelling rent growth to a record eight 6%.
In the office sector uncertainty is still the prevailing theme of this sector, but after two straight quarters of improving leasing activity and slight positive net absorption. The national office market is starting to stabilize we're showing signs of stabilization stabilization and is likely in the early stages of recovery. However.
<unk> headwinds and questions remain.
Yes.
The glut of sublet space remains a drag on the office markets recovery, though office users are increasingly trying to sublet leases for their space needs, it's still a tenant market and while we've seen marginal increases in occupancy in face rents such an improvement masks the higher concessionary environment.
Which is weighing on owner revenue.
Loopnet could help those owners get a great lease now.
And the national multifamily market is expected to normalize in 'twenty, two but the sector remains in our historically strong position search activity in apartments Dot com reached record levels in 'twenty, one thanks to pent up demand and regional shifts in migration in favor of Sunbelt markets record setting demand is pushing vacancy rates to.
New lows in turn multifamily owners and managers are benefiting from record setting rent growth.
Developers are working to deliver new products to meet unrelenting demand, especially in the southeast.
Commercial real estate investment across the board is hitting record levels led by unquenchable unquenchable interest in multifamily and industrial assets.
Retail and office volume is making traction approaching pre pandemic levels. Meanwhile, volume was up in virtually every major metropolitan area pricing is trending higher in all property types distressed sales remain a small portion of overall activity underscoring the prevailing health of the <unk>.
Gary industry.
At this point I'm going to turn the call over to our brilliant Chief Financial Officer, Scott Wheeler.
Excellent. Thank you Andy you are welcome.
Brilliant category today Hope you think so.
Reading all of these numbers.
Certainly appreciate the comments on the great performance of the business in 2021.
And obviously it sounds like there is no shortage of great opportunities ahead of us.
Actually I, particularly enjoyed your throwback chart that you've sent me from that 2020 sales conference. When you have that <unk> Tam from 20 years ago of $1 6 billion.
That had grown to 20 in 2016, when I joined it was $6 billion. We thought it was at that point and not only five years later, we're talking about $100 billion Tam size and so I think that's pretty amazing.
Anyway enough that giant global Tam mumbo jumbo, let's talk to the financials.
So fourth quarter revenue and adjusted EBITDA results were better than expected. Both ahead of our consensus 4 million ahead for revenue and $28 million beat on profit.
That was a great way to end the year.
Our fourth quarter adjusted EBITDA margin was 38% demonstrating the strong operating leverage inherent in our business.
Our overall organic revenue growth rate was 11% for 2021, continuing a trend of 10 straight years of double digit or greater organic revenue growth.
Costar revenue grew 13% in the fourth quarter and 9% for the full year of 2021 in line with our previous guidance.
Many product enhancements and our successful shift to a global Costar platform has resulted in increased demand and improved pricing.
Anticipate that this positive growth trend will continue and expect both first quarter and full year 2022 revenue growth of 15% for Costar.
Multifamily revenue grew 6% in the fourth quarter and 13% for the full year of 2021 also in line with the guidance we provided on our last call.
As Andy mentioned, we saw multifamily sales levels improve sequentially in the fourth quarter compared to the third quarter of 2021, although we're not quite back yet to the level of sales we generated in the early part of 2021.
Accordingly, we expect revenue growth rates to remain in the mid single digits in the first half of 2022 for multifamily before improving to double digit growth rates in the second half of 2022.
Full year growth rates for revenue and multifamily, which will be around 8% to 9% for the full year of 2022.
Loopnet revenue grew 13% in the fourth quarter and 15% for the full year of 2021.
Our Costar sales team continues to sell an amazing amount of Costar.
That results in less sales of Loopnet at the lower end of our expectations as we build out our dedicated loopnet sales team.
Regardless, we will still grow loopnet revenue double digits, even with the smaller sales team.
For 2022, we expect Loopnet revenue growth in the low double digits fluctuating around the 10% 11% range throughout the year.
Literally this is a cautious outlook until our new dedicated sellers ramp up to full production later in 2022.
Information services revenue grew 6% in the fourth quarter and 9% for the full year of 21 in line with our guidance.
We expect revenue growth in the mid to high single digits in the first half of 2022, improving to the low double digits in the second half of the year is contingent conditions improve and our hospitality industry.
Overall, we expect 2022 revenue for information services to grow 8% to 9% year over year.
Our residential business delivered $21 million of revenue in the fourth quarter of 2021 slightly ahead of our guidance with nearly all of the revenue coming from home snap product as we complete the wind down of the legacy homes Dot com revenue.
Home snaps pro forma revenue growth was more than 60% in the fourth quarter of 2021.
For 2022, we expect residential revenue to be around $70 million representing growth of approximately 15% year over year. After adjusting for the run off of home is dot com product revenues.
As we move into 2022, we've identified specific residential products that are expected to be part of our long term growth strategy. These.
These products include the home snap pro plus agent subscriptions home snap listing ads in home snap Concierge Pro plus lead management subscriptions, all of which in aggregate generated revenue of $55 million.
Over 70% of the 2021 residential revenue these.
These continuing strategic project products are expected to grow around 25% in 2022.
By the end of the year. These products are expected to represent over 95% of the resident residential revenue.
Another marketplace revenue was $35 million in the fourth quarter of 2021, well ahead of our guidance estimate of $32 million to $33 million on the strength of a big finish to the year for our <unk> X platform.
In 2022, we expect continued strong growth from <unk>, along with our lands and businesses for sale marketplaces, all of which are expected to grow around 20% for the year.
In total our other marketplace sector is expected to achieve revenue growth of 20% in 2022.
Which compares favorably to the 10% pro forma revenue growth rate, we had in 2021.
Net income was $93 million in the fourth quarter and $293 million for the full year of 2021.
Our effective tax rate was 30% for the fourth quarter and 28% for the full year.
Included in this effective tax rate for 2021 were onetime increases primarily from international tax restructuring that will support our future growth.
Without these restructurings, our effective tax rate would've been approximately 24% in the fourth quarter and for the full year.
So let's cover a few performance metrics, starting with our net new sales bookings.
We achieved $67 million of net new bookings in the fourth quarter and $217 million for the full year.
Just like to say that again, but Andy covered all that cool stuff on a record sales level for the quarter. So I will 217 217.
Right.
Our sales force totaled approximately 825 people at the end of the year. They certainly had an exceptionally productive fourth fourth quarter without record sales result.
The fourth quarter number is down approximately 25% compared to the third quarter of 2021 as a result of attrition in the homes Dot com sales team that joined us in mid 2021.
With increased confidence in our ability to train new sellers and visit our customers in person. This year. Our 2020 to outlook includes expansion plans across all of our major sales teams in January of 2022, we added over 35, new sellers to the ranked so we're off to a strong start.
Our contract renewal rate was 92% for both the fourth quarter and full year of 2021 unchanged from the third quarter of 2021.
Current renewal rate is 200 basis point improvement over the fourth quarter of 2020, with both Costar and loopnet improving year over year.
Renewal rate for the fourth quarter of 'twenty, one for customers who've been subscribers for five years or longer was 97% up 200 basis points from the fourth quarter of 2020 and consistent with the second and third quarters of this year.
Subscription revenue on annual contracts was 77% for both the fourth quarter and the full year 'twenty, one slightly below the fourth quarter to 2020, but slightly higher than the third quarter of this year.
These modest fluctuations as a result of improvements in multifamily.
Along with increased residential and Loopnet signature AD revenue, which tend to have shorter duration subscription contracts.
Now for our 2022 outlook.
We expect 2022 revenue to range from $2 145 billion to $2 $1 5 billion, an increase of approximately $210 million at the midpoint of the range, implying an annual growth rate of 11% organic.
Organic growth, excluding the revenue runoff from those legacy homes Dot com product is expected to be around 12%.
Before I cover the 2022, adjusted EBITDA outlook and investment I'd like to highlight the exceptional results. We continue to see in our commercial real estate focused product areas, which includes costar multifamily Loopnet information services and our other marketplace businesses.
A few years back at the end of 2018, we set ambitious growth goal to reach $3 billion in run rate revenue by the end of 'twenty, three and 40% adjusted EBITDA margins for that year.
As a reminder, our $3 billion in run rate revenue goal was comprised of both organic revenue growth of 12% to 14% per year.
Approximately $6 million to $700 million of new revenue from acquisitions.
So how we performed against these goals.
Well with regards to the organic revenue growth. Our performance is right on track in that 12% to 14% revenue growth range for the year 2019 through our 2022 outlook.
This highlights the strength and resiliency of our product portfolio as we certainly did not anticipate the significant pandemic revenue slowdown in costar in 2020 or the current low vacancy market environment in multifamily that impacts the growth of that business.
Regarding acquisition related revenue, we added a little over $200 million in acquired revenue since 2018.
In that time, we've certainly passed on deals that many times that amount given what I consider to be unrealistic valuations and the difficulty of acquiring in a remote work environment.
By my estimation, we could've spent around 4% to $6 billion of capital to acquire the level of revenue we had assumed in our targets.
But rather than chase deals at those higher prices, we elected to forgo a number of opportunities and focus organically, which currently provides a much better return currently for our shareholders.
With regards to our profit target of 40% adjusted EBITDA in 2023, we now expect to achieve that goal. One year ahead of schedule and are forecasting 40% adjusted EBITDA for 2022, and the commercial real estate focused product areas.
As we've either accomplished or on track with our current long term goals. We believe it's time to establish new long range goals as the old Goldstone include our recent expansion into the residential property markets, where the great opportunity we see there.
I will get to the new goals in just a minute.
So our adjusted EBITDA outlook for 2022 is comprised of two important components. One is the cash generation and the second is deploying that capital for our growth investments.
First I'll cover cash generation, we expect to generate approximately $170 million of incremental adjusted EBITDA in 2022 from the 12% organic revenue growth forecast.
This added profit reflects approximately an 80% incremental margin drop through on new revenue.
Pretty consistent with what we've done in the past the.
The second component is deploying capital towards our top growth initiatives.
First we plan to invest approximately $20 million in 2022 to expand our many sales forces as well as extend our international footprint in Central Europe .
More significantly as Andy discussed in his remarks, we plan to invest in content technology and marketing to support our residential expansion strategy.
Operating costs and investments for residential which totaled approximately $100 million in 2021 are expected to increase by around $200 million to $220 million to a range of $300 million to $320 million in 2022.
A little over half of that increased investment is focused on proprietary content research with the remaining amount earmarked for marketing and software design and development.
So when we combine the cash generation of $170 million with a total investment range of $220 million to $240 million. The result is adjusted EBITDA outlook for the year in the range of 565 million to $605 million.
Adjusted EBITDA margin is expected to be approximately 20%, 27% at the midpoint of that range.
First quarter 2022, adjusted EBITDA is expected to be in a range of $1 $55 million to $160 million, indicating margin of 31% at the midpoint.
As we move through 2022, we expect adjusted EBITDA margins in the low 20% range during the second and third quarters of 2002 during the peak marketing and research season.
Fourth quarter 22, adjusted EBITDA margin is expected to improve to around 30%.
I'll wrap up today with a summary of our new long range targets that I mentioned earlier these new targets incorporate this significant growth opportunity as well as the required investments for our success in the residential market strategy.
Our new long range target is to achieve a $5 billion in revenue and $2 billion in adjusted EBITDA in the year 2027 and.
And this target is an overall, 17% compounded annual revenue growth rate.
Our goal is to generate revenue from residential products in the range of $700 to $1 billion in 2027, which would replicate if not improve upon the success, we have demonstrated with our partner <unk> Dot com investments.
We believe the market size and opportunity in residential is significantly larger than in multifamily and we would anticipate investment levels in residential during the earlier to increase before becoming profit accretive in a few years.
Fortunately, we have a very large and profitable commercial product portfolio that we expect will generate over $800 million of adjusted EBITDA in 2022 that will soon grow to over $1 billion per year.
By the end of our long term target horizon I would expect adjusted EBITDA margins from the commercial real estate focused product areas of our business to approach 50%.
With that I'd like to add and thanks to all of our amazing and hardworking Costar colleagues for a fantastic 2021.
And I certainly look forward to 2022, and what we can accomplish together in those years ahead.
So I'll now turn the call back over to Bill and our operator is theyre going to lead us in a rousing rendition of stumped the chops.
Phil back to you. Thank you Scott.
Blue would you please assemble the queue for Q&A.
Analysts.
Analysts please limit yourself to one, particularly insightful question. Thank you.
Go ahead Bill you as a reminder to ask a question. Please press star one on your telephone.
First question comes from the line of Sterling Auty from Jpmorgan Chase <unk> company.
No.
Yeah. Thanks, Hi, guys I was just curious in terms of the investment residential help us understand in 'twenty two how much of that is going to go into sales and marketing how much is going to go into R&D and how that mix will more as you move towards that 2027 goal. Thank you.
Sure.
So the majority of that investment in 2022 is content.
So it's.
It's in our wheelhouse, it's one of our core strengths is collecting.
Content for residential real estate to create a favorable environment for SCO and scaling our traffic to our site.
A smaller part of that investment later in the year is towards marketing for the launch of the new site. There's also a significant component for software development and R&D do you want to add anything to that sure yes as sterling.
The content portion is over half of the incremental investment, which is I gave a range of $200 million to $220 million.
And then the other portion which is a little less than half.
Is probably 60% marketing, but as Andy said, it's more later part of the year as we get ready for <unk>.
Broader product Rollouts and then the rest of the technology development and software component.
Which may seem a little low but.
We have a number of software teams in house now that shift over and help us.
Develop these new products as will happen with our research teams as well. So we would expect these things to switch places as we go into 2023 as we will have most of the content development piece behind US then we will shift more into marketing and product launch I would expect in the in the next year or two.
Your next question comes from the line of Ashish, So Badger from RBC capital markets. Your line is now open.
Thanks for taking my question, maybe a quick question around the multifamily.
Again.
Strong bookings there.
Discussion around mid single digit growth in the first half and double digit in the back half I was just wondering how much visibility do you have regarding the acceleration in growth in the back half. Thanks.
Yes, thanks for the question.
We definitely we're encouraged when we saw in the fourth quarter that things.
It came off of the what we'll call the bottom in the third quarter, which as you know when we run this subscription model out that low third quarter will affect us in the first and second quarters of 2022. So just by the fact that you get past that and we move into the first half of 2022 into the stronger rental season, I think those natural growth numbers.
We will advance in the second half.
Now right now the success of the team.
And putting in our new list prices and then executing on price increases is pretty much driving all the growth we saw in the fourth quarter.
And so we're starting to see signs of increased upgrades and volume coming in to this next year and assuming that continues and we will see those growth rates to lift in the second half. So it's still a ways away, we'd like to keep things a little bit close and cautious as we go into new year's.
Those first couple of quarters play out then we'll have a much better sight for you on the second half.
Your next question comes from the line of George Tong from Goldman Sachs. Your line is now open.
Hi, Thanks, good afternoon.
The $300 million to $320 million in investment spend in residential is a significant step up and you mentioned the majority is going into content can you elaborate on what kinds of content you're investing in that you currently don't already have residential.
This level of step up.
Sure.
So it is it's $200 million incremental investment beyond the baseline of operating home snap at homes. That's currently in place so that content, but the area, where we're adding a lot of content. If you think about the home shopping experience.
There are a number of things that are not about the specific home, but are about the place or in <unk> or in the case of <unk>.
Condominium building about the community not about the specific unit those are very cost efficient places.
Collect valuable contents of neighborhoods parks schools condos and it creates good SCO drivers and it creates.
Good shopper experience that we have tested with the markets and got very solid feedback on.
One of the things we like about that investment is that while it's a lot of hard work.
And as.
Aggressive.
Clearly it's in our wheelhouse, we have visited millions and millions of buildings across many countries.
<unk> been able to do that effectively and efficiently. The other thing that's good about that investment is it doesn't just benefit.
Homes, it benefits apartments, it benefits loopnet.
It's a pretty boy.
It's a pretty broad initiatives strengthen our content across the platform.
So.
We think in in comparison to.
The scope of the Tam and the opportunity and the competitive advantage. We perceive we can achieve we feel it's a very reasonable investment.
And was there a second part of that question.
I don't think so but I'll add a second part of an answer let's.
Let's do that Scott.
Some of it comes with the content creation that we've talked about in the early years, a number that is onetime gathering of data and media that you've seen us do successfully.
Many different commercial platforms and markets and so you would expect that level of investment to drop back in the next year. As you then focus more to the the <unk>.
Marketing and the.
And the sales generation on the platforms. So again, considering the size of the market that we're talking about with residential.
That's sort of an upfront investment is pretty small compared to the the opportunity we see ahead.
Your next question comes from the line of beef Christiansen from Citi. Your line is now open.
<unk>.
Good evening guys. Thanks for the question.
There is some helpful comments on M&A during during the pandemic.
It sounds like.
Costar is now geared more organically going forward from here, but.
As you think about the potential landscape for M&A.
Going forward, particularly in residential are there opportunities out there do you believe that could accelerate you're scaling up on the resi side here.
Yes, definitely we do have irons in the fire.
We are looking at things.
And.
There are opportunities to scale and accelerate that so obviously as usual we can't talk about anything until they are real.
But there's some pretty significant.
There are some significant things out there that we're really focusing as much as anything on strategic.
Things that we feel will give us valuable content.
<unk>.
We will help us build the.
Most heavily traffic site over time.
And we're not looking to buy revenue per se.
Your next question comes from the line of Andrew Jeffrey from <unk> Securities. Your line is now open.
Hey, guys.
Pardon me thanks for taking the question.
Yes, Andy.
For those of US at least for me speaking for myself it might be a little bit to.
The answer slower on the uptake.
I think one of the things I'd love to hear you.
Articulate.
As concisely as you can especially in the context of this big stepped up.
Investment.
What exactly is this.
What is the strategy right I mean I guess.
Want to understand who you go and again I realize it's a big Tam right, we all get that who you're going up against how do you plan to monetize how do you plan to displace.
Competitors, which I assume are companies like Zillow and redfin, it's helpful. I think.
Just really concisely I think investors want to know what you are spending all this money on in.
Now what youre spending on what the return can be and how you get from point a to point b.
Yeah. So.
And in terms of what you're investing in.
We have been.
The core we have gotten clear market research that says theres demand for collaboration it's really simple.
Today agents and buyers really exist in too disconnected ecosystems, though they have to collaborate in the overwhelming majority of deals. So we are building platforms, where they can share content back and forth.
Buyer favorites of property there as you can see it when an agent unless recommended property goes into the favorite lists of the client pretty straightforward, we've tested that with consumers all over the country in Asia. So all over the country gotten very positive feedback along with a number of other.
Software components and features so that's one that's a big theme, so working with the industry rather than working to dis intermediate the industry and Thats.
That's something that worked well for us in the apartment industry, it's worked well for us in the Loopnet industry in the Loopnet side of the business Costar lands of America. So it's a proven model and it's unique in the residential space. We're the only ones doing it where you work with the industry rather than more towards just remediation.
In terms of SCO and content, we asked consumers what they what's really important to them.
What they care about and the site what they're looking for when they select a new home.
You wouldn't be surprised to find out that for <unk>.
Couple.
From the age of 25 to.
40.
Schools are important and in a focus group. They all lean forward when you show them pictures of the neighborhood school.
And leaning forward a focus group is good that's something we'd like to get be able to do so we have tested and tested and tested we found content that people care about and like that isn't currently offered so if you look at the current.
Portals, they're all about taking content that other people have produced and repackaging it and.
And there's not a lot of original content being produced on those portals theres opportunity to cost effectively produce content that we believe appeals to consumers. So.
In this case I'm using something Super simple like.
Picture of the local school.
Sure.
Information about.
Ah.
<unk> something that we've done before and done quite successfully so.
The neighborhood information in.
The neighborhood information apartments helped us grow from being number seven.
Oh to being number one in SCS, so that kind of stuff, we've done strategically and if you look back to when we launched apartments Dot com, we did exactly this.
We put a lot of people on producing content that gave us SCO advantage.
And it worked and.
So it's tested we don't I don't.
Want to write out a roadmap in plain English for everyone to hear.
But I'm trying to give you some balance between them and us.
And this is.
It's not you know it.
It's not rocket science, it might be science, but it's not rocket science.
And it's fairly straightforward and.
You look at what Costar is good at we're good at SCO were good at.
Content development.
Good at taking pictures of millions and millions and millions of pictures and we are good at collaborating.
With the industry and building successful models and collaboration.
And so thats were going to our strength.
Your next question comes from I'm, sorry, I'm, sorry, I will just add one more thing how you monetize it.
Pretty straightforward.
And it it shouldn't mystified people.
You monetize it just the way, we monetize apartments dot com or Loopnet lands of America people will pay for enhanced exposure to generate more leads or more activity on properties that are selling that's the single biggest revenue opportunity and real estate.
The second way you monetize it is by letting people market their agency services in a way that.
Is not repugnant to the industry in a way that is supportive of the industry instead of repugnant to the industry.
So that's pretty straightforward.
And.
And.
And the question of how we compete against other people.
Costar group has a track record of competing against other people effectively and I think will rest on a record.
Your next question comes from the line of <unk> Yang.
And from Needham Your line is now open.
Hey, good afternoon. This is actually a cow Peterson on for Mike.
Thanks for taking the question.
Just wanted to see if there was any notable seasonality that we should keep in mind for particularly the residential.
Given that theres, some runoff from <unk> Dot com, but then also a little bit of seasonality in the resi real estate industry and also some pretty strong organic growth.
One of the core underlying businesses that you guys highlighted.
Yes, sure we do see we do see.
Seasonality not too much different than what we saw when we first jumped into the apartment space, where you have.
Apartments as a rental season in the spring in the summer months. It would then cool off after kids went back to school in the residential side you see a similar path.
Where things will start off though say at a moderate level and to start the year and then it picks up in the spring and the summer months and then by the time, we get to the end of the year. The fourth quarter is going to be the weakest as far as new engagement involvement in the industry. So we think second and third quarters are the biggest fourth quarter is the lightest in first quarter fall somewhere in.
Between.
We also expect that that's where our investment focus.
We will also follow that pattern, when you talk about marketing and being able.
To collect valuable content during nicer months of the year then versus.
Joey Cold.
Winter months of the year, you could actually look at the storage on our servers and you can tell the weather by how many.
Terabits.
Putting into them makes sense, so I can actually see the weather and our storage.
Your next question comes from the line of Ryan Tomasello from <unk> W. Your line is now open.
Good evening, thanks for taking the questions.
I was hoping you can put a finer point on some of the drivers.
The guiding for multifamily growth this year, specifically, what you're contemplating for.
The mix of pricing increases versus.
New community count growth.
As well as any potential color around the revenue mix among the different segments of the market 100, plus unit market.
And the landlord independent landlord long tail I know in the past you provided.
Growth rates around those different buckets, so it'd be helpful to understand how all of that is levering up into your outlook for this year. Thanks.
Sure.
The early part of the year, we expect the revenue growth really from the list price and the pricing initiatives that we've implemented salesforce is doing a great job of getting around to the customers.
And as we mentioned in the comments, we are not seeing people drop off the platform. We certainly see some of the fuller buildings in the market like we commented I think last quarter that might rotate off all of their buildings rotate on within a customer's portfolio. So.
So you see a few less properties in total, but you definitely see people staying on the platform and the pricing initiatives have been very successful.
I expect all the growth in the first half of the year is pretty much from pricing.
And then as you get more volumes into this.
Spring and summer season, those volumes will carryover and Youll start to see I think more upgrades fewer downgrades and a little more volume in the second half to get us back to that double digit growth.
And we're still focused on.
Still definitely focused on increasing penetration to new roofs, and institutional and multifamily the mid market and the independent owners there is still significant penetration opportunity there.
We plan to continue to grow that sales force to be able to.
To basically touch more of those prospects and we believe we can do that well.
The pandemic was a slow time for being able to grow and more importantly train sales forces is getting a lot easier.
And.
We just finished up our first in person sales conference in two years.
In Miami, Florida, and as the Guy who spends the first four hours up on stage talking to the sales force I will tell you without a question we have a much bigger sales force today.
Did two years ago. It is getting quite large and I would say that group is <unk>.
Very motivated and very positive right now and is.
Producing at some of the highest levels they produce that to with the record quarter.
And so adding into that group, we think is.
Is it going to be possible to build a go for more penetration, but scott's really forecasting more off of pricing and one thing about the pricing.
We are.
Providing more and more value to our customers as our as our traffic success grows our leads grow and as our leads grow our price per lead naturally goes down when we're pricing at the community level. So there's lots of room to.
Get recognition from our customers for the additional value, we're providing them an increased lead flow in essence, they are getting better and better values on lead flow.
Pricing per community might be going up share shift to us from.
Possibly from other marketing vehicles.
Your next question comes from line of Stephen Sheldon from William Blair. Your line is now open.
Hey, thanks.
I guess on the Salesforce side, it seems like from the sales force build out to Dan a little slower than expected and are weighing on growth, especially looking at loopnet.
At a high level is there anything you need to do better to hire and retain sales resources across the company. If you think about.
2022 in the next few years.
Yeah.
I think we are having I think we need to.
Like the most important part of the equation.
Is.
It's great to have geese that lay golden eggs, what's even better is to have geese that leg east that lay golden eggs.
Those are our recruiters.
And one of the things we're doing is we're looking within our own salesforce for people that want to evolve their careers or.
Into moving into the recruiting space.
And I think our training programs are pretty darn good at this point.
And our Onboarding is getting our success rate is people come onboard is getting better.
But.
Our sales force is getting pretty large again, you know as you sit there and look at thousands of people at our sales conferences. It is growing.
With Loopnet in particular.
That is something just like apartments Dot com is following that same trajectory, where initially apartments dot com was sold by the Costar group and eventually we built our standalone salesforce to sell apartments loopnet in that same phase.
And we're having some success as I look at.
The individual metrics of people going into Loopnet, the salespeople going in into that group Standalone.
A standalone sales force, they're producing at.
Much better numbers that we saw during the pandemic as we tried to onboard people and in fact, there is some real success stories in that group. So.
Now there is a I think our number two producer number one producer I believe started with us like just like two years ago. So.
And then we have David <unk>, who just joined US from homes Dot Com is an experienced operations executive now running the Loopnet group, which is good leadership and Mark Mathis, who actually started with Costar. Many years ago was a senior player at.
At Realtor, Ryan there sales Org has been with homes is now running the Loopnet team. So we're beginning to both the group up and its a process it will be.
Another two or three years before we have a robust.
In a several hundred person large loopnet sales team, but we will get there just like we did with apartments.
Your next question comes from the line of John Campbell from Stephens Your.
Your line is now open.
Hey, guys. Thanks for taking my question just a quick one here I mean, I think on the sizable residential reimbursement cycle I mean, I think that was a pretty common fear factor in periodicals.
That's your base pushing pool around that and I think importantly behind.
Almost 52 week low here, but your core business it seems to be in a great spot you've got this big bet on resi kind of be more of an offensive move by you guys and you guys do sound pretty convicted and you've got a framework around essentially driving up those returns.
I mean, obviously with these progressing as you guys expected you've got stock that's kind of dislocated here.
I'm sure you guys are essentially waiting for this question, but you've got nearly $4 billion of cash on the balance sheet. It sounds like M&A is maybe a little bit less of a focus.
The core, but just give us your latest views on the buyback and how that might change if theres any further dislocation.
Thanks.
I think that's a great question and I will turn that over to Scott Wheeler.
Thanks Danny.
Yes, we certainly thought period here in the last well its really only been a year. We just raised a bunch of that capital in the mid 2020. So.
Only a year and a half since the money came on board.
Certainly the period of high.
High multiples and valuations have wait a little bit on the pace of our acquisitions I wouldn't go so far to say that we're not focused on acquisitions anymore. Because we definitely are still very seriously focused on acquisitions in our initial thesis when we brought in the capitals thats going to take probably about five years for us to burn through that as we do deals across the platform.
So I think we're still committed to that.
That strategy right now.
Obviously, if this continues up for another year or two pace, we might have a different conversation but.
But for now that's still our direction and where we're focused on putting that money to work first in the acquisitions and then to the extent we needed on an organic would do that as well, but like you said, our organic commercial business producing pretty significant cash flow now and that's very helpful. When you look at our ability to invest in.
And residential and still return, we're still going to do almost $600 million of EBITDA next year, even with.
As you put a big offensive investment so we're pretty comfortable with the math and the balance of where we are.
When you look at our past track record.
We are an acquisitive company and.
We have acquired home snap homes STR recently.
There are things out there, but we are a value sensitive and.
And I would imagine that over the course of the next.
Three years four years, we would probably is a lot of that capital and acquisitions.
Your last question comes from the line of Jeff Mueller from Baird. Your line is now open.
Yes, Thanks for fitting me in so I appreciate the confidence in the strategy working out over the next several years, but just.
Help investors understand like what are the Kpis as you think about keeping incremental spend through the three stages of your.
Your strategy and then on I guess monetization lagging I understand the new product.
Phase of the Spooling up as products launched starting in early 'twenty, three but on the existing <unk>.
Revenue.
You said $70 million in 2022, and you had over like 20 million or around there of homes now.
Revenue in Q4, so youre already run rating above that if you could just help us understand.
Why theres not better monetization.
Better ramp on that existing monetization.
Yeah. So.
We're really going for the $1 billion not the one hundreds of millions is what it is.
And so the most important role home snap plays to the company is.
As growing the participating agent.
<unk> user base and getting deeper engagement with those users.
So we you'll see us up in the 770000 agents.
Registered youll see us growing the number of folks paying for the premium version, we have multiple products, we can sell over at home staff, we can sell.
Sort of re targeting and Facebook ads in Instagram and ways and all kinds of stuff.
Those are the higher dollar value things, but there are less strategic like getting of agent to buy.
The.
$30 $40 $50, a month premium version of home snap is much more valuable to us and that they use and engage in the product more the agents are the key to the supply side of the real estate industry and we want to be the first place. They go when they have a new listing or when they approached them.
Our credit one they wanted to distribute content to their to their customers.
So on the.
So that work.
Where we are.
Going for the big win not the second or third quarter.
And.
In terms of Kpis, if you go back to that.
Three step process of grow.
Monetize and scale.
Grow.
Where we are and grows where we will be.
Into 2023 and that is.
Growing content growing users growing unique visitors.
Growing engagement and relevancy.
So.
We do not believe that we should pull the monetizing.
<unk>.
You haven't.
Scale traffic.
So you are if you try to pull the monetizing lever before you scaled traffic youre going to be setting price points, well below which you could set a year or two out. So we want to build engagement grow that engagement grow the unique visitors and for KPN I would recommend that.
As we launched a new product you look at our site traffic our engagement in.
In the shorter term you can look at.
The volume of content coming onto the site and.
A little basis, you can see that right now <unk> dot com unique visitors doubled year over year.
Keep doubling after a while it gets larger.
And.
So then the next thing you are going to be looking for in 2023, you will continue to grow and monetize.
Home staff.
Great product that people like and it's getting better.
And as you go into 2023, you'll be looking for new high margin.
Products that will be available on homes dot com, whether it's marketing.
Agency in a responsible way or.
And all industry aligned way or if it's marketing actual helping people market theyre actual properties and the first revenue you see coming in may be measured in tens of millions of dollars, but you can then understand that.
I understand the price points and you can understand the penetration opportunity could begin to paint out a 10 year picture.
The scale is probably the scaling it to more meaningful levels is probably.
24.
And Thats when we are beginning to.
Challenge some of our other product areas.
And move towards that $1 billion revenue goal.
So we'll talk about the kpis in each one of those three phases.
And I think.
We are.
It's obviously a huge industry there there's some solid competitors out there.
So it is not a get rich quick scheme, it's a.
Work hard build a plan and have a multiyear vision of where you're going but we will be able to talk about the kpis at each of those three phases.
There are no further questions at this time I will now turn the call back over to Andy Florance founder and CEO .
Well, thank you everybody for joining us for the.
For our fourth quarter 2021 earnings call. We're excited about the initiatives. We've got going on here. We're very excited about the residential initiative our core business is obviously showing great momentum.
We're very proud of what we've accomplished and I want to congratulate our sales leaders.
Mark Schwartz Paige Forrest branded live Tim Condon, David Gibson, Joe Valero and others and their teams have just turned in our best.
Bookings quarter ever with our best.
November December January being three of our four strongest sales months ever look forward to them continuing to turn in a great result throughout 2022.
We believe that the market conditions in residential sector.
Combined with our strength in our core business makes us the right time to accelerate our investment in residential and lay the foundation for growth that will enable us to reach our new five year financial goals.
Our expansion into the residential property sector I believe that our investments will yield $5 billion in revenue for Costar group in 2027.
I am confident in our ability to scale, our information and marketplace businesses deliver attractive returns with adjusted EBITDA margins at or above 40% when we achieve that $5 billion in revenue.
We look forward to meeting with you again in our first quarter call in April 26.
At the same time on the same channel until then stay safe and thank you very much for participating. Thank you Bill. Thank you Scott enjoy doing this earnings call with you. Thank.
Great. Thank you.
Good night, everyone and gentlemen.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.