Q4 2022 CoStar Group Inc Earnings Call
Good afternoon, My name is Matt and I'll be your conference operator today at this time I would like to welcome everyone to the Costar group fourth quarter and year end 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session now Cindy <unk> head of Investor Relations will read the safe Harbor.
Cindy you may begin.
Thank you Matthew good evening and thank you all for joining us to discuss the fourth quarter and full year 2022 results at the Costar group.
Before I turn the call over to Andy Florance, Costar, 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 outlook and expectations for the first quarter and full year 2023.
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 subsequently and subsequent quarterly reports on Form 10-Q under the heading risk factors.
All forward looking statements are based on the information available to Costar on the date of this call Costar assumes no obligation to update those statements whether as a result of new information future events or otherwise reconciliation to the most directly comparable GAAP measure of non-GAAP financial measures discussed on this call including EBITDA.
Adjusted EBITDA, adjusted EBITDA margin and non-GAAP net income and non-GAAP net income per diluted share and forward looking non-GAAP guidance are also shown in the detail in our press release issued today along with the definition of 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.
These 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 Cindy good work that was fantastic Safe Harbor.
Good evening, everyone and thank you for joining us for Costar group's fourth quarter 2022 earnings call.
Total revenue for the full year of 2022 was $2 2 billion or 12% year over year growth coming in at the high end of our guidance range and above consensus estimates.
Our fourth quarter revenue grew 13% on a constant currency basis over the fourth quarter of 'twenty, one up to $573 million. This is our 12th year in a row with double digit revenue growth.
We had a phenomenal year in sales we delivered the highest net new sales ever with 2022 sales, reaching $305 million or 41% growth over the net new sales in 'twenty one.
We delivered exceptional sales results in the fourth quarter as well with annualized net new sales bookings of $77 million. This is a 15% increase over the same quarter in 'twenty, one and our second highest quarterly net sales bookings result ever.
<unk> dot com had their highest sales quarter ever exceeding their prior records set in this set in the second quarter of 'twenty by 25%.
So a shadow to Paige Forrest and her entire team at apartments Dot com.
We substantially increased the size of our sales force in 'twenty, two adding almost 300 people net.
We had a very strong we had a very strong profit performance in 'twenty, two as well our full year. Adjusted EBITDA was 672 million, which was also above the high end of our guidance range and consistent consensus estimates.
Overall, we had an exceptional year with both strong sales and profit performance, while continuing to invest and grow the business.
Apartments Dot com revenue was $198 million in the fourth quarter, increasing 16% over the fourth quarter of 'twenty one.
And $740 million for the full year was a 10% increase over the prior year.
Apartments Dot com delivered another outstanding quarter with a record set record in sales and an increase in net bookings of 177% over the same period last year.
2022 was an exceptional year for apartments dot com, our efforts to attract talented sales professionals give them world class training and get them into production pay dividends, we increased the sales force by 40%, adding over 100 sales representatives to the team.
At the same time, we were able to increase our sales productivity with monthly net new sales up 187% as compared to 21.
The team also conducted 450000 quality meetings, both with existing clients and potential prospects the highest number of meetings in our history.
We maintained a very impressive net promoter score with our clients of 93%.
The apartments Dot com brand is stronger than ever and 2022, we delivered over $1 2 billion visits to our platforms. Our award winning marketing campaign, featuring the wonderful and funny, Jeff Goldbloom. This Brad bellflower inventor of the apart from Internet entertained audiences and delivered over 12 billion impression.
Across linear TV and our other 130 media channels, we continue to reach renters and potential renters, where they consume the most content, including streaming video audio social media platforms and through marketing Influencers are investments keep proving successful the new all time high in <unk>.
Unaided brand awareness in the fourth quarter and the number one ranking among our target audience.
Rent dynamics, a leading CRM platform for multifamily properties conducted an analysis of over 500000 rental leads submitted in the fourth quarter 2002.
They determined that the apartments dot com network converted leads to leases at twice the rate of Zillow to be clear. This data shows that the community would have to get twice as many leads from Zillow is from apartments dot com in order to provide the community with an equal number of leases.
In fact, the same studies show that apartments Dot Com network provided committees with almost four times more leases than the Zillow rental network and over nine times more leases than.
Rent period.
As we look ahead, we are well positioned to penetrate the existing the estimated $1 $4 billion marketing opportunity and apartment buildings, which have less than 50 units, but more than five in.
In 'twenty, two we more than doubled our sales force dedicated this opportunity in the fourth quarter. We introduced flexible listing plans the perfect solution for managers, who oversee multiple properties in this under 50 unit apartment category the.
The product allows managers the flexibility to swap properties. They advertise at any time based on their current needs and upcoming availabilities.
I'm proud to say, we launched apartments dot com in Canada in the fourth quarter, marking the brand's first expansion outside the United States Renters in Canada May now search Canadian geographies for apartments.
<unk> condos and town homes for rent searches can be conducted in English or from say some of the key clients in the United States have either already moved into Canada, or our plans to move in 2023, and we're ready to support them.
42 of Canada's largest property management companies have already provide us with their data on their communities and we've acquired listing data from the Canadian Real estate Association.
This allows us to present rental listings for various Canadian MLS is on apartments Dot com, we have already experienced enormous traffic growth since our recent launch and are positioned at or near the top of organic spot for searches. We believe we are well positioned to penetrate this $600 million estimated Canadian apartment and <unk>.
<unk> opportunity with our strong brand and unique product offerings.
The U S macroeconomic conditions continue to support an increase in the demand for advertising.
U S multifamily vacancy rates rose another 50 basis points to seven 1% compared to the last quarter.
The U S and Canadian market conditions, along with the strength of our brand and our sales force give us confidence in our ability to return to 20% annual revenue growth.
Costar revenue was $837 million in 2022 up 16% over the prior year, making it an outstanding year.
Costar net new sales were a record high and 16% more than our prior highest sales here, both the north American and European sales teams delivered the highest net new sales ever.
We added over 60, new sales representatives to the Costar team. This past year, which is an increase of almost 20% over 21.
We're in the final stages of transitioning customers to the global Costar platform, which to Jake to date has generated over $40 million in incremental revenue.
We launched the Costar lender product, which generated almost $6 million already in net new sales and 140, new customers and we're just getting started there.
This quarter, we expect to complete the process of linking over 70000 commercial properties to 12600 investment funds or property investment funds, providing our clients with insights into these property fund portfolios. The product will allow user to search for funds raising capital knows with dry powder to invest.
And gather insights into a fund managers investment strategy property type target country or <unk> transaction history.
We're about to deliver significant enhancements to our tenant product as well in the past our tenant product is to provide our users with valuable details on over $5 million tenant locations with a coming upgrade of tenant will provide users with an aggregate roll up of all of the company given company's locations. So that the user can better understand.
The most important tenants utilize space across their portfolios and how our clients can best capitalize on these various tenants space needs.
Costar definitely had a tremendous year I'm confident in our ability to continue to grow at double digital digit rates with the strength of our product capabilities high renewal rates and continued ongoing thoughtful investments.
Loopnet fourth quarter revenue was $61 million up 12% over the prior year.
Net new sales bookings in 'twenty to set a record for Loopnet net new sales in the fourth quarter were up 198% over the fourth quarter of last year and trailing 12 months net new sales were up 56% over 21.
We added over 100 sales representatives to Loopnet in 'twenty, two which almost quadrupled the size of the Loopnet sales team with a successful launch of Loopnet in Canada and U K, we now have a growing international offering.
We have planned launches in France, and Spain in 2003.
Our brand and our product remains strong with traffic to Loopnet network of sites continuing to outperform competition dramatically both domestically and internationally.
<unk> now ranked number one for 129000 relevant commercial keywords on Google and we have twice the number of keywords ranked in the top three positions than our next closest competitor.
In 'twenty three we will continue to grow the sales force as well as our SCM investment along with our digital and broad based media campaigns. The new marketing campaign will be focused on elevating loopnet brand owners and brokers across a mix of multimedia channels, including linear digital and social platforms.
Marketing efforts will drive leads to our expanded sales force and reposition our re enforce our position as the most popular place to find the space.
Overall I'm extremely pleased with the progress we've made building out the loopnet team and its international platform, which gives confidence in our ability to achieve our target of 18% to 19% revenue growth in 2003.
Str's revenue growth accelerated from single digit growth in the first quarter of 'twenty, 2% to 12% year over year growth in the fourth quarter of 2002 on a constant currency basis.
The hotel industry has recovered and in the U S average daily rates and revenue per room are well ahead of pre pandemic levels.
Internationally, the industry isn't far behind.
Current market conditions put us in a great position to launch our new benchmarking product, which we believe will provide incredible new valuable to hotel brands operators and owners around the world.
Our new benchmarking.
<unk> combines the very best of Str's deep hotel industry acumen, and expertise with costars innovative technology and industry, leading software users will find an interactive benchmarking platform with areas that preserves the familiarity of the Star report, whilst introducing new features and.
City, and analytics charts, and graphs to deliver additional insights into their hotels performance.
The deep proprietary performance data and user defined competitor competitive sets aggregates will be available for users to manage their properties set rate occupancy strategies and optimize performance.
Costar now houses an inventory of more than a quarter million hotels, including 77000, benchmarking participants and over 180 countries.
With 175000 unique users for that information these.
These users will access their performance data the industry data.
572, hospitality markets 1900 sub markets and over 6000 class segments and their selected currency.
Owners will have clearer visibility into asset performance market performance and the competitive landscape.
This insight is valuable for asset acquisition repositioning and disposition operators will have access to data and tools to better forecast budget yield manage and identified demand drivers and supply implications.
The hotel brands will have his full suites to support development teams franchise and owner relationships and management contracts.
During 'twenty three we'll be migrating those 175000 users, including 900 corporate customers and 6000 independent hotels to this new digital marketing platform based in Costar.
They have already begun to integrate the outputs with their workflows and we're experiencing significant product and are experiencing significant productivity improvements in short we are on track to achieve our goal to effectively utilize a digital product that entire.
Industry relies on and unlock significant new value for our clients. These enhancements will help us to gain further share and penetrate the $300 million addressable hotel market.
Tenex brought $5 billion in assets to the platform for sale in 'twenty, two for an increase of 42% year over year.
That's the highest level, we've seen on the platform since 2012.
<unk> closed $2 5 billion of those asset sales, which is up 16% over last year and the highest level since 2016.
This performance was in the face of a significant slowdown in overall commercial real estate sales volumes, which had declined almost 55% compared to the fourth quarter of last year, we continue to see consistency in the percentage of non distressed assets brought to the platform.
Approximately 80%, indicating that the volume of distressed sales has not yet picked up.
Yeah.
Full year revenue for <unk> grew 11% year over year.
In 'twenty, two we made significant progress enhancing the platform.
We've now fully integrated <unk> with our Costar and Loopnet platforms, and that's driving sales and operating efficiencies. We had our first buyer a bid on a tenex property from within Loopnet last week and they won the auction for that property.
So they're really fully integrated now with integration <unk> is now positioned to handle dramatically higher volumes.
We have also doubled our tenex salesforce.
Since the last year, New <unk> sales representatives with tenure under 24 months are productive and brought 318% more assets to the platform in 'twenty two than the prior year and they accounted for 55% of total assets.
The commercial property transaction market is in a period of disruption with $93 billion of <unk> loans expected to come due in 2003.
Trade rates continue to reflect the spread and buyer and seller expectations.
<unk> continues to maintain a significant advantage off the old offline trade rates.
And exceed and we've exceeded those by 81% over the course of 'twenty. One so we are.
In a down market dramatically more effective digital platform that can close the transaction within 90 days as compared to the market average offline of approximately 300 days has a significant advantage and is well positioned for challenging market conditions.
Yeah.
I am pleased to report that we're making significant gains in building consumer traffic on homes Dot com.
Unique visitors to homes dot com climbed 130% year over year in January according to Google analytics.
Our SCO traffic to homes Dot com increased 78% month over month in January .
Our SCO traffic to homes Dot com increased 78% month over month in January .
According to Comscore January 23 over January 'twenty, two our homes dot com traffic increased 100%.
While comscore indicated realtor dot com was down 15% Zillow was down 6% and redfin was relatively fat flat at about 6%.
In total our homes Dot Com network had approximately 24 million unique visitors in January according to Google analytics.
Yeah.
We still have a lot of work to do here, but we have a clear roadmap and have our heads down focused on building the best residential real estate portal in the United States.
Our team is excited to be working on this they're highly motivated and committed to the mission.
We believe that given our progress in building traffic to date will be in a position to begin monetizing homes dot com in the later part of this year.
We now have over 1 million agents registered on our homes Dot com platform, which is an increase of 33% over last year.
During the year, we successfully integrated the back ends of homes Dot Com and home staff platforms into one efficient residential technology stack.
We're making significant progress executing on your listing your lead strategy.
Other sites are injecting their agents into the home buyers search experience somewhat awkwardly, we offer a friction free environment connecting buyers directly to the listing agents who know the property.
And the home best that the buyers interested in.
We're also presenting consumers with hundreds of thousands of highly qualified potential buyer agents for free based upon those buyer agent skills and experiences rather based on how much the buyer agents willing to give up in commission to the portal.
We believe that we offer a dramatically better consumer experience than do sites that try and take a commission split from the inquiries buyers submit.
I've used some of these competing sites myself and submitted leads on properties I'm interested in.
The experience is remarkably awful.
You submit a lead in for months afterwards, you are bombarded with coal costs from countless agents who've have.
Questionable qualifications.
We believe that homes dot com offers a significantly improved consumer experience over that competition.
Not only do we believe we offer a superior consumer experience for buyers. We also believe we are much better aligned with real estate agents. The competing models use all the agents listings in a market the funnel monetize leads to just a very small percentage of agents. So.
Some of these competing models are diverting all the agents leads to a small number of agents who are paying the portal.
And their model. These few agents pay a huge fees and the vast majority of agents get little value if not downright disadvantaged by these competitors.
We believe that by respecting your listing your lead we can serve all of the agents better.
We are not just providing value to the agents with the listing, though we're making it easier for buyers to find agents, who have expertise and experience that are the best match for the needs of those buyers and.
Facilitating connecting with them and collaborating with them without us trying to again inject ourselves in the process and appropriately.
Our product development and research teams have now released a robust agent directory, featuring hundreds of thousands of agents and extensive media to enhance their profiles are agent collaboration tools are up and running we've had tremendous feedback from both agents and consumers.
The interactive experience replaces the historically inefficient email and text communications back and forth between agents and homebuyers. We've successfully previewed this new homes Dot com at the National Association of Realtors Convention in November where we demonstrated our product to close to 2000 agents and we receive.
Very positive feedback across the board.
Revenue for residential segment was $74 million in 'twenty, two which was roughly flat compared to revenue in 'twenty one.
As we mentioned in our last call. This is legacy home snap revenue.
Mostly selling social media and search engine advertising to agents.
We believe that this revenue is less strategic and less sticky than the revenue we will generate from a high intent marketplace like <unk> Dot com.
We have effectively transitioned most of our sales resources to other higher yield marketplaces, we continue to deemphasize the homestead products in favor of future homes Dot com revenue in the later part of the year, we will begin to bring more sales resources back on to the residential segment.
In the homes dot com product or.
Our planned investment in marketing to drive traffic to homes Dot Com will increase later in the year as we approach the point, where we are ready to monetize homes Dot com.
As you've heard us say before Costar is always assessing opportunities to maximize shareholder value, including strategic acquisitions and the discussions announced last month by news Corp, with respect to a potential sale of move Inc. The operator.
Realtor dot com, where part of that ongoing effort, while we typically do not comment on potential acquisition opportunities.
In light of news Corp's prior announcements we are confirming here at this point Costar group is not acquiring realtor dot com.
We have tremendous respect for the people behind realtor Dot com and for the National Association of Realtors.
But again I need to make it clear at this point Costar group is not acquiring realtor dot com.
We continue to believe that homes Dot coms business model and our principles are well aligned with the interests of NAR members and real estate agents generally.
Yeah.
Turning to the real estate economy. The office sector continues to show weakness with vacancies up 13 of the past 14 quarters and now stands at 14, 6%.
Availability rates are much higher at 18, 5%.
Second generation office properties now in significant distress, we expect to see many of these owners with no choice, but to hand, the keys back to the bank where.
We are well positioned to assist and recapitalizing those properties on <unk> as they come to market.
I do believe that there is hope of recovery in the out years for office, though.
A recent castle index reading showed a possible shift in momentum as office usage climbed over 250% mark over the pre pandemic levels that means that for the first time since the pandemic more people are working in an office that are working at home I believe that.
Because people are more productive efficient and in touch when they work together.
In person I also believe the teams work together are more competitive.
While we expect vacancy to continue to rise and office properties continued to be negatively impacted in the near term. We see the continued return to work trend is a positive sign for the office sector future with one 3 million office using jobs added since the beginning of the pandemic and negative 118 million square feet.
Absorption over the same time period.
There may be significant pent up demand for office space.
The industrial sector posted a healthy fourth quarter and the sector is seeing an unprecedented amount of new supply due to the high levels of demand for goods.
<unk> seen since the beginning of the start of the pandemic or since the start of the pandemic. The sectors vacancies are at half of their long term average.
The retail sector exhibited the strongest fundamentals in the fourth quarter and was the only asset class to see vacancies decline relatively strong demand and relatively low supply are both a continuation of trends we've seen since the beginning of the pandemic demand has outpaced new supply for seven consecutive.
Quarters, leading to a fourth quarter vacancy of four 2% the lowest retail vacancy rate ever recorded.
So it would appear that the death of retail real estate.
Was only a rumor.
The residential housing market is continuing to see softness home prices soared during the pandemic due to cheap money, but now mortgage rates have climbed over 7% as you likely know and.
In combination. This has resulted in terrible affordability issue at levels not seen in more than 30 years with buyers being priced out of the market and existing homeowners being discouraged removing due to having finance at historically low rates existing home sales have fallen for the 11th consecutive Mark.
Months.
And an overall drop of 38%.
We've recently celebrated our introduction to the NASDAQ100, and the S&P 500.
That's probably connected to the fact that we've now achieved 12 straight years of double digit revenue growth.
22 was our highest net new sales bookings year ever and we now have over 1100 productive sales representatives executing on many of our significant market opportunities.
We published our second environmental and social and governance report, which you can find in the Investor relations sector of our website, highlighting our ESG goals and accomplishments for 'twenty two.
Now reporting our baseline greenhouse gas emissions.
Inside Costar group, we continue to prioritize being a leader in sustainability, we have a hybrid or electric fleet of over 200 research vehicles, we select LEED certified or energy Star rated buildings for most of our 80 plus offices we.
We have facilitated over $30 million of virtual tours through apartments dot com loopnet homes dot com and land marketplaces.
Thereby potentially avoiding massive amounts of carbon that would have been created by people driving for traditional.
Physical property tours.
We've also increased the transparency of our human capital disclosures, including publishing both our EEO dash, one and pay gap analysis.
I'm extremely proud of our diverse and equitable workforce I am encouraged by all that we've done and all that we're still poised to do in making Costar group is sustainable transparent and a diverse as company as can be.
Our 2022 employee engagement scores climbed to a well above average, 83%, which is the highest engagement scores. We've ever obtained we're also proud to have a highly engaged workforce, which is reflected in our low average monthly voluntary turnover rate of just one 6%.
<unk>, which is way below the professional and business services industry rate of three 3%.
So with that at this point I'm going to turn the call over to our approximately 83% engaged Chief Financial Officer, Scott Wheeler.
Thank you Andy I think I'll I'll get through about 83% of my script, and then ill turn it off to Mike How's that.
Actually I think Youre right.
You're probably increasing are you brought down our turnover rate given your tenure here at the company. So thank you for that contribution.
So as Andy talked through a lot of this so the 2022 is certainly a very strong year for the business, particularly in light of all the economic uncertainty we have had with inflation.
Interest rates continued fears of recessions.
You've seen so many technology companies, particularly property technology companies that have seen steep revenue declines in their cost cutting in this past year, but fortunately that certainly is not our costar situations.
We've pointed this out many times before over the years, but it is certainly worth repeating.
Our business model is extremely resilient to economic and transactional fluctuations.
We have a mission critical information countercyclical marketplaces, a disciplined subscription revenue model with 90 plus percent renewal rate and we have a monstrous balance sheet.
All in all we're coming out of 'twenty two stronger than ever.
It's important and strategic I believe at this time for us to continue to invest in our biggest growth opportunities.
Similar to our strategy in 2015, when we increased investment levels to build apartments dot com.
Which we believe is now the undisputed leading rental marketplace in the United States and soon in Canada.
More on that later.
So financially in the fourth quarter and in 2022, we certainly crushed it all around.
We beat our revenue goals every quarter topping the high end of our guidance range once again in the fourth quarter.
Our $2, one 8 billion of revenue for the year is well above the initial forecast we communicated at the beginning of 2022.
Our organic revenue growth rate was 12% for the year.
Profit results for 2022 also came in above expectations with fourth quarter adjusted EBITDA exceeding the high end of our guidance range.
Our commercial information and marketplace businesses delivered strong operating leverage improving margins by 300 basis points in 2022 to get within 1% of our established 40% margin goal for the year.
We made excellent progress with our residential investment program, while spending less.
Overall, we ended the year with $672 million and adjusted EBITDA to 15% above the middle of the guidance range that we set out to start the year.
We're determined to repeat and improve upon our 22 performance in 'twenty three using the same strategic formula.
Our focus is on accelerating revenue growth in our commercial information and marketplace businesses.
Delivering cost productivity operating leverage and strong margins. This.
This commercial business engine is expected to provide increased profit levels and cash flow to fund our growth investments, most notably our homes dot com residential marketplace expansion.
With regards to revenue performance and outlook in our various businesses I'm going to have to give my MVP boat this year to apartments Dot com.
Our multifamily revenue growth continued to accelerate throughout 2022, ending the year at 16% in the fourth quarter up five percentage points from 11% revenue growth in the third quarter.
We see positive signs in both volume and add level mix. The number of properties advertising on the apartments Dot Com network continues to grow and we're now at a peak level of over 62000.
They can see rates increase we see more properties moving up add levels to increase their exposure and their lead volumes, creating positive revenue mix.
We expanded our sales force in 'twenty, two by 40% in apartments Dot Com and we certainly expect these new sellers to increase their productivity in 2023.
So we expect revenue growth to increase to 19% in the first quarter of 2023 and 20% for the full year for apartments Dot com.
Truly an amazing comeback this past year for the team and the best is still ahead.
Costar revenue grew 15% in the fourth quarter and 16% for the full year in line with our previous guidance.
Costar has 22 revenue growth rate was seven percentage points higher than that of 2021 on the strength of our sales efforts and the global product upgrade initiative, which to date has contributed approximately $40 million of revenue to costar.
For full year 2023, we expect costar revenue growth to moderate somewhat to 12% as the global product upgrade campaign nears completion, and our CPI renewal pricing is expected to soften throughout the year with the rates of CPI.
We expect Costar revenue growth in the first quarter of 2023 to be approximately 13%.
Loopnet revenue grew 12% in the fourth quarter and 11% for the full year of 2022 in line with our guidance.
Over the past 12 months, we've increased our loopnet sales team by over 100 heads with two thirds of those hires joining us in the last six months.
Our loopnet dedicated sales team made a significant contribution to the increase in net new bookings of over 50% for the year.
As our new sellers ramp up their experience and productivity in the year ahead, we expect further increases in Loopnet sales.
We expect first quarter 2023, loopnet revenue growth in the 14% to 16% range and folio of growth around 18% to 19%.
Residential revenue was $16 million in the fourth quarter and $74 million for the full year up slightly from the $73 million guidance. We previously provided.
We now estimate that the revenue of approximately $45 million will be in 2023 for residential a reduction of around $30 million.
That reduction is revenue from the <unk> lead scrubbing product with another 25% of the decline, resulting from the annualized nation of homes Dot com and MLS revenues that we discontinued in 2022.
Pumps snap pro and pro plus continue to perform well with over 1 million registered users and nearly 500000 active agents on the platform.
We expect residential revenue of approximately $13 million in the first quarter.
Not included estimated revenue from homes Dot com advertising products at this time in our 2023 forecast.
We will provide further updates as we make progress throughout the year.
Other marketplace revenue was $38 million in the fourth quarter of 2000 to a growth rate of 8% year over year.
Land for sale in business for sale marketplaces continue to perform well growing 17% in aggregate in the fourth quarter of 2022.
<unk> continues to generate solid revenues, despite the significant disruption in the transaction markets with fourth quarter revenue up slightly over the fourth quarter of 2021.
<unk> revenues are expected to trend lower in the first half of 2023 on a sequential and year over year basis before recovering in the second half of the year with stronger growth.
We expect the lands and businesses for sale marketplaces to continue to deliver strong double digit growth in 2023.
Overall, we expect full year 2023 revenue growth of 10% to 11% and our other marketplaces sector with Q1 revenue down in the range of 10% to 13% year over year on lower 10 X transaction revenue expectations.
Information services revenue grew 12% in the fourth quarter and 11% for the full year of 2022 ahead of our 10% guidance for.
For 2023, we expect first quarter revenue growth of 10% to 12% in full year growth in the range of 7% to 9%.
Our sales force totaled approximately 1130 people at the end of the year, an increase of 300 sales reps over the ending.
2021 sales teams levels.
We're already seeing strong contributions from our new sellers and the booking results and we expect this sales investment to produce revenue growth acceleration in 2023 and beyond as they become more productive over time.
We intend to continue to selectively grow the sales force in 2023, albeit at a little slower pace than in 2022 with a focus primarily on apartments dot com and Loopnet, both of which are expected to benefit from the positive countercyclical effects of lower occupancy levels.
Our contract renewal rates remain in the 90% to 91% range that we communicated last quarter.
The renewal rate in the fourth quarter for customers who've been subscribers for five years or longer remained strong at 95%.
Subscription revenue on annual contracts continues to climb and was 81% for the fourth quarter of 2022 up from 77% in the previous year and up three percentage points sequentially from third quarter of 2022. These.
These improvements reflect modest increases in both multifamily and loopnet.
And a positive mix effect of winding down some of those unattractive legacy products in the residential sector.
So looking ahead to 2023, we expect revenue to range from $2 46 to $2 48 billion, an increase of approximately $290 million at the midpoint of the range, implying annual growth rates of 13%.
First quarter 2023 revenue is expected to range from 575 million to $580 million, representing revenue growth of 12% year over year at the midpoint.
Now the big question around here is who is going to reach the $1 billion revenue run rate <unk>.
Will it be costar apartments dot com.
Going to be exciting to watch as we get into the second half of the year and down the home stretch into the fourth quarter.
With our biggest commercial businesses of Costar apartments dot com in Loopnet growing in the strong double digits with bigger sales teams, we expect revenue growth rates to accelerate for our commercial information and marketplace businesses from 13% in 2022% to 15% organic revenue growth in 2023.
We plan to operate our commercial businesses in 2023 to deliver similar adjusted EBITDA levels as we achieved in 2022 on a margin perspective and in order to provide growth capital for our homes dot com residential marketplace investments.
2023, adjusted EBITDA is expected in the range of $500 million to $520 million, reflecting an adjusted EBITDA margin rate of approximately 21% for the year.
First quarter 2023, adjusted EBITDA is expected in a range of 111 million to 116 million, indicating a margin of 20% at the midpoint.
As we move through 2023, we expect adjusted EBITDA margins in the 20% range during the second and third quarters of $23 three with fourth quarter. Adjusted EBITDA margin is expected to improve modestly to around 22% to 23%.
Included in our 2023 outlook are a number of our most important strategic investments for the future growth of the company.
As Andy talked through we're making significant progress with regards to our homes dot com residential marketplace.
We plan to increase our investment levels in 2023.
Our investments continue to be focused on product development content creation in building consumer traffic on homes Dot com.
Growing our sales force across all of our major businesses is another important area of investment.
The majority of the new sales resources in 2022 were added in the middle of the year the cost of which carries over to 2023, along with the added investment in new sellers that we plan to add this coming year.
We expect a great return on every salesperson and are more than happy to care of the investment at this point ahead of when they become fully productive.
Closely aligned with the growth of our sales team is our plan to invest in fresh marketing campaigns in both apartments dot com in Loopnet.
With so many new sellers.
We plan to provide the necessary marketing air cover to generate quality sales leads for our sales team.
Finally, with regards to areas of growth investment we plan to continue our European expansion in order to build the Pan European Loopnet marketplace and increase information content for Costar expansion.
So in summary, I'm very encouraged by the exceptional results we delivered in 2022.
At a time when the markets and interest rates and inflation has all created a healthy dose of economic volatility.
Our team is laser focused on our most meaningful growth investments, while producing strong sustainable profit levels in our established commercial businesses.
With the early success and increased momentum in our homes Dot com residential marketplace I remain confident that we are on pace to achieve the long range targets. We set last year of $5 billion in revenue and $2 billion in adjusted EBITDA in the year 2027.
Thanks to the entire Costar team for a fantastic 2022, and I look forward to our next update in a couple of months.
With that I will now turn the call back over to Matt. So we can start the Q&A session Matt.
Matt over to you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Feel like to withdraw your question Press Star followed by two.
Each analyst is permitted to ask one question.
Your first question comes from the line of George Tong with Goldman Sachs. Your line is now open.
Hi, Thanks, good afternoon.
Your guidance assumes significant EBITDA margin contraction this year, the 21% at the midpoint and you touched on.
Some of your growth investment priorities can you elaborate on where the bulk of your investments are going as well as what margins will be this year in your nonresidential businesses and what the path to 40% EBITDA margin by 2027 would look like.
Hey, George Thanks for the question.
Yes, we do have a significant investment planned for the year and as I listed the investments that we're working on in 'twenty three I listed those in priority and size order.
As you can expect our investment into residential will be the biggest increase that we will have in 2023.
To your question about the commercial business as you said, we almost reached the 40% margin that we set out for this year and we expect to continue to deliver that same margin level next year in our commercial business and so we're really focused on getting productivity out of our sales resources and the rest of the the teams and the commercial side of the business.
So we will be at about the 21% margin rate next year.
Interesting enough.
This wasn't planned that way, but when we made the apartments dot com investment back in 2000.
15, our margins also went to 21% at that point and have moved up nicely since then and.
And we are in a in a <unk>.
Market with residential that's at least two to three times the size.
The apartments dot com opportunity. So I think that gives you a sense of where our focus is for investment and why we think now is the right time to.
To make that investment ahead of the growth that we're going to get up into 2027.
We're not providing any margin guidance right now past 2023, so stay tuned as we move throughout time, we'll give you more guidance here.
Got it thank you.
Your next question comes from the line of Peter Christiansen with Citigroup. Your line is now open.
Yes.
Thanks for the question good evening Nice results Andy now that.
We have moved past move.
And considering the considerable firepower or are you still have on the balance sheet.
Just trying to think Where's your head now.
Okay.
And I mean, do you still see opportunities for M&A in the residential side, maybe you are leaning more now towards commercial the existing segment. Just wondering if you can give us some color on how youre thinking about M&A. These days. Thank you.
Sure so.
There are as we have been in <unk>.
Loring different opportunities.
There have been.
Other opportunities in the wings and we assess each one.
For its potential ROI complexity and risk.
So there are additional opportunities out there in both commercial and in residential.
And.
We're also looking at.
We're also looking at.
The buy versus build scenario continuously.
So.
Could.
Use a.
You could use a real estate analogy you could buy an existing property or you could build a property.
<unk>.
And there are different seasons for each where you get a better ROI on one or another.
So right now you can see some of the success, we're having in traffic growth.
And.
See some of the positive feedback we're getting on the approach we're taking to the market.
And so we feel that we have a.
Our unique offering on the organic side no one else's offering out there and so we're a little more focused on that and acquisitions that might support for inorganic.
Inorganic or more organic strategy on building out the opportunity.
It is important to remember that in the residential.
<unk> space.
The vast majority of residential agents.
Don't buy anything from the leading portals. So I believe that maybe 97% of active residential agents aren't buying anything from the existing portals.
And so we think there is a very attractive organic opportunity there and we think that there are.
Acquisitions that help you reach that goal and then there are also.
Less directly related acquisition opportunities so.
It's.
It's a changing landscape and you're making judgments as you go and making sure that you Bill.
I'll leave it as the best ROI for the investors.
Thank you.
Okay.
Your next question comes from the line of heavier both SKU with Bank of America.
Your line is now open.
Hi, Thank you for taking my question.
Just going back to the M&A question.
With regards to your balance sheet and you guys are sitting on a lot of cash I guess, if it sounds like youre thinking organic you're thinking organic investment youre thinking it sounds like maybe some.
Sure.
Acquisition, it sounds like might be tuck in or you may do something transformational I guess in the meantime, how are you thinking about your balance sheet and the cash sitting sitting on your balance sheet.
Okay.
Yes, thanks for the question.
The continued.
Our strategy is to is to focus on acquisitions, and adding meaningful scale to the company through that vehicle, which is why we raised the capital over the last few years.
And in the meantime, obviously, we will try and maximize the returns from the capital.
We have it is helpful that interest rates have gone up to help us a bit with that.
Of course, we'll always keep open other alternatives for that capital as time goes on but that's how we're thinking about our our capital still today and we have many other acquisition opportunities in the pipeline that we hope to deploy that capital against.
In the near future.
And I apologize Matt.
In terms of the investment spend for residential in 2023.
Sorry about that thank you.
No no no no no no no go ahead go ahead.
Okay. Okay.
The actual dollar spend specifically for residential in 2023 like you guys have been sharing that.
Yeah, No. We haven't we haven't provided that information in 2023, and let me explain I'm sure everyone's wondering that that now that we've integrated home snap we've integrated homes Dot com. They are all in our combined technology stacks with the rest of the things that Frank some real runs in our marketplaces. We also have significant resources.
And our research team now embedded under lease the ruggles working on residential as well as the research for Costar apartments Dot Com Loopnet.
And so as they deploy folks out into the field to do media shoots in other property information those resources go all across the different property types that we have and they produce information.
So we don't spend the time to go back and track time sheets or record what everyone's working on in a way that would say hey, we're going to we're going to track margins by each of our businesses.
As you know we have not provided margins by businesses in the past and we don't intend to do that because of the integrated nature of the business. We run so what we found out this year with it as we go into this more integrated residential strategy that as it.
It comes a lot of work and difficult to break that out now in broad sense as I think you can get to roughly what that looks like given the the commercial growth the commercial margins and we do give revenue breakouts.
By the different businesses. So so hopefully that will allow everyone to to get a sense of where we're going in and you can tell how important this residential strategy is to us by the amount we're willing to invest again, knowing that we've got a phenomenal opportunity.
In a few years for the revenue to get to that one.
Billion dollars or so in residential that we spoke about before.
And there is.
Competitive elements here, where you don't want to be.
Terribly transparent on every detail than you want.
We believe investors and analysts can figure some of this stuff out, but we don't want to put it in an earnings call script to make it that easy.
Yes.
Alright, Thank you very much.
Thank you. Your next question comes from the line of Stephen Sheldon with William Blair. Your line is now open.
Hey, Thanks, so it seems like you're ramping the residential investments pretty heavily this year and Andy I think you said that you could start to see some better monetization of content et cetera. Later in 2023, it doesn't seem like you've assumed that really in the residential revenue guidance that you laid out Scott.
Just curious to get some more detail on.
When you would expect to see residential monetization really improve and do you think that 2023 could.
Could be the peak drag or disconnect. However, you want to frame it between residential revenue and operating expenses.
So.
I believe we met with a number of investors and discuss the point, where we begin to.
Due to the first levels of monetization at 25 million Uniques and.
In January we were at 24 million uniques.
So we're a little ahead of our plan there and.
And so we are focusing on the back half of the year too.
Build out of that product.
Or to build to build out that offering and apply sales resources to it.
It would be no way that it would be meaningful revenue in 2003, just because of the timing of the ramp up.
I think that the question of where you see peak.
Peak investment includes a psychological element to it.
So I think.
Where the point at which you are an investor is.
Not yet seeing the first stage of monetization or seeing traffic strategy or unique positioning of our product.
From that perspective, I would say that 23 is probably the peak psychological negative operating.
Margin time period.
And we would hope to be showing.
Signs of success in 'twenty four 'twenty five so we've done this a number of times. This is if you use.
I use the analogy of building a building and you're building out first year, you're acquiring the land design the properties second year, you're getting the permits bidding out.
Our third Youre building out if you're leasing it up.
<unk> built a number of buildings just like this before.
And so typically when people see the groundbreaking in year, two three and the building starting to come up they can begin to imagine it.
We're still in the early phases.
Two really of this initiative, but.
Eventually people got pretty excited because they realize as a digital building and it has a fixed cost and you can lease it up repeatedly and repeatedly repeatedly it makes a lot of a lot of money on it. So I think 23 is a substantial investment year.
I would anticipate that there would be investment in 2004, but with more kpis that the world could see and appreciate it.
Yeah.
Makes a lot of sense. Thank you.
Mhm.
Thank you.
Your next question comes from the line of Ryan Tomasello with Stifel. Your line is now open.
Hi, everyone. Thanks for taking the question.
Switching over to the commercial business, maybe you can talk about the puts and takes beyond what you mentioned in your prepared remarks, Andy around the current backdrop in CRE, specifically as it relates to Costar suite and Loopnet.
Yes for suite with the step down in growth Youre contemplating this year and the guidance is that including any modest headwind from the core broker base.
In terms of attrition there.
And in terms of Loopnet.
Nice to see the acceleration in growth for 2023.
I guess backend weighted but would be helpful to understand what gives you confidence in your ability to execute on the growth initiatives. There we've met in this environment, particularly for the.
Significantly.
Owner focused.
Advertising product thanks.
Sure. So on the Costar side, the renewal rates are fantastic and we are not seeing.
Any sort of friction.
With brokers in any way shape or form you had a bit of a surge with.
You had a bit of a surge there with with a global platform sale over the last year or two.
But one of the things we do now is we've got our our sales force began to focus on some other initiatives that we think are equally valuable on the lender side, the corporate real estate side and the owner side. So we feel that there is.
More than ample opportunity to continue that growth rate.
In Costar.
I think I have made that same comment and been right about it for about 140 earnings calls.
And the.
And on the Loopnet side.
We're at a really important junction there, where we are actually building up a sales force that is capable of going after this opportunity and national level first time, we've ever had.
A dedicated sales force for Loopnet at that level.
We did an extensive set of focus groups.
Earlier this earlier the very tail end of last year, and we we spoke with our market researchers collected information from owners from brokers and from corporate real estate users.
One of the things that really.
Was impactful was.
10 for 10, all of the Fortune 1000 real estate folks we were talking to.
We're using the heck out of Loopnet to select and find their facilities, which leads me to believe that Loopnet is the single most important marketing vehicle in commercial real estate.
And in that context in a game and it's not a game in a situation where.
In some sectors, particularly say office, it's a game of musical chairs, where the person with the tenant.
<unk> big and that person without a tenant is handing the keys back to the bank.
I believe that there is.
Smart people would invest in digital marketing campaigns to give themselves the best shot at filling up their properties in a tough environment.
So.
One building it up by individual Rep by Rep performance gives us the outlook that we think makes sense.
And two just looking at.
The market conditions, and how Loopnet is optimally positioned to help people with very valuable assets with relatively minor investments in digital marketing.
It's may talking which skewed, but when I see a.
A broker or an owner with a significant leasing problem that may cause them to hand back their keys and they failed to marketed on Loopnet.
I'm just gobsmacked at what a stupid move that is.
So.
I believe that again from listening to.
100 hours of focus groups I believe we've got a winner of a product and executing building a sales force to go after that opportunity and marketing that opportunity will allow us to continue and accelerate the growth rate that youre already seeing us accelerate.
Do I sound confident due I think does it sound like my child is handsome.
Great Thanks for that.
Hmm.
Thank you for your question.
Your next question comes from the line of Jeffrey Mauler with Baird. Your line is now open.
Yes. Thank you I know you don't have formal sub segment or product level margin.
39% flattish margins for non <unk> I just want to confirm that that includes the investment in sales force as well as apartments dot com and Loopnet marketing and other.
Initiatives and then so that's just the first part and then second can you help us with the Q1 margin guidance is that the apartments dot com marketing or are you starting to market homes dot com significantly more aggressively this early in the year as well. Thank you.
Okay.
Yes, so Jeff the first part of your question.
Margins I referenced on the commercial information and marketplace businesses.
<unk> includes Costar Loopnet.
Apartments Dot com all of the investments that we make in those those platforms.
So everything outside of the residential marketplace.
And then I think more notably in the first quarter of the year is is the hiring that we did in the second half of the year last year along with the.
Increases we give for wages in the first quarter, which we do want to keep our employee base ahead of inflation, that's more of those impacts that roll into the first quarter as opposed to any acceleration.
Acceleration of marketing spend across the company in general So that's what we're seeing.
And then like I mentioned before we won't be hiring as many of those sales forces this year or other resources that will moderate that increase flattened out as we go through the year.
Okay. Thank you.
You bet.
Thank you for your question.
Your next question comes from the line of John Campbell with Stephens. Your line is now open.
Hey, guys. Good afternoon. Thanks for squeezing my question.
Just sticking on the M&A conversation, Andy when you talk about the build versus buy is it safe to assume that you are now I guess fully committed to building the traffic based on organic basis versus acquiring it or should we not necessarily roll that out with it may be just coming down to whether you can get the right price for the right asset.
I don't think you can rule anything out.
Like its a flexible it's a flexible thing and I think you described it accurately.
I think we are fortunate to have a <unk>.
Very viable organic path.
And again there are.
There are many.
I would say going into this year or going into the fall.
It felt almost sometimes if there were too many M&A opportunities out there. So there are there are a number of things, but as you know we're not at liberty to discuss.
These kinds of things typically in detail.
Understood. Thanks, Andy.
Okay.
Thank you.
Next question is from the line of Ashish <unk> with RBC. Your line is now open.
Thanks for taking my question I, just had a broader question about the guidance and the conservatism that's baked in last year, we saw a pretty.
Pretty up lake expectation for a pretty upfront.
As the investment in and we saw numbers being beaten and raised as we went through the quarters is that something similar this year as well as maybe we've taken some conservatism around these growth investments.
Thanks.
Yes, I appreciate the question as we really started to make.
Progress into our investments last year.
We gave a much broader range of outcomes. When we started the year I think our our EBITDA range was $40 million, which when you look back in time, we've never really provide that kind of.
The range is sort of spoke a little bit to the uncertainty that we had coming into last year. When we were really initiating some of our uptick in the investments, particularly around content and other other parts that we were focused on.
So Fortunately, we were able to spend less in those areas and I think what you saw this year is that we've tightened up the range that we go out for the beginning of the year, which should let you know that we have a little bit better line of sight to the the progress we're making we're a year further into it we can engage our investments more.
But that being said the marketplace changes quarter to quarter and we see the opportunities are the challenges and we will adjust appropriately.
We're always looking for where do we.
Where do we minimize investment at the right time, so that we are building at pace, but not not.
We're not spending too much but then when it does come to the point, where we launch products and we see ramp ups.
In revenue and it's time to put in more investments than we definitely include some of those in our forecasting. So I think we're I think we have a better line of sight. This year, but as you would expect in the early stages.
And in the investment cycle you have to be.
Already for changes along the way I hope that provides a little bit of guidance.
Guidance there.
That's very helpful. Thanks, Thanks, a lot.
Thank you.
Your next question is from the line of Andrew Jeffrey with Truest. Your line is now open.
Hi, Good evening guys. Thanks for taking the questions I appreciate it.
Recognizing Andy that the.
He has.
Very good track record as you pointed out of identifying big opportunities investing against them and putting up outsized revenue growth.
And in light of the fact that you were asking investors to just sort of.
Stomach another year of down margins as you do that in residential can you maybe give us a little bit of a sneak peak of what you think the business looks like on the other side.
Can this be.
As you start to monetize residential should we think about this being a mid teens organic revenue growth business or there are some trade offs.
I recognize you have these 2007 targets out there just sort of wondering kind of what a post investment in costar growth profile looks like.
Well I think apartments dot com, probably gives you a.
A good view of what that would look like.
It is.
It is something that has I believe post establishing a.
Platform with a unique value proposition and a significant presence.
That you have multiple decades of growth that follows on that and there's ample precedent for that.
The World and also.
In an apartment is dot com in Costar and Loopnet.
So it definitely is a multibillion dollar revenue opportunity and in my mind is a.
North of $1 billion EBITDA opportunity.
And.
And it is.
Obviously multi trillion dollar sales market it is a vast opportunity.
So it does take investment to build out the platform.
As it took investment to build out the Costar platform as it took the investment to build out the loopnet platform as it took investment to build out the apartments platform.
But the other side of it you get.
Predictable high margin growth for <unk>.
<unk>.
Similar to building a building.
So, but not similar to building building because you'd never lease up you can just keep selling more and more of it once you get there.
So.
Yeah, and I would say that.
We're.
Further end of the process.
Our confidence in the clarity grows a little bit.
Which leads to.
Some of our positioning today.
Okay. Thank you.
Hmm.
Thank you.
Next question is from the line of Jeff <unk> with BMO. Your line is now open.
Alright, thanks, so much it's close.
You talked about moderating the hiring of sales force, but you're still going to make some investments I'm just curious given what's going on in the market, especially in the real estate area is it easier to find salespeople than it was maybe six to 12 months ago.
Yes, I would think so yes on.
A number of elements.
One is that we have.
We've been through a large hiring stage and so our own processes and ability to identify the right candidates has increased.
The candidates the candidate pools that.
That are seeing tightening up in other sectors in and reductions in staff and other sectors are helping us find good quality candidates and anyone that selling digital products can be.
<unk> for our sales forces on the information side.
And then we're getting better at.
Not only the candidate identification, but then the onboarding and the training and the coaching is as we bring in these cohorts so starting from the market side, all the way through the pipeline, it's getting easier.
So, adding another let's say 100 folks in 2023 versus the 300, we added last year.
Like to lay out for us now, but theres still a lot of work to do to onboard and make sure all of the 300 R. R.
Our getting to be productive.
Contributing members to that strong revenue growth and then the replace the ones that inevitably there is some that won't be able to.
Pass that hurdle and we will know that within about six months and then we replace and move on.
We're definitely in a place where we can be selective and we definitely a place where we're able to meet our hiring goals.
It's not just in the sales side and the software.
<unk> side, it's in the research side, it's in throughout the company, we're seeing it we're seeing it's much easier to hire now.
At the same time.
We're retaining people simultaneously so that's a good place to be in.
Because we are able to put together the absolute highest quality team.
That you'd want to put together with.
The ability to hire and the ability to retain right now.
Okay I appreciate the color. Thanks.
Okay.
Thank you.
Next question is from the line of Stephanie more with Jefferies. Your line is now open.
Hi, Good evening. Thank you for the question.
Thank you.
I wanted to actually just.
I wanted to touch on it might be helpful to hear what you're seeing maybe from some of the year and customers what youre seeing in terms of customer sales cycle, but that has changed at all as.
As the year progressed and into this year.
I think that the the sales cycle on apartments Dot com has gotten faster as the market's eroded I think that the.
Sales cycle and Costar is a mix because you are selling into so many different sectors, when you're selling into lenders or big corporate users that tends to be a more deliberate longer sales cycle process.
The ownership side is similar on the Loopnet side.
I think thats not so much about sales cycle, it's more about.
It takes.
About six to nine months before the Loopnet salespeople really get their sea legs.
Legs, and understand digital marketing and commercial real estate so.
It's more of a ramp up thing, but the sales cycle itself and that in Loopnet I think is pretty fast.
So we're not seeing.
Anything in the only place, we're seeing something changed fundamentally in sales cycle as apartments and it's shortening.
Understood. Thank you so much.
Yeah.
Thank you.
Your next question is from the line of Joe Goodwin with JMP. Your line is now open.
Great. Thank you so much for taking the question I guess.
Andy when you stepped up investment in apartments Dot com in 2015.
That business was.
Larger scale than the residential businesses today. It took me around six seven years to get to north of $700 million in revenue for apartments.
2027 target calls for at least $700 million of residential.
Revenue on an organic basis I believe so I guess, just other than the residential market being larger.
Some of the other elements or factors in the residential market that gives you the confidence the residential business will outperform the apartments dot com business.
Sure so.
The market the revenue was actually.
Roughly the same revenue in place that we have so I think 75, roughly 75 atmosphere. So is roughly the same revenue.
The market itself in residential is dramatically larger.
Also our experience with operating digital marketplaces has continued to grow.
And the number of resources, we have to bring to bear and both sales talent.
<unk> marketing software development the whole range is broader.
Also I believe there is some level of.
Synergy across these platforms. So because you have a strong presence in apartments or loopnet.
There is or land or in any of these areas. There is.
There's a little bit of an accelerating.
<unk> across the platforms, but I would say.
I would go back one of the things is that piece.
People forget but that in with apartments dot com.
There was a lot of <unk>.
Competition that was better established than we were.
So there were four or five players from Craigslist of Zillow two.
Apartment guide to rent com to for rent to apartment finder, all bigger than us that we were competing up against.
And back then and when you looked around at our apartment communities.
Most were buying from one or more of several of these different players there is something very different happening in residential real estate, which is.
The vast majority of players.
In residential real estate arent buying from any of the.
Of the established larger residential portals, the vast majority of people aren't buying anything from them.
Our number one competition in my mind is the United States Postal service.
So I feel very comfortable competing against the United States postal surface.
In fact, I don't know if its your mailbox looks like but.
The last thing in my Mailbox is residential ads, so collect them all from every every place ever mailbox and I bring them on a throw them at a conference table in our office here in the product design studio just as a reminder of how much money.
<unk> real estate as spending on marketing properties very little of it with who you would consider to be the entrenched real estate portals.
Great. Thank you.
Mhm.
Thank you for your question.
Again, if you would like to ask a question Darren and the number one on your telephone keypad.
Yes, Scott you can as I can if there are no further questions. At this time, we will turn it back to Andy to wrap up.
Okay, well I appreciate everyone joining us for this fourth quarter two earnings call.
We're we're in 'twenty three we expect to deliver accelerating revenue growth and strong margins very strong margins in the commercial business, while continuing to start careful.
Thoughtful responsible investment into the residential market opportunity.
The strong performance of our core commercial real estate products support that continued investment at homes dotcom.
Back.
Back going back to the analogy of 2015, we invested tens of millions of dollars into marketing.
Apartments, dot com and that brought our margin down a little bit.
But today that business has become a multibillion dollar asset for our shareholders.
Incredibly attractive ROI not dissimilar to what.
The investments we've made in Costar and then incredible ROI there. So I believe that our focus and investment in the residential sector will yield an equally attractive.
If not superior return through time.
So we look forward to speaking with you again on our first quarter call on April 25th at.
At five <unk>.
O'clock Eastern standard time until then stay safe and thank you very much for participating in the call.
Except for the competitors listening.
Yes.
This concludes today's conference call you may now disconnect your lines.
Yeah.