Q3 2023 CoStar Group Inc Earnings Call

[music].

Good day, everyone. My name is Lisa and I'll be your conference operator today at this time I would like to welcome everyone to the Costar Group third quarter 2023 earnings call all.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session now Cindy <unk> head of Investor Relations will read the Safe Harbor statement Cindy you may begin.

Thank you Lisa good evening and thank you all for joining us to discuss the third quarter 2023 results of 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 Harbor statement.

Certain portions of this discussion today may contain forward looking statements, including the company's outlook and expectations for the fourth quarter and the full year of 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.

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 early 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 the information available to Costar on the date of this call Costar assumes no obligation to update these statements whether as a result of new information future events or otherwise reconciliation of the most directly comparable GAAP measure of any non-GAAP financial measure is discussed in this call whereas.

Discussed on this call are shown in detail in our press release issued today, along with definitions for those terms.

This release is available on our web site 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.

Good evening, everyone and thank you for joining us for Costar group's third quarter 2023 earnings call.

Revenue for the third quarter of 2023 was $625 million or 12% growth year over year.

Our commercial real estate information and marketplace businesses grew in revenue at an impressive 14% this quarter compared to the same quarter a year ago.

We also delivered strong net new bookings of $65 million in the third quarter with Costar sales improving sequentially in apartments dotcom coming off the seasonally strongest sales record set in the second quarter.

We've now reported 15 straight quarters of double digit revenue growth stretching all the way back to the first quarter of 'twenty 11, as we came out of the great financial crisis. This is a remarkable achievement over the past 12 plus years, we've generated 21% compound annual revenue growth increasing <unk>.

[noise] tenfold from $230 million to over $2 3 billion on a trailing 12 month basis.

As we move into the fourth quarter, we are generating almost $1 billion of adjusted EBITDA annualized from our commercial real estate business.

We have diversified our revenue across counter cyclical market places such as Loopnet and apartments dot com, while diversity diversifying costar product revenue into broader vertical markets, such as owners and lenders.

Alongside our diversification efforts, we remain committed to building a subscription only revenue portfolio across the business the.

As a result, we see today is an extremely resilient and steady growth business, even during a time when the property markets are in a hard down cycle as they are now.

To produce these exceptional results, we made big investment bets on expanding our geographical footprint or entering new adjacent segments. These investments for example, such as expanding costar into all of the U S City is Canada, and the U K or entering the apartment marketplace business.

So clear to us we're not universally popular at the time when we were in the investment phase they required.

We pursue growth investments, regardless, because we are singularly focused on the enormous value creation, we see in meeting the demand for digital information analytics and marketing of the 300 trillion dollar real estate asset class globally.

Digitizing real estate is unlocking major value and we are absolutely in the earliest innings of this opportunity.

I believe that Costar group's revenue will grow 10 fold again over the next 12 years because of the careful significant calculated investments, we're making that optimize our competitive advantages and capabilities.

We firmly believe that homes dot com can compete and win in the residential opportunity just as we lead today in all the prior asset class we've entered in the past, including office industrial retail hospitality multifamily land et cetera.

Lisa: Good day, everyone. My name is Lisa and I'll be your conference operator today. At this time, I would like to welcome everyone to the CoStar Group 3rd quarter 2023 earnings call.

Lisa: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Homes Dotcom delivered over 100 million unique visitors in the month of September According to Google analytics.

Cindy Eakin: Now, Cindy Eakin, head of investor relations, will read the safe harbor statement. Cindy, you may begin. Thank you, Lisa.

That's an increase of 1290% over the same period a year ago.

Cindy Eakin: Good evening and thank you all for joining us to discuss the 3rd quarter 2023 results of 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 this discussion today may contain forward-looking statements, including the company's outlook and expectations for the 4th quarter and the full year of 2023 based on current beliefs and assumptions.

Making homes dot com, the fastest growing residential marketplace in the United States.

Our residential network traffic, which consists of homes and apartments reached over 140 million monthly unique visitors in September which is more than realtor in redfin combined based on the traffic reported in their most recent earnings announcements.

According to Comscore, we are clearly now the second most heavily trafficked residential network by a wide margin with monthly unique visitors, 35% higher than realtor dot com and 90% higher than redfin in September.

Cindy Eakin: 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 that 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 10K and subsequent quarterly reports on Form 10Q under the heading risk factors.

Looking at the trend lines, we are in a convergence path with historically most traffic site.

Okay.

Two short years ago, when we acquired homes Dot com, we set out to deliver in agent friendly site that homebuyers love.

I believe that reaching over 100 million monthly unique visitors in September to homes Dot com is evidence that we are achieving that goal.

Cindy Eakin: All forward-looking statements are based on the information available to CoStar on the data disk call. CoStar assumes no obligation to update these statements, whether as a result of new information feature events or otherwise. Reconciliation is the most directly comparable gap measure of any non-gap financial measure is discussed in this call, or as discussed on this call, are shown in detail in our press release issued today, along with the definitions for those terms. The press release is available on our website located at CoStarGroup.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.

Our returning users have increased almost 900% over September of last year, which is a testament to our success of building rich content and providing a great consumer experience.

The traffic generation plans for homes Dot com are still in the early stages and we've already delivered double the 50 million monthly unique visitors that we initially targeted.

In the Apple App store homes Dotcom has climbed from 136 under lifestyle to now become number 19 homes Dot Com is now ranked above realtor, redfin, trulia and even apartments dot com and the App store.

Cindy Eakin: Please refer to today's press release on how to access the replay of this call.

When we announced that we were going to build homes dot com into a leading residential portal.

The number one risk factor called out with skepticism that we could build the traffic required to compete.

Andy Florance: And with that, I would like to turn the call over to our founder and CEO, Andy Forens. Good evening everyone, and thank you for joining us for CoStarGroup's third quarter 2023 earnings call. Revenue for the third quarter of 2023 was 625 million or 12% growth year-over-year. Our commercial real estate information and marketplace businesses grew in revenue at an impressive 14% this quarter compared to the same quarter a year ago. We also delivered strong net new bookings of 65 million in the third quarter with CoStarSales improving sequentially and apartments.com coming off the seasonally strong sales record they said in the second quarter. We've now reported 50 straight quarters of double-digit revenue growth stretching all the way back to the first quarter of 2011 as we came out of the great financial crisis.

Earlier this year media reports speculated that Costar group was in talks to acquire realtor Dot com.

For approximately $3 billion, if that was true the primary objective in acquiring realtor dot com could've been to take the number two traffic position in the United States.

Given that that speculation did not come to pass we might have been good stewards of our shareholders' $3 billion that we saved by building that traffic to homes dot com for a fraction of the cost of buying it.

Clearly successfully building traffic is no longer homes Dot coms primary risk factor.

Andy Florance: This is a remarkable achievement. Over the past 12 plus years, we've generated 21% compound annual revenue growth, increasing revenue 10 fold from 230 million to over 2.3 billion on a trailing 12 month base. As we move into the fourth quarter, we are generating almost 1 billion of adjusted e-beta annualized from our commercial real estate business. We have diversified our revenue across counter cyclical marketplaces such as loopnet and apartments.com, while diversifying co-star product revenue into broader vertical markets such as owners and lenders.

At this point shrewd investors seeking a new risk factor to replace the now reduced traffic risk factor will now need to turn to monetization as the next key risk factor.

Unlike its competitors homes dot com has never invested in any material brand marketing.

Because of that homes Dot coms unaided awareness is in the low single digits, while our competitors unaided awareness is in the mid to high double digits.

When we acquired apartments Dot com. It's similarly had a single digit unaided awareness problem, but through persistent creative branding, we've grown apartments dotcom unaided awareness to the industry, leading unaided awareness of 53%.

Andy Florance: Alongside our diversification efforts, we remain committed to building a subscription only revenue portfolio across the business. The result we see today is an extremely resilient and steady growth business, even during a time when the property markets are in a hard down cycle as they are now. To produce these exceptional results, we made big investment bets on expanding our geographical footprint or entering new adjacent segments. These investments, for example, such as expanding co-star into all the U.S, cities, Canada and the UK, or entering the apartment marketplace business, though clear to us, we're not universally popular at the time when we were in the investment phase they required.

Achieving significant unaided awareness is important because it improves SCO optimizes SCM investments and facilitate sales of advertising products to prospects.

Is essential to build unaided awareness before we begin monetizing.

We do not believe that building unaided awareness is our most significant risk factor.

We anticipate selling homes dotcom memberships in the second quarter of 2024.

Costar group has created dozens of successful monetization strategies and we believe that our planned monetization strategy for homes Dot com.

We'll become a dozen plus one of our successful monetization strategy.

Andy Florance: We pursue growth investments regardless because we are singularly focused on the enormous value creation we see in meaning of demand for digital information, analytics and marketing of the $300 trillion real estate asset class globally. Digitizing real estate is unlocking major value, and we are absolutely in the earliest innings of this opportunity. I believe that co-star groups revenue will grow tenfold again over the next 12 years because of the careful, significant calculated investments we're making that optimize our competitive advantages and capabilities.

When we acquired home staff, we quickly built a centralized sales team to sell their Facebook ads, while we did not believe in the long term value of reselling low retention low margin Facebook ads. We did very quickly scale of sales force and sold tens of millions of dollars worth of ads, we look forward to doing it again with homes Dot com.

Which we will believe will be a much better product with higher margin and higher retention.

William Blair recently published a paper on October 20th titled competition, Intensifying among home search portals.

There's some interesting callouts from their survey of residential agents that are worth noting.

Andy Florance: We firmly believe that homes.com can compete and win in the residential opportunity just as we lead today in all the prior asset class we've entered in the past, including office, industrial, retail, hospitality, multi-family, land, etc, homes.com delivered over 100 million unique visitors in the month of September according to Google Analytics. That's an increase of 1,290% over the same period a year ago. Making homes.com the fastest growing residential marketplace in the United States.

Combined spend and potential efficiency gain from agents market in their properties and services is 15% to 20 billion in the United States. Most of the agents marketing spend today is not on our competing portals.

Print.

Most patients do not spend marketing dollars with Zillow.

Most agents do not spend marketing dollars with realtor dot com.

Most of those clients feel that.

Zillow will become less important to their lead generation.

Efforts in the next one to two years.

60% of Zillow Premier agent client surveys stated that the value of the product is declining.

Andy Florance: Our residential network traffic, which consists of homes and apartments, reached over 140 million monthly unique visitors in September, which is more than realtor and redfin combined based on the traffic reported in their most recent earnings announcements. According to ComScore, we are clearly now the second most heavily trafficked residential network by a wide margin with monthly unique visitors 35% higher than realtor.com and 90% higher than redfin in September. Looking at the trend lines, we are on a convergence path with the historically most traffic site.

And 5% said, it's improving.

So 60% said the value was declining and 5% said it was improving.

94% of Zillow Premier agent customers, so that they're very open or somewhat open to alternative sources for lead generation.

Sounds good to me.

Even before we begin selling premium services, we're creating real value for agents.

As a result of our traffic growth and superior your listing your lead business model I believe we are already generating millions of leads for agents that are converting to commissions for them I'm encouraged by the fee.

Andy Florance: Two short years ago when we acquired homes.com we set out to deliver an agent friendly site that home buyers love. I believe that reaching over 100 million monthly unique visitors in September to homes.com is evidence that we are achieving that goal. Our returning users have increased almost 900% over September of last year, which is a testament to our success of building rich content and providing a great consumer experience. The traffic generation plans for Homes.com are still in the early stages, and we've already delivered double the 50 million monthly unique visitors that we initially targeted.

With one agent, saying that 85% of their total sales come from being able to build their brand and collaborate with sellers and buyers on the homes Dot Com network.

From these leads we estimate that homes dot com is helping agents generate billions and billions of dollars in annual commissions already while saving them billions and referral fees.

Last week Stitzer Burnett versus NAR lawsuit went to trial, we could be seeing the biggest change to the residential real estate industry, and recent or even intermediate history or long term Mr. Stitzer.

Stitzer Burnett another class action lawsuits are challenging the legality of the buyer broker Commission rule, which requires the home seller to pay the homebuyers agent fees.

Andy Florance: In the Apple App Store Homes.com has climbed from 136 under lifestyle to now become number 19. Homes.com is now ranked above Realtor, Red Ventrulia, and even apartments.com in the App Store. When we announce that we were going to build Homes.com into a leading residential portal, the number one risk factor called out was skepticism that we could build the traffic required to compete. Earlier this year, media reports speculated that CoStar Group was in talks to acquire Realtor.com for approximately $3 billion.

Plaintiffs are seeking damages of more than 40 billion.

Implying the nationwide damages of more than 400 billion.

Several defendants have already agreed cold to collectively pay $138 million in settlements and the changes to the rule.

Andy Florance: If that was true, the primary objective in acquiring Realtor.com could have been to take the number to traffic position in the United States. Given that that speculation did not come to pass, we might have been good stewards of our shareholders $3 billion that we saved by building the traffic to Homes.com for a fraction of the cost of buying it. Clearly, successfully building traffic is no longer Homes.com's primary risk factor. At this point, Shrewd Investors seeking a new risk factor to replace the now-reduced traffic risk factor will now need to turn to monetization as the next key risk factor.

The first generation real estate portals leverage this threatened buyer broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with the portal often that's the model many agents and brokers strongly resent that model.

Now that homes Dot com is one of the most heavily traffic portals. There is a strong and viable alternative for lead generation available to agents that does not require is serious commission splits.

Unlike the first generation portals homes Dot com business model is not negatively impacted by the potential and of the buyer broker Commission rule.

Momentum around our residential strategy is clearly building with the early successes of homes Dot com and there is potential for dramatic change in the industry soon or.

Andy Florance: Unlike its competitors, Homes.com has never invested in any material brand marketing. Because of that, Homes.com's onade awareness is in the low single digits while our competitors onade awareness is in the mid to high double digits. When we acquired apartments.com, it similarly had a single digit onade awareness problem. But through persistent creative branding, we've grown apartments.com onade awareness to the industry leading onade awareness of 53%. Achieving significant onade awareness is important because it improves SEO, optimizes SEM investments and facilitates sales of advertising products to prospects. It is essential to build onade awareness before we begin monetizing. We do not believe that building onade awareness is our most significant risk factor.

Our confidence in the success of homes Dot com and timing is increasing the need to.

Time them the movement that we see happening for these reasons, we have decided to slightly accelerate the pace and level of our investments into homes Dot com.

Last week, we announced our offer to acquire on the market. The third most traffic residential property portal in the U K for approximately 100 million pounds.

It doesn't seem like we thought that number out carefully how can it just round out to 100 million pounds. Okay.

We did actually.

The market was founded by agents in 2013 to provide a competitive alternative to the existing U K portals, which they agents felt represented a duopoly extracting economic rent from them.

Andy Florance: We anticipate selling Homes.com memberships in the second quarter of 2024. Coast our group has created dozens of successful monetization strategies and we believe that our planned monetization strategy for Homes.com will become a dozen plus one of our successful monetization strategy. When we acquired Homes.com, we quickly built a centralized sales team to sell their Facebook ads. While we did not believe in the long-term value of reselling low retention, low margin, and Facebook ads, we did very quickly scale a sales force and sold tens of millions of dollars worth of ads.

We believe that right moves ARPA is 21000, while ours is less than 1000. So we feel confident that we can profitably profit to profitably deliver the uk's most cost effective solution over the long term.

On the market has successfully developed a large network of agents and property listings by taking an agent friendly approach today on the market has over 13000 agent advertisers and attracts high intent leads at a fraction of the cost of other UK portals.

Our intention with the acquisition of on the market is to create the number one property affordable by by combining the strengths of our leading commercial UK commercial property site.

Andy Florance: We look forward to doing it again with Homes.com which we will believe will be a much better product with higher margin and higher retention. William Blair recently published a paper on October 20 titled Competition and Tensifying Among Home Search Portals. There's some interesting callouts from their survey of residential agents that are worth noting. Combined spent and potential efficiency gained from agents marking their properties and services is 15 to 20 billion in the United States.

You said UK twice there.

Costar and our technology platform driving homes dot com with on the market's large network of agents. So taking our two decades of experience with commercial property sites in the U K, along with a technology driving the successes of homes dot com and combining it with on the market's large share of agents in the United Kingdom to create a very.

Valuable solution.

Andy Florance: Most of agents marketing spend today is not on our competing portals, it's like print. Most agents do not spend marketing dollars with Zillow. Most agents do not spend marketing dollars with Realtor.com. Most of Zillow's clients feel that Zillow will become less important to their lead generation efforts in the next one to two years. 60% of Zillow's premier agent client surveys stated that the value of the product is declining and 5% said it's improving.

We believe the acquisition of the on the on the market represents an attractive and efficient entry point into the eight trillion dollar United Kingdom residential property market.

Costar group has a proven track record of acquiring strong performing property poor portals that are not the number one players and investing and building them into the most successful portals serving their market.

We intend to apply a similar approach with on the market as we plan to invest $46 5 million pounds into sales and marketing in the first full year. Following the commencement of the integration of the portal into Costar as network of marketplaces.

Andy Florance: So 60% said the value was declining and 5% said it was improving. 94% of Zillow's premier agent customers said that they're very open or somewhat open to alternative sources for lead generation. Sounds good to me. Even before we begin selling premium services, we're creating real value for agents. As a result of our traffic growth and superior your listing your lead business model, I believe we're already generating millions of leads for agents that are converting to commissions for them.

That amount represents six times on the market's current annual media spend and more than three times. The current annual media spend of rate move.

Sales and marketing investments in the first stage of a multiyear investment program.

To drive a consumers to on the market portal with the goal of significantly increasing the quality of valuable leads to on the market agent clients.

At good prices.

Andy Florance: I'm encouraged by the feedbacks. With one agent saying that 85% of their total sales come from being able to build their brand and collaborate with sellers and buyers on the homes.com network. From these leads we estimate that homes.com is helping agents generate billions and billions of dollars in annual commissions already while saving them billions in referral fees.

We believe that real estate portals across Europe, we will soon be entering a period of consolidation.

We did not want to approach that emerging opportunity by jumping into buying assets that are priced to perfection.

Private equity firms are more likely to seek to acquire portals and the number one position at elevated multiples because they don't have the same strategic value add with which to grow share. We believe that as a strategic with extensive proprietary technology and expertise we can create more value for shareholders by acquiring good or great assets at <unk>.

Andy Florance: Last week, Stitzer Burnett versus NAR lawsuit went to trial. We could be seeing the biggest change to the residential real estate industry in recent or even intermediate history or longer mystery. Stitzer Burnett, another class action lawsuits are challenging the legality of the buyer broker commission rule which requires the home seller to pay the home buyer's agent fees. Plaintiffs are seeking damages of more than 40 billion implying the nationwide damages of more than 400 billion.

Excellent values that may benefit from our track record of acquiring and growing traffic share and revenue and high potential portals.

Andy Florance: Several defendants have already agreed coal to collectively pay 138 million in settlements and to changes to the rule. The first generation real estate portals leverage this threatened buyer broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with the portal. Often that's the model. Many agents and brokers strongly resent that model. Now that homes.com is one of the most heavily trafficked portals, there is a strong and viable alternative for lead generation available to agents that does not require userious commission splits.

We believe that Europe represents a $17 billion revenue opportunity currently we estimate that publicly traded and large private portals in Europe have a market cap of about $30 billion or so.

We also believe that those declined.

About 10% when we announced the acquisition of on the market.

Or since we.

We don't know that's related but there has been a decline since we announced the acquisition of on the market.

Apartments Dot com continues to deliver impressive quarterly results with revenue of $235 million in the third quarter, a 24% increase over the third quarter of last year.

Apartments Dot Com is now our largest business by revenue is on track to reach a $1 billion in revenue run rate in the first quarter of 2024.

Net new bookings increased year over year for the seventh consecutive quarter, while communities advertising their spaces on apartments Dot com grew to more than 69000 in the third quarter, the highest tally ever and 15% above the third quarter of 'twenty to 'twenty two.

Andy Florance: Unlike the first generation portals, homes.com business model is not negatively impacted by the potential end of the buyer broker commission rule, momentum around our residential strategy is clearly building with the early successes of homes.com and there is potential for dramatic change in the industry soon. Our confidence in the success of homes.com and timing is increasing that the need to time the movement that we see happening. For these reasons we have decided to slightly accelerate the pace and level of our investments into homes.com.

Apartments Dot com achieved an all time high in unaided brand awareness in the third quarter of 53% proving the strength of our brand and the value of our long term commitment to marketing investments.

Apartments dot com attracts the highest quality potential renters with average monthly unique visitors of $45 million in the third quarter. According to Google analytics outperforming the market on a year over year basis.

Is it or spend twice two X more time on our site per visit in our leads convert to leases three point forex more than our closest competitor according to rent dynamics.

Andy Florance: Last week we announced our offer to acquire on the market the third most traffic residential property portal in the UK for approximately 100 million pounds. It doesn't seem like we thought that number out carefully. How could it just round out to 100 million pounds?

Our sales team continues to deliver strong results conducting the highest number of quality meetings ever at 163000 meetings in the quarter.

Andy Florance: Okay, we did actually. On the market was founded by agents in 2013 to provide a competitive alternative to the existing UK portals. Which they agents felt represented duopoly extracting economic red from them. We believe that right moves ARPA is 21,000. Well ours is less than 1,000. So we feel confident that we can profit, profit, a profitably deliver the UK's most cost effective solution over the long term. On the market has successfully developed a large network of agents and property listings by taking an agent friendly approach.

This is an increase of 36% over the same quarter last year, all while maintaining our net promoter score of 95.

Our expansion of the mid market sales team continues to deliver productive results, we have more sellers increasing levels of productivity and new flexible listing plans all of which resulted in a 48% increase in properties under 50 units advertising on apartments Dot com.

The size and strength of our sales team continues to differentiate us from the competition as.

As we hear about competitors shrinking their sales teams, we continue to add and train new sales reps each month to capitalize on the large opportunity we see clearly in front of us.

Andy Florance: Today on the market has over 13,000 agent advertisers and attracts high intent leads at a fraction of the cost of other UK portals. Our intention with the acquisition of on the market is to create the number one property portable by combining the strengths of our leading commercial UK commercial property site.

Andy Florance: I said UK twice there. Coast our in our technology platform driving homes.com with on the markets large network of agents. So taking our two decades of experience with commercial property sites in the UK along with the technology driving the successes of homes.com and combining it with on the markets large share of agents the night kingdom to create a very valuable solution. We believe the acquisition of the on the on the market represents an attractive and efficient entry point into the eight trillion dollar United Kingdom residential property market.

We continue to see favorable overall economic conditions for rental property advertising.

They can see rates continue to go up with three to five star property vacancy rates, increasing 200 basis points over prior year to eight 1%.

New unit deliveries are expected to continue at or near all time highs through the end of the year.

For these reasons, we expect to see apartments dot com revenue grow growth to continue at 24% in the fourth quarter of 2023.

Costar revenue for the second quarter was $233 million or a 10% increase over the same period last year and in line with our expectations are.

Our focus on selling to owners lenders investors and corporates continues to yield great returns and most of our sales activities are now focused on these high value customers.

Andy Florance: Coast our group has a proven track record of acquiring strong performing property portals that are not the number one players and investing in building them into the most successful portals serving their market. We intend to apply a similar approach with on the market as we plan to invest 46.5 million pounds into sales and marketing in the first full year following the commencement of integration of the portal into co stars network of market places.

Even though the property markets remain as some of the worst in decades, we still see high levels of engagement and usage of costar by our customers are.

Our subscriber count remains well above a 180000 this year and our renewal rates increased sequentially in the third quarter and are now above 93%.

There were 140000 distinct logins to Costar in September our second highest month of logins. This year properties searches were up 13% compared to the same period last year.

Andy Florance: That amount represents six times on the markets current annual media spend and more than three times the current annual media spend of right move. The sales and marketing investments in the first stage of a multi investment program to drive a consumers to on the market portal with the goal is significantly increasing the quality of valuable leads to on the market agent clients, at Good Prices. We believe that real estate portals across Europe will soon be entering a period of consolidation.

Our sales force remains strong and very active in our attrition rates are at an all time low.

Demand for our new lender product continues to be strong. We now have 230 customers in the Costar lender platform, which is more than double what we had this time last year our year to date net new bookings have increased 45% versus last year.

Costar lenders now helping clients manage over $620 billion of debt.

Andy Florance: We did not want to approach that emerging opportunity by jumping into buying assets that are priced at perfection. Private equity firms are more likely to seek to acquire portals in the number one position at elevated multiples because they don't have the same strategic value add with which to grow share. We believe that as a strategic with extensive proprietary technology and expertise, we can create more value for shareholders by acquiring good or great assets at excellent values that may benefit from our track record of acquiring and growing traffic share and revenue in high potential portals.

Or 14% of the outstanding four for Julien trillion, and non securitized commercial property debt and still we have significant opportunity to expand into the market further.

I am encouraged by continued strong customer engagement on Costar and the success of these new product capabilities, our ability to continue to generate solid revenue growth and sell through the current downturn is a testament to the value of Costar at all points in the property cycle.

Loopnet revenue was $68 million for the quarter.

Up 15% year over year, and slightly ahead of our guidance forecast.

Andy Florance: We believe that Europe represents a $17 billion revenue opportunity. Currently, we estimate that publicly traded in large private portals in Europe have a market cap of about 30 billion or so. We also believe that those declined about 10% when we announced the acquisition of on the market or since we don't know this related but there has been a decline since we announced the acquisition of on the market. Apartment.com continues to deliver impressive quarterly results with revenue of 235 million in the third quarter a 24% increase over the third quarter of last year.

Loopnet International revenue for the third quarter was up 38% compared to the same quarter last year as we continue to work towards the launch of Loopnet in France and Spain.

Office vacancy rates increased again in the third quarter now over 13% and then and then Phantom vacancy rates are dramatically higher creating counter cyclical momentum with the need to advertise empty commercial property space signature AD listings in the third quarter up 16% compared to last year.

And we see more customers move up from the basic silver level adds to the higher performing loopnet signature ads, which deliver more traffic and lead flow to their properties.

Andy Florance: Apartment.com is now our largest business by revenue is on track to reach a billion dollars in revenue run rate in the first quarter of 2024. Net new bookings increased year every year for the seventh consecutive quarter while communities advertising their spaces on apartments.com grew to more than 69,000 in the third quarter the highest tally ever and 15% above the third quarter of 2022. Apartment.com achieved an all time high and unated brand awareness in the third quarter of 53% proving the strength of our brand and the value of our long term commitment to marketing investments.

Loopnet generated 14 million monthly unique average.

Visitors for the third quarter in a row and increase of 10% year over year.

We have a new sales leader in place for Loopnet branded Lou who has extensive experience leading both costar and loopnet teams and his experience with Tenex as well.

We also changed the Loopnet dedicated sales team Commission plan to now focus on both sales and service, which will be backed up by our activity metrics and net promoter score tracking capabilities since making these changes sales activities, including customer service means have almost doubled from the prior quarter.

Andy Florance: Apartment.com attracts the highest quality potential renters with average monthly unique visitors of 45 million in the third quarter according to Google Analytics outperforming the market on a year over your basis. Visitors spend twice 2x more time on our site per visit and our leads convert to leases 3.4x more than our closest competitor according to rent dynamics. Our sales team continues to deliver strong results conducting the highest number quality meetings ever at 163,000 meetings in the quarter.

We continue to expand our dedicated loopnet sales team, while shifting more and more of the direct customer count responsibilities over to Loopnet from the Costar sales team I am confident in the long term opportunity for continued strong revenue growth in loopnet.

Yeah.

STR revenue growth was 12% compared to the third quarter of last year with subscription revenue growth accelerating to 22%.

Andy Florance: This increase of 36% of the same quarter last year all while maintaining a net promoter score of 95. Our expansion of the mid market sales team contains the liver productive results we have more sellers increasing levels of productivity and new flexible listing plans all which result in a 48% increase in properties under 50 units advertising on apartments.com. The size and strength of our sales team continues to differentiate us from the competition.

STR had another incredible sales quarter, where their second highest sales ever growing 156% in the third quarter versus the same quarter last year.

We have now reached a record 78000 host hotels participating with historical data and over 100, I'm, sorry over 16000 hotels, providing forward looking data.

The more hotels, we have contributing the better data, we are able to provide to the industry, which is evidenced by our impressive 97% renewal rate.

Andy Florance: As we hear about competitors shrinking their sales teams we continue to add and train new sales reps each month to capitalize on the large opportunity we see clearly in front of us. We continue to see favorable overall economic conditions for rental property advertising. They can see rates continue to go up with three to five star property, vacancy rates increasing 200 basis points over a prior year to 8.1%. New unit deliveries are expected to continue at or near all time highs through the end of the year.

We've now migrated over 300 customers to the new Costar hospitality benchmarking product up from 60 last quarter with another 200 underway.

One customer referred to the new benchmarking product as a quote game changer, saying I grew up with the old STR report and watched its evolution over 30 years and by far. This is the best thing that could have happened with the tool.

And quote.

Andy Florance: For these reasons, we expect to see apartments.com revenue grow growth to continue at 24% in the fourth quarter of 2023. CoStar revenue for the second quarter was 233 million or at 10% increase over the same period last year and in line with our expectations. Our focus inside the owners, lenders, investors, and corporates continues to yield great returns and most of our sales activities are now focused on these high value customers. Even though the property markets remain as some of the worst in decades, we still see high levels of engagement usage of CoStar by our customers.

In total our plan is to migrate over 900, corporate accounts and 6000 independent hotels into the Costar platform and we expect that process will be completed by the end of the second quarter next year.

<unk> strong double digit revenue growth to continue for STR for the foreseeable future as more and more hospitality customers see the enhanced value that costar information analytics brings to their subscription.

Tenex brought $1 1 billion assets to the platform in the third quarter and achieved a 51% trade rate more than double the trade rate. We are currently seeing in the offline transaction space.

Andy Florance: Our subscriber count remains well above 180,000 this year and our renewal rates increase sequentially in the third quarter and are now above 93%. There will 140,000 distinct log-ins to CoStar in September our second highest month of log-ins this year. Property searches were up 13% compared to the same period last year. Our sales force remains strong and very active and our nutrition rates are at an all-time low. The man for our new lender product continues to be strong.

We continue to see tremendous transaction interest in the platform in the third quarter as we reviewed four 8 billion in potential assets for sale in the quarter.

Unfortunately bid ask spreads remain at high levels, leading to only 35% of these potential assets moving through to auctions on <unk> in the quarter.

The CRE market continues to face significant head wins with transaction volumes down 47% in the third quarter as compared to the same quarter a year ago.

Storage really low levels of transaction volumes are continued expected to continue for the remainder of 'twenty three and 'twenty four.

Andy Florance: We now have 230 customers on the CoStar lender platform which is more than double what we had this time last year. Our year-to-date net new bookings have increased 45% versus last year. CoStar lender is now helping clients manage over $620 billion of debt or 14% of the outstanding 4.4 trillion in non-securitized commercial property debt and still we have significant opportunity to expand into the market further. I'm encouraged by continued strong customer engagement on CoStar and the success of these new product capabilities.

At least the first half of 'twenty four it's still early to see an increase in distressed assets on 10 X at this point.

We continue to see the long term value and digital transaction platform.

For us for both commercial and residential real estate, regardless of any current market conditions.

We're focused on continuing to improve our technology tools as part of our Costar integration and believe there are additional performance synergies to be gained by aligning our tenex sales and marketing activities closer with Loopnet.

Andy Florance: Our ability to continue to generate solid revenue growth and sell through the current downturn is a testament to the value of CoStar at all points in the property cycle. Loot net revenue was $68 million for the quarter, up 15% year-ever-year and slightly ahead of our guidance forecast. Loot net international revenue for the third quarter was up 38% compared to the same quarter last year as we continue to work towards the launch of Loot net in France and Spain.

Turning to the real estate economy.

The capital markets continue to be stressed as I've mentioned with transaction volumes significantly lower values are also down with both office and multifamily prices falling by 16% year over year for multifamily and office prices.

Down 30% from their peak banks are not lending and now they're shedding CRE loans from their balance sheet.

M. B S. Delinquencies are also trending higher with office delinquencies of 6% up more than 600%, where they were at the end of 2022 and rapidly approaching the 10, 5% peak last seen after the last recession.

Andy Florance: Office vacancy rates increased again in the third quarter now over 13% and in phantom vacancy rates are dramatically higher, creating counter-cyclical momentum with the need to advertise empty commercial property space. Signature ad listings in the third quarter are up 16% compared to last year and we see more customers move up from the basic silver level ads to the higher performing Loot net signature ads which deliver more traffic and lead flow to their prop.

We expect this expect this trend to continue as it took more than three years. After the conclusion of the great financial crisis for the delinquencies to peak.

The office sector already experiencing its worst market conditions ever continued to weaken in the third quarter totaled total negative absorption for the year is now 50 million square feet.

Andy Florance: LubeNet generated 14 million monthly unique visitors for the third quarter in a row, an increase of 10% year-to-year. We have a new sales leader in place for LubeNet, Brandon Lue, who has extensive experience leading both CoStar and LubeNet teams and has experienced with 10X as well. We also changed the LubeNet Dedicated Sales Team Commission plan to now focus on both sales and service. Which will be backed up by our activity metrics and net promoter score tracking capabilities.

Since the pandemic begin there's been over 170 million square feet of negative absorption in the office sector, which represents about 30% of all of the positive absorption that occurred in the 10 year recovery period after the last recession.

Absorption will likely continue to be negative for some time as most indicators point to continued weaknesses.

Measures of workers coming back to the office have largely been flat and only slightly up over the past year lease renewal activity is well below pre pandemic levels in new leases now average about 20% less in Florida place for space than pre pandemic levels.

Andy Florance: Since making these changes, sales activities, including customer service means have almost doubled from the prior quarter. We continued to expand our Dedicated Sales Team while shifting more and more of the direct customer account responsibilities over the LubeNet for the CoStar Sales Team. I'm confident in the long-term opportunity for continued strong revenue growth in LubeNet. SDR revenue growth was 12% compared to the third quarter of last year with subscription revenue growth accelerating to 22%.

S Hotel sector continues to approach pre 2020 levels in the third quarter made a weak occupancies rose fueled by group and corporate customers room rates and occupancy rates are also improved and Revpar is expected to grow at about four 5% for the year, even with a potential recession.

The industrial and retail sectors continue to perform well the industrial vacancy rate remains low at five 3% in the third quarter and rent growth remains strong as well at seven 5% over the past 12 months.

Andy Florance: SDR had another incredible sales quarter where their second highest sales ever growing 156% in the third quarter versus the same quarter last year. We have now reached a record 78,000 host hotels participating with historical data and over 16,000 hotels providing forward-looking data. The more hotels we have contributing the better data we are able to provide to the industry which is evidence by our impressive 97% renewal rate. We have now migrated over 300 customers to the new CoStar hospitality benchmarking product up from 60 last quarter with another 200 underway.

Retail vacancy reached another all time low at four 1% with steady demand fewer store closures and minimal new supply.

The residential sector continues to face challenges from still rising mortgage rates and associated declining home sales down 15% year over year in September.

More than 90% of the in place loans are now below 6% with more than 60% below a 4% leading to very low levels of inventory the combination of rising prices and mortgage rising mortgage rates has pushed affordability to its lowest level since July of 1985.

Andy Florance: One customer referred to the new benchmarking product as a quote game changer saying, I grew up with the old SDR report and watched its evolution over 30 years and by far this is the best thing that could have happened with the tool. Total our plan is to migrate over 900 corporate accounts of 6,000 independent hotels into the CoStar platform and we expect that process will be completed by the end of the second quarter next year.

In conclusion.

For my part Costar group continues to deliver both.

Double digit revenue growth and accelerate our performance against our homes Dot com residential strategy.

I'm very proud of our residential team for hitting a record milestone of 100 million monthly unique visitors to homes Dot com in September.

Achieving the number two position in the residential marketplaces in the United States and climbing coming off of our 1290% year over year growth rate.

Andy Florance: I expect strong double-digit revenue growth to continue for SDR for the foreseeable future as more and more hospitality customers see the enhanced value that CoStar Information Analytics brings to their subscription. 10x brought 1.1 billion assets to the platform in the third quarter and achieved a 51 percent trade rate. More than double the trade rate we are currently seeing in the offline transaction space. We continue to see tremendous transaction interest in the platform in the third quarter as we reviewed 4.8 billion in potential assets for sale in the quarter.

I'm also very proud of the success of our commercial real estate teams have had increasing our revenue 10 fold over the past 10 years, 12 years, and generating 14% year over year revenue growth in a downturn, while growing our commercial property adjusted EBITDA to approaching 1 billion annualized as we move.

Into the fourth quarter.

At this point I'm going to turn the call over to our Chief Financial Officer, Scott Wheeler.

Scott the floor is yours.

Andy Florance: Unfortunately, bid-ass spreads remain at high levels, leading to only 35 percent of these potential assets moving through to auctions on 10x in the quarter. The Siri mark continues to face significant headwinds with transaction volumes down 47 percent in the third quarter as compared to the same quarter a year ago. Historically, low levels of transaction volumes are continued, expected to continue for the remainder of 23 and 24, or at least the first half of 24.

Thank you Andy.

Great set of results strong improvements in both investment momentum and clearly our revenue growth. So let me cover some.

Facts by the service areas to start out.

With Costar revenue grew 10% year over year in the third quarter, which was in line with our guidance.

I think of course this is outstanding growth at a time when everything is pretty much gone pear shaped for the property markets with rising interest rates high inflation record high office vacancies only 50% returned to office numbers and pretty much a frozen up transaction market.

Andy Florance: It's still early to see an increase in distress assets on 10X at this point. We continue to see the long-term value in digital transaction platform. Platforms are both commercial and residential real estate, regardless of any current market conditions. We're focused on continuing to improve our technology tools as part of our CoStar integration and believe their additional performance synergies to be gained by aligning our 10X sales and marketing activities closer with LoopNet.

We saw a stable improving trends in costars net new bookings in the third quarter as our sales efforts are focused on new product capabilities in high value portfolio customers like lenders owners and corporate tenants.

Our costar retention rates improved sequentially sequentially in the third quarter to 93%.

This includes higher levels of cancellations from bad debt as the property downturn lingers, while client initiated cancellations are actually lower than in prior downturns.

Andy Florance: Turning to the real estate economy, the capital markets continue to be stressed as I mentioned with transaction volumes significantly lower. Values are also down with both office and multi-family prices falling by 16% year-over-year for multi-family and office prices down 30% from their peak. Banks are not lending and now they're shedding Siri loans from their balance sheet. CNBS delinquencies are also trending higher with office delinquencies of 6% up more than 600% where they were at the end of 2022.

Once again, we're seeing that Costar has proven to be mission critical to our customers regardless of where we are in the property cycle.

So this is our third major down cycle in the last 15 years, starting with the great financial crisis in 2008.

And of course, the Covid pandemic disruption in 'twenty, two or sorry, 2020, and most recently now the high interest in inflation cycle that started in 2021.

And each progressive cycle costars performance has been stronger.

During the great financial crisis, net new bookings went negative in Costar revenue growth dipped into negative territory for three quarters before returning to positive growth.

During the Covid disruption Costar net new bookings remain positive in revenue growth slowed to only 4% positive growth before returning back up to double digits.

Andy Florance: And rapidly approaching the 10.5% peak last scene after the last recession. We expect this trend to continue as it took more than three years after the conclusion of the great financial crisis for the delinquencies to peak. The office factor, already experiencing its worst market conditions ever, continued to weaken in the third quarter. Total negative absorption for the year is now 50 million square feet. Since the pandemic began, there has been over 170 million square feet of negative absorption in the office sector, which represents about 30% of all of the positive absorption that occurred in the 10-year recovery period after the last recession.

The current market environment is much worse economically than in 2020, and we see costars revenue performance being stronger we continued to invest in the costar product and our sales force through the pandemic and it's paying off.

We expect Costar revenue growth between 10% to 11% for the full year 2023, and in the range of 8% to 9% in the fourth quarter.

If market trends continue as they are now we expect costar revenue growth would stabilize around 7% to 8% in the first couple of quarters of 2024, and possibly improving thereafter.

Again this is a very strong performance and certainly above the growth we saw from Costar in the prior downturns.

Andy Florance: Absorption will likely continue to be negative for some time as most indicators point to continued weaknesses. Measures of workers coming back to the office have largely been flat and only slightly up over the past year. Least renewal activity is well below pre-pandemic levels and new leases now average about 20% less in floor space than pre-pandemic levels. The US hotel sector continues to approach pre-2020 levels in the third quarter, made a week occupancies rose, fueled by group and corporate customers.

Apartments Dot com revenue growth increased to 24% year over year in the third quarter to $235 million in apartments Dot Com is now our single largest business by revenue volume.

This is remarkable for a business that did not even existing costar 10 years ago.

For those of you that were with US back in 2014 and 2015, you'll certainly remember the acquisition of little apartments Dot Com number five in the market and the subsequent announcement of a major investment cycle that consumed practically all of our profits at the time.

Andy Florance: Room rates and occupancy rates are also improved and rev-pars expected to grow at about 4.5% for the year even with a potential recession. The industrial and retail sectors continue to perform well. The industrial vacancy rate remains low at 5.3% in the third quarter, and rent growth remains strong as well, at 7.5% over the past 12 months. Retail vacancy reached another all-time low at 4.1%, with steady demand, fewer store closures, and minimal new supply.

Fast forward to today, we now have the leading apartments marketplace with the most revenue for most customers the highest brand awareness and organic growth at the highest level now at scale than at any time since the first year of the site launch in 2015 and 2016.

By my calculations apartments Dot Com has added over $10 billion of market cap to Costar group.

I think we would all agree that the early years of investing our profit and <unk> Dot Com was a very smart thing to do.

Andy Florance: The residential sector continues to face challenges from still rising mortgage rates and associated declining home sales, down 15% year over year in September. More than 90% of the in-place loans are now below 6%, with more than 50% below 4% leaned to very low levels of inventory.

Something we believe we can repeat at an even bigger scale as we invest in our residential markets with homes Dot com and now the pending offer to acquire on the market.

Property is advertising on apartments dot com increased 15% year over year with mid market as the leading category of the growth.

Andy Florance: The combination of rising prices and mortgage rising mortgage rates has pushed affordability to its lowest level since July of 1985.

Our sales force is approximately 22% larger year over year and their performance continues to fuel the growth.

Net new bookings in the third quarter remained strong but stepped down from the record results of the second quarter for both seasonal reasons and due to spending capacity limits in some communities that are faced with the unfortunate decision to pay their high interest and rising inflation costs or to pay more in marketing.

Andy Florance: In conclusion, for my part, CoStar Group continues to deliver both double digit revenue growth and accelerator performance against our homes.com residential strategy. I'm very proud of our residential team for hitting a record milestone of 100 million monthly unique visitors to homes.com in September, achieving the number two position in the residential marketplaces in the United States and climbing, coming off of our 1,290 percent year-veer growth rate. I'm also very proud of the success of our commercial real estate teams have had increasing our revenue 10 fold over the past 10 years, 12 years, and generating 14 percent year-veer revenue growth in a downturn while growing our commercial property adjusted EBITDA to approaching 1 billion annualized as we move into the fourth quarter.

We expect fourth quarter revenue growth to remain incredibly strong at 24% for apartments Dot com and our full year revenue growth outlook is 23%.

Loopnet revenue grew 15% in the third quarter, and we're expecting fourth quarter growth of 11% and full year revenue growth in the range of 14% to 15%. This is relatively unchanged from what we talked about last quarter.

Revenue from information services grew 9% in the third quarter with STR and real estate manager subscription revenue posting combined 17% revenue growth we continue.

We expect information services full year revenue growth to be in the 9% range.

We're doing the right thing in information services, deemphasizing, and reducing transactional revenue, while we focus and grow our subscription revenue across those platforms.

Scott Wheeler: At this point, I'm going to turn the call over to our chief financial officer, Scott Wheeler. Scott, the floor is yours. Thank you, Andy. Great set of results, strong improvements in both investment, momentum, and clearly our revenue growth.

Residential revenue came in at $10 million in the third quarter and we expect full year 2020 through revenue of $43 million as we continue to run off the legacy products.

The old pro plus products are holding up better than we expected while the Facebook advertising products decline.

Scott Wheeler: So let me cover some facts by the service areas to start out. With CoStar, our revenue grew 10 percent year-veer in the third quarter, which was in line with our guidance. And you think, of course, this is outstanding growth at a time when everything is pretty much gone pear-shaped for the property markets, with rising interest rates, high inflation, record high office vacancies, only 50 percent return to office numbers, and pretty much a frozen up transaction market.

Suspect agents are finding that our millions of free leads from homes Dot com are a much better source of potential customers and the poor performing Facebook ads that were sold through homestead.

Other marketplaces revenue was $34 million in the third quarter down 5% year over year as <unk> is still facing the headwinds of the low transaction volume market.

Our lands and business for sale marketplace revenues are consistently delivering double digit growth.

Scott Wheeler: We saw stable improving trends in CoStar's net new bookings in the third quarter, as our sales efforts are focused on new product capabilities and high-value portfolio customers like Lenders Owners and Corporate Tenants. Our CoStar retention rates improved sequentially in the third quarter to 93 percent. This includes higher levels of cancellations from bad debt as the property downturn lingers, while client initiated cancellations are actually lower than in prior downturns. Once again, we're seeing that CoStar is proving to be mission-critical to our customers, regardless of where we are in the property cycle.

As we don't see near term indications of an upturn in transaction volumes, nor do we plan for those we expect full year revenue for other marketplaces that have approximately $130 million.

Looking at profitability, our adjusted EBITDA for the third quarter was $112 million slightly below our guidance range of $1 15 to 120 as we made the prudent decision to accelerate investments in our residential strategy.

Yeah.

Turning to performance Rectrix, our sales force totaled approximately 1180 people on September 30th an increase of 8% from September of last year, and approximately 20 more than last quarter.

Scott Wheeler: So this is our third major down cycle in the last 15 years, starting with the great financial crisis in 2008, then of course the COVID pandemic disruption in 2022, or sorry 2020, and most recently now, the high interest and inflation cycle that started in 2021. In each progressive cycle, CoStar's performance has been stronger. During the great financial crisis, net new bookings went negative and CoStar revenue growth dipped into negative territory for three quarters before returning to positive growth.

Our contract renewal rate was 91% for the third quarter of 2023 with the renewal rate for customers who've been subscribers for five years or longer at 96% with both rates increasing sequentially over the second quarter.

This is particularly impressive given the current state of the property markets.

Subscription revenue on annual contracts was 82% for the third quarter of 2023 compared to 80% in the third quarter of 2022. This.

Scott Wheeler: During the COVID disruption, CoStar net new bookings remain positive and revenue growth slowed to only 4 percent positive growth before returning back up to double digits. The current market environment is much worse economically than in 2020, and we see CoStar's revenue performance being stronger. We continue to invest in the CoStar product and our sales force through the pandemic and it's paying off. We expect CoStar revenue growth between 10 to 11 percent for the full year 2023, and in the range of 8 to 9 percent in the fourth quarter.

This is primarily attributable to our strong apartments dot com growth.

We have a fortress balance sheet with $5 2 billion in cash that is now, earning 5% interest our net quarterly interest income is pacing at around $55 million.

Turning to the outlook for 2023 with our offer to purchase on the market expected to close late in the fourth quarter, our guidance does not reflect any financial impact of the potential transaction.

We expect full year 2023 revenue outlook in the range of 2.445 billion to $2 45, 1 billion representing growth of 12% at the midpoint of the range.

Scott Wheeler: If market trends continue as they are now, we expect CoStar revenue growth would stabilize around 7 to 8 percent in the first couple quarters of 2024 and possibly improving their after. Again, this is a very strong performance and certainly above the growth we saw from CoStar in the prior downturns.

Modest adjustment to our revenue guidance range is from less favorable property market conditions, primarily in the third quarter.

Our commercial business growth rate for the year is expected to be 14% generating revenue of over $2 $4 billion.

Scott Wheeler: Partners.com revenue growth increased to 24 percent year over year in the third quarter to 235 million and apartments.com is now our single largest business by revenue volume. This is remarkable for a business that did not even exist in CoStar 10 years ago. For those of you that were with us back in 2014 and 2015, you'll certainly remember the acquisition of littleapartments.com, number five in the market and the subsequent announcement of a major investment cycle that consumed practically all of our profits at the time.

The company expects revenue for the fourth quarter of 2023 in the range of $630 million to $635 million, representing revenue growth of 10% to 11%.

The commercial business growth rate for the fourth quarter is expected to be approximately 12% to 13%.

We anticipate adjusted EBITDA for the year in the range of 485 million to $490 million.

The fourth quarter of 2023, adjusted EBITDA is expected to be in a range of 123 million to $128 million.

Scott Wheeler: Fast forward to today, we now have the leading apartments marketplace with the most revenue, the most customers, the highest brand awareness and organic growth at the highest level now at scale than at any time since the first year of the site launch in 2015 and 2016. By my calculations, apartments.com has added over $10 billion of market cap to CoStar Group. I think we would all agree that the early years of investing our profit in apartments.com was a very smart thing to do and something we believe we can repeat at an even bigger scale as we invest in our residential markets with homes.com and now the pending offer to acquire on the market.

This guidance includes the additional homes Dot com investment that Andy mentioned as we prepare for our residential product launch in 2024.

Overall, we're excited to be able to deliver 50 straight quarters of double digit growth.

Over the past 10 years, we've built a much more diversified portfolio focused entirely on subscription revenue, which makes our growth rates are increasingly resilient to economic and commercial property cycles.

What we're now seeing in the property markets are some of the worst conditions in decades.

I suspect. This is the first time that many people on this call have experienced high inflation and interest rates like some of us enjoyed back in the eighties and nineties and maybe back in the seventies.

Scott Wheeler: Properties advertising on apartments.com increased 15 percent year over year with mid market as the leading category of the growth. Our sales force is approximately 22 percent larger year over year and their performance continues to fuel the growth. Net new bookings in the third quarter remain strong but step down from the record results of the second quarter for both seasonal reasons and due to spending capacity limits in some communities that are faced with the unfortunate decision to pay their high interest in rising inflation costs or to pay more in marketing.

But costar has learned and demonstrated overtime because it's important to continue invest in attractive long term opportunities for revenue growth and Tam expansion during downturns, when others are shrinking or retrenching. We're.

We are once again leaning into our high growth future with great promising investments like homes dot com and on the market.

The overwhelming proof of the success of this strategy is happening now as we continue to deliver double digit revenue growth in our commercial information and marketplace businesses, which we expect will continue into 2024.

Scott Wheeler: We expect fourth quarter revenue growth to remain incredibly strong at 24 percent for apartments.com and our folio revenue growth outlook is 23 percent. Luke Net revenue grew 15 percent in the third quarter and we're expecting fourth quarter growth of 11 percent and folio revenue growth in the range of 14 to 15 percent. This is relatively unchanged from what we talked about last quarter. Revenue from information services grew 9 percent in the third quarter with STR and real estate manager subscription revenue posting combined 17 percent revenue growth.

Assuming market conditions and trends don't improve next year, we expect continued double digit revenue growth throughout 2024 in the range of 11% to 12% exclusive of our residential business and depending on the market transaction.

With these impressive growth expectations, we expect to generate over $1 billion in adjusted EBITDA from our commercial portfolio next year.

With that I will now turn the call back over to our call operator to begin the question and answer session.

Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question that is star one again.

Scott Wheeler: We continue to expect information services folio revenue growth to be in the 9 percent range. We're doing the right thing in information services de-emphasizing and reducing transactional revenue while we focus and grow our subscription revenue across those platforms. Residential revenue came in at $10 million in the third quarter and we expect folio 2023 revenue of $43 million as we continue to run off the legacy products. The old pro plus products are holding up better than we expected while the Facebook advertising products decline.

Your first question comes from the line of George Tong with Goldman Sachs.

You mentioned commercial real estate transaction volumes are seeing significant declines can you elaborate on how different customer types within costar suite are responding to these trends so large brokers small brokers and non brokers how are basically net bookings.

Scott Wheeler: I suspect agents are finding that our millions of free leads from homes.com are a much better source of potential customers than the poor performing Facebook ads that were sold through homes. Sam. Other marketplaces revenue was $34 million in the third quarter, down 5% year over years, 10X is still facing the headwinds of the low transaction volume market. Our lands and business for sale marketplace revenues are consistently delivering double digit growth. As we don't see near-term indications of an up-term in transaction volumes, nor do we plan for those, we expect full-year revenue for other marketplaces of approximately $130 million.

Growing year over year across these different types of customers.

Yeah.

Well.

Most of the most of the brokerage firms are going to be.

Doing both leasing valuation and.

And investment sales or property sales the folks doing property sales are certainly seeing.

Lower revenue.

But I would not call out any.

<unk>.

Big difference from one firm to another owners.

I think the big I think the bigger difference is that our sales force is investing more effort right now against owners and <unk>.

Scott Wheeler: Looking at profitability, our adjusted EBITDA for the third quarter was $112 million, slightly below our guidance range of 115 to 120, as we made the prudent decision to accelerate investments in our residential strategy. Turning to performance metrics, our sales force totaled approximately 1,180 people on September 30, an increase of 8% from September of last year, and approximately 20 more than last quarter. Our contract renewal rate was 91% for the third quarter of 2023, with the renewal rate for customers who have been subscribers for five years or longer at 96%, with both rates increasing sequentially over the second quarter.

Corporations and lenders then they're focusing on brokers. So we're seeing an increase of bookings with owners corporates and lenders because that's where the sales force.

As place their strategy and that's based on new product offerings, and the fact that those have been the.

Historically underpenetrated areas for us so the.

The actual.

A reduction in.

Year over year sales volume is only really impacting tenex as far as I'm aware.

Scott Wheeler: I find this particularly impressive given the current state of the property markets. Subscription revenue on annual contracts was 82% for the third quarter of 2023, compared to 80% in the third quarter of 2022. This is primarily attributable to our strong apartments.com growth. We have a fortress balance sheet with $5.2 billion in cash that is now earning 5% interest. Our net quarterly interest income is pacing at around $55 million. Turning to the outlook for 2023, with our offer to purchase on the market expected to close late in the fourth quarter, our guidance does not reflect any financial impact of the potential transaction.

That's very helpful. Thank you.

Your next question comes from the line of Pete Christiansen with Citi.

Thank you good evening.

Good evening.

Good evening.

We could.

Dig into the bookings performance this quarter a little bit.

We had the the pivoted in suite, which I think was really soft.

Began like Q4 of last year, then you have the commission change in Loopnet and the new leadership change in Loopnet.

It should.

Do you think.

The bookings growth that we saw this quarter really as an inflection point or a bottom or do you think this is more of the liberalized a level kind of production.

Scott Wheeler: We expect full year 2023 revenue outlook in the range of $2.445 billion to $2.450 billion, representing growth of 12% in the midpoint of the range. The modest adjustment to our revenue guidance range is from less favorable property market conditions, primarily in the third quarter. Our commercial business growth rate for the years expected to be 14%, generating revenue of over $2.4 billion. The company expects revenue for the fourth quarter of 2023 in the range of $630 million to $635 million, representing revenue growth of 10 to 11%.

The amount that we should expect for the next few quarters given the economic backdrop. Thank you.

Yeah. Thanks for the question Pete.

As you know and you've watched our patterns over the years quarter to quarter.

Changes in our net bookings numbers don't create trends you have to obviously look for more quarters in a row to actually determine what that looks like.

Scott Wheeler: The commercial business growth rate for the fourth quarter is expected to be approximately 12% to 13%. We anticipate adjusted EBITDA for the year in the range of $485 million to $490 million. The fourth quarter of 2023 adjusted EBITDA is expected to be in a range of $123 million to $128 million. This guidance includes the additional homes.com investment that Andy mentioned as we prepare for our residential product launch in 2024. Overall, we're excited to be able to deliver 50 straight quarters of double-digit growth.

We come off of Q2, which is seasonally a high quarter for apartments.

Which was also fueled by the NAA conference and some of those things and so that's where you see most of the.

Variation between the two quarters as I mentioned costars solid if not mildly improving loopnet not.

Not changed much since the last quarter.

I think we see.

We see everyone is holding on well with good strong growth. The new sales teams. We've added are performing well and we don't we don't attempt to predict for forward guidance on the bookings again because of that quarter to quarter volatility, but hopefully that helps you get an understanding of where the changes were in the quarter.

Scott Wheeler: Over the past 10 years, we have built a much more diversified portfolio focused entirely on subscription revenue, which makes our growth rate increasingly resilient to economic and commercial property cycles. What we are now seeing in the property markets are some of the worst conditions and decades. I suspect this is the first time that many people on this call have experienced high inflation and interest rates, like some of us enjoyed back in the 80s and 90s, and maybe back in the 80s.

Thank you that's helpful.

Our next question comes from Heather <unk> with Bank of America. Please go ahead.

Hi, Thank you.

I was hoping you could well thank you for the explanation on the market and what you plan to do I was hoping you could do.

Scott Wheeler: What CoStar has learned and demonstrated over time is that it's important to continue invest in attractive long-term opportunities for revenue growth and tam expansion during downturns when others are shrinking or retrenching. We expect that we will continue into 2024. Assuming market conditions and trends don't improve next year, we expect continued double-digit revenue growth throughout 2024 in the range of 11-12%. Exclusive of our residential business and depending on the market transaction. With these impressive growth expectations, we expect to generate over $1 billion in adjusted EBITDA from our commercial portfolio next year.

Dig in a little bit more on the spending.

And help us just understand kind of when you talked about after the first year of integration you're going to spend the $46 million is that the right way to think about it and what that spending means for your 2027 target acquisitions.

Given that youre going to be investing behind it.

Yeah.

Yeah. Thank you Heather so the the integration of the after the pending transaction.

Would begin of course win when the transaction close if it gets approval the vote from the shareholders. We expect that to be at the end of the year in December.

So.

Obviously, theres Theres people technology and other things you would start to work on immediately is that we've got.

As we've outlined in our $2 seven announcements.

We can't say much more beyond what those integration activities are but we do expect those those synergies and the advertising to begin within six months following the closing of the acquisition.

Scott Wheeler: With that, I will now turn the call back over to our call operator to be in the question and answer session. Thank you.

Lisa: At this time, I would like to remind everyone in order to ask a question, please press star than the number one on your telephone keypad. If you would like to withdraw your question, that is star one again.

And so.

We don't we don't include any of that yet in our longer term outlooks, we will wait until we see what the shareholder vote and the transaction looks like first and then we can provide more updates on the effects into next year and beyond.

Scott Wheeler: Your first question comes from the line of George Tongue with Goldman Sachs. You mentioned commercial real estate transaction volumes are seeing significant declines. Can you elaborate on how different customer types within CoStar suite are responding to these trends? So large brokers, small brokers and non-brokers, how are basically net bookings growing year-over-year across these different types of customers? Well, most of the brokerage firms are going to be doing both leasing, valuation, and investment sales or property sales.

And I would just outside of commenting on anything specific to on the market I would say that something at that scale would not be likely a material change materially change our 27 outlook.

That's helpful. Thank you.

Our next question comes from the line of Alexia <unk> with Jpmorgan.

Hi, This is Alex Smith on behalf of Alexia <unk> from Jpmorgan. So my first question Hi, Good day. Good to hear you. Andy can you help us understand the organic investments into the residential business over the next few years could this be north of $400 million in 'twenty, four and 'twenty five respectively.

Scott Wheeler: The folks doing property sales are certainly seeing lower revenue. But I would not call out any particular big difference from one firm to another owners. I think the bigger difference is that our sales force is investing more effort right now against owners and corporations and lenders than they are focusing on brokers. So we are seeing an increase of bookings with owners, corporates, and lenders because that is where the sales force has placed a strategy.

Taper off and Ben.

So thanks for the question, we have yet to set out investment plans for 2024 for the residential investments. So I won't be able to give you any specific guidance out into 2024.

As we've talked about today, we've seen such strong response, both in traffic.

And in the capability of the site restrict reaction from customers and from agents that we felt it was the right thing to do to keep moving as fast as we can also knowing that theres been some.

Cracks, possibly in the industry business models, and we want to be as prepared as we possibly can with the site. If it changes happen in the industry. So it wasn't a significant move in the in the 2023 time period I think it was roughly around $30 million. When you look at the change in the guidance, but certainly we expect to continue to invest.

Scott Wheeler: And that is based on new product offerings and the fact that those have been historically under penetrated areas for us. So the actual reduction in year-over-year sales volume is only really impacting 10x as far as I'm aware.

Scott Wheeler: Very helpful.

In residential into next year through when we monetize things are going well and now is the time, you keep going and you don't back off on their spend levels for sure.

Scott Wheeler: Thank you.

Pete Christensen: Your next question comes from a line of Pete Christensen with city. Thank you.

Understood. Thank you and my follow up question is around the market dynamics in the U K.

Scott Wheeler: Good evening. I was hoping we could dig into the bookings performance this quarter a little bit. I know we had the pivot in suite which I think was really start beginning like two, four of last year. Then we have the commission change and loopnet of the new leadership change and loopnet. I think of the bookings growth that we saw this quarter really as an afflection point or bottom or you think this is more of a level a level kind of production, and kind of a amount that we should expect for the next few quarters given the economic backdrop.

<unk> has maintained a market dominant position in the UK for quite some time and as we understand that many players have sock puppet disrupt rightmove with marketing and digital investments and they've largely failed what do you think costar can do desperately to disrupt the market.

The company is minimal presence in Europe currently.

Yeah.

Well I.

Well I tend not to assign godlike characteristics to mere companies and when I see a 70, 274% margin in a company.

With none of the major players actually materially investing in my view into significant marketing in.

Scott Wheeler: Thank you. Yeah, thanks for the question, Pete. As you know, and you've watched, you know, our patterns over the years, you know, quarter to quarter changes in our net bookings numbers don't create trends. You have to obviously look for more quarters in a row to actually determine what that looks like. You know, we come off of Q2, which is seasonally a high quarter for apartment. Which was also fueled by the NA conference and some of those things.

In the market.

I think that.

The power of the technology, we've developed with homes Dot com.

And our experience in building traffic often against companies that have more traffic than we have when we begin.

Feel very comfortable we have something to bring to the table in the United Kingdom and that we.

Can offer some real value in the market.

Scott Wheeler: And so that's where you see most of the variation between the two quarters. As I mentioned, you know, co-stars solid, it's not mildly improving loop nets, not changed much since the last quarter. So I think we see, we see everyone is holding on well with good strong growth. The new sales teams we've added are performing well and we don't, we don't attempt to predict forward or forward guidance on the bookings again because of that quarter to quarter of all utility. But hopefully that helps you get an understanding of where the changes were in the quarter. Thank you, Pebble.

I would flatly reject any concept that.

That any company.

Is impervious to competition with the exception of a couple of the fangs.

Okay.

Great. Thank you so much.

Yes.

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

Okay.

Hi, everyone. Thanks for taking the questions I guess following up on the U K.

Andy.

Obviously on the market gives you a solid foothold in the U K, specifically, but you also called out.

Heather Balsky: Our next question comes from Heather Balsky with Think of America. Please go ahead. Hi, thank you. I was hoping you could, well, thank you for the explanation on on the market and what you plan to do. I was hoping you could dig in a little bit more on the spending and help us to understand kind of when you talked about after the first year of integration. You're going to spend the $46 million. Is that the right way to think about it? And what that spending means for your 2027 targets in this acquisition, just given that you're going to be investing behind it.

The optionality that that infrastructure brings you to expand.

The homes brand across the European market more broadly.

Just curious if you could elaborate on the strategic rationale of what a.

Trans European type residential portal brands, what synergies that could provide what the strategy can look like from here in terms of perhaps participating in that consolidation wave that youre expecting across our portals, perhaps in other countries just a finer point around what that could look like over the next several years.

Scott Wheeler: Yeah, thank you, Heather. So the integration of the after the pending transaction would begin, of course, when the transaction closed, if it gets approval, the vote from the shareholders. We expect that to be at the end of the year in December. So obviously there's people, technology and other things you'd start to work on immediately as we've outlined in our 2.7 announcements. So we can't say much more beyond what those integration activities are, but we do expect those synergies and the advertising to begin within the six months following the closing of the acquisition.

Sure.

I don't know there's probably.

80 portals operating in Europe.

With a market cap very roughly.

Some are private some republic.

30 day plus.

Some of them trade at extremely high multiple solid trade at lower multiples.

It's a very it's a very fragmented market and I do believe I think theres two different camps.

There is some camps that feel that technology does not play a meaningful role in the Digitization of real estate and there are some people that think that technology will play a big role.

Scott Wheeler: And so we don't we don't include any of that yet in our longer term outlooks. We'll wait until we see what the shareholder vote and the transaction looks like first. And then we can provide more updates on the effects into next year and beyond. And I would just outside of commenting on anything specific to on the market, I would say that something at that scale would not be likely a material change or 2027 outlook. That's helpful.

The digitization of real estate.

Scott Wheeler: Thank you.

We fall in the camp of thing and that technology is important and that having.

And that scale there'll be greater scale in individual countries over time and that's fundamentally what these companies are doing is very similar there basically putting placards maps SCS strategy SCM strategy branding strategy.

They are serving up.

Digital twins, they are serving up videos, it's all very similar.

Alexei Gogolev: Our next question comes from the line of Alexi Google with JP Morgan.

And there is the opportunity to differentiate one brand from another with technology.

And.

So I believe there'll be significant consolidation and there will be.

Alexei Gogolev: Hi, this is Ella Smith on behalf of Alexi Google from JP Morgan. So for my first question.

A little bit of a musical chairs occurring and we are.

Andy Florance: Hi, good to hear you Andy. Can you help us understand the organic investments into the residential business over the next few years? Could this be more so 400 million and 24 and 25 respectively and then taper off from them? So, thanks for the question. We have yet to set out investment plans for 2024 for the residential investment. So, I won't be able to give any specific guidance out into 2024. As we talked about today, we've seen such strong response both in traffic and in the capability of the site, reaction from customers and from agents that we felt it was the right thing to do to keep moving as fast as we can, also knowing that there's been some cracks possibly in the industry, business models, and we want to be as prepared as we possibly can with the site if changes happen in the industry.

And then you know.

Yeah.

There'll be winners and losers in it and we want to keep a careful eye on it and I just would say that it reminds me very much of the United States, maybe 10 years ago before a lot of consolidation occurred.

So I think it's an exciting opportunity again the scale of the opportunity both in the.

The revenue potential and the.

$10 billion to $20 billion range in the market caps.

$30 billion plus.

It's great to have a seat at the table and we believe that our technology is competitively advantaged in the market and.

And so we're operating on that premise.

And as a follow up to just the residential opportunity in the U S.

Andy Florance: So, it wasn't a significant move in the 2023 time period. I think it was rough for around $30 million when you look at the change in the guidance, but certainly we expect to continue to invest in residential in the next year through when we monetize. Things are going well, and now's the time you keep going, and you don't back off on the spend levels for sure.

Regarding the commission lawsuits you've talked about the potential outcomes, there that could pose a risk to the legacy portals focused on buyer agent lead Gen but.

Andy Florance: Understood. Thank you.

From the perspective of homes Dot Com is there an opportunity where that brand more directly benefit from structural changes there over time.

Unbundling commissions helped unlock the under monetized home advertising Tam that you've spoken about in the U S.

Andy Florance: And my follow-up question is around the market dynamics in the UK. So, right move has maintained a market dominant position in the UK for quite some time, and as we understand it, many players have thought to disrupt right move with marketing and digital investments, and they've largely failed. What do you think co-star can do differently to disrupt the market, despite the company's minimal presence in Europe currently? Well, I tend not to assign Godlike characteristics to mere companies, and when I see a 70, 274% margin in a company with none of the major players actually materially investing in my view into significant marketing in the market, I think that the power of the technology we've developed with our home.com, and our experience in building traffic often against companies that have more traffic than we have when we begin.

Yeah.

I think we can succeed regardless of what the outcome is in those cases, but I think.

It would likely.

If the plaintiffs prevail will likely create rapidly changing conditions that might favor a company like homes Dot com, which is not focused on monetizing buyer agent leads and as things get turned upside down.

If you're not in the blast radius of that change you're much better off to compete the next day. So I think that's where it really matters.

Yeah.

Thanks for taking the questions.

Yeah.

Our next question comes from Stephen Sheldon with William Blair. Please go ahead.

Hey, Thanks for taking my questions.

So I wanted to spend a little bit more it sounds like you're committed to continue spending on homes Dot com. So just kind of curious at a high level more qualitatively how the area to spin could change as we head into 2024.

Andy Florance: I feel very comfortable we have something to bring to the table in the United Kingdom, and that we can offer some real value in the market. I would flatly reject any concept that any company is impervious to competition with the exception of a couple of the fangs.

So when do you think brand marketing spend for <unk> dot com could pick up could the budget for that be covered covered from reduced spend on STM. This year Reallocations from brand marketing on other assets and then on the content side will you be building out different content next year versus a lot of our neighborhood and community content has been building up over the last year.

Ryan Tomasello: Great. Thank you both so much.

So just curious where your areas of investment chain.

Changing.

Sure on the <unk>.

Ryan Tomasello: Your next question comes from a line of Ryan Tomasello with KBW. Please go ahead. Hi everyone. Thanks for taking the questions. I guess following up on the UK deal, Andy, obviously on the market gives you a solid foothold in the UK specifically, but you also called out the optionality that that infrastructure brings you to expand the home brand across the European market more broadly.

Content side.

We will be continuing to build out and evolve.

Neighborhood content.

<unk> two.

2024.

We will be initiating.

More general blog content part content more school content.

So it'll be a shifting mix with some of the same in the first half of the year and then.

Andy Florance: So just curious if you could elaborate on the strategic rationale of what a trans-European type residential portal brand, what synergies that could provide, what the strategy can look like from here in terms of perhaps participating in that consolidation way that you're expecting across other portals, perhaps in other countries, just to find a point around what that could look like over the next several years. Thanks. Sure. I have this probably 80 portals operating in Europe with a market cap very roughly, you know, because some are private, some are public, 30 billion plus.

Some some evolutions in the year out.

In terms of the mix of what is on branding versus what is on SCM versus what is on content that will absolutely shift from quarter to quarter.

Clearly.

We have to.

Build the unaided brand awareness. So we've got a great site, we've got some great traffic, we have some great return visitors.

Andy Florance: Some of them traded extremely high multiples, someone traded lower multiples. It's a very fragmented market, and I do believe, I think there's two different camps. There's some camps that feel that technology does not play a meaningful role in the digitization of real estate, and there's some people that think that technology will play a big role in the digitization of real estate. We fall in the camping and the technology is important, and that having, and that scale, there'll be greater scale than individual countries over time, and that fundamentally what these companies are doing is very similar.

Feel very strong that we feel very confident about our roadmap going forward.

But you have to have that unaided awareness number grows so there will be there will be some shifting in changes in what we're doing but we have not done a week.

We certainly have not done our 2020 for budget. So we can't really comment specifically.

Great. Thank you.

Uh huh.

And we can get you a copy of that William Blair report, if you want.

[laughter].

Okay.

We'll take our next question from John Campbell with Stephens, Inc.

Hey, guys, good evening and congrats on the homes that comp traffic gains and depending on the market deal those are pretty exciting developments.

Got it.

Sure I've got two questions that follow up too.

Two other questions you guys have already received but first one the resi investment spend.

Andy Florance: They're basically putting placards, maps, SEO, strategy, SEM, strategy, branding strategy. They're serving up visual twins, they're serving up videos. It's all very similar, and there is the opportunity to differentiate one brand from another with technology. I believe there will be significant consolidation, and there will be a little bit of a musical chair is occurring, and we are, and that they'll be winners and losers in it, and we want to keep a careful eye on it, and I just would say that it reminds me very much of the United States maybe 10 years ago before a lot of consolidation occurred, so I think it's an exciting opportunity.

Maybe just kind of put us just pinpoint this just for now but I'm curious about what the kind of breakout or the mix of spend looks like today for content versus marketing versus software.

Yeah.

I can give you a directional marketing is going to be.

The top category.

Content generation would be the second technology would be the third.

But that's probably as a as much information and I'll, probably give on the components for now John.

That's helpful.

Yeah, they're all pretty big.

And then on the marketing side I mean, if I'm hearing you correctly. It sounds like the majority of that is probably SCM.

Lawrence marketing this year and then the softer brand side the TV radio print all of that is going to going to be what.

Andy Florance: Again, the scale of the opportunity, both in the revenue potential in a 10 to 20 billion range in the market caps and 30 billion plus. It's great to have a seat at the table, and we believe that our technology is competitively advanced in the market, and so we're operating on that premise.

Essentially ramped into next year.

It's a combination of a number of things for marketing so.

Sure.

We're doing a lot of industry marketing as well.

So, it's a mix and but yes.

Moving into next year.

There will be more brand development, which will be important.

We'll see a mix of the marketing change as we go forward.

Ryan Tomasello: As a follow-up to just the residential opportunity in the U.S., regarding the commission lawsuits, you've talked about the potential outcomes there that could pose a risk to the legacy portals focused on buyer-agent legion, but from the perspective of homes.com is there an opportunity where that brand could more directly benefit from structural changes there over time, would unbundling commissions help unlock the under-monetized home advertising team that you've spoken about in the U.S.? I think we can succeed regardless of what the outcome is in those cases, but I think it would likely, if the plaintiffs prevail, it will likely create rapidly changing conditions that might favor a company like homes.com, which is not focused on monetizing buyer-agent leads, and as things get turned upside down, if you're not in the blast radius of that change, you're much better off to compete the next day. So I think that's where it really matters. Thank you for taking the questions.

That's helpful. And then the other question on the resi strategy I mean, clearly it seems to me that the chess pieces are kind of put in place where you would benefit from.

Kind of are happening.

Potential ripple effects from the from.

The commission suits now.

So Andy I'm curious if you can.

Exactly so if you could maybe talk to.

How do you envision, particularly how do you envision.

Excuse me <unk> kind of fitting into the mix it seems like it might have a place in helping.

Helping filled offers are organized offers or maybe even serving as that final kind of a cash register in the late stages of the transaction.

Sure.

I think the best.

We are very focused right now we are working very hard on many many fronts on building out the site and our monetization strategy our brand development strategy this quarter next quarter or 2024.

At 10 X will not enter into the residential mix in the next.

12 to 18 months, but I wouldn't say that it won't ever.

Enter into the mix.

When when various players moved into asset heavy participation in basically I buying.

Stephen Sheldon: Our next question comes from Stephen Sheldon with William Blair. Please go ahead. Hey, thanks for taking my questions.

It struck me that there is an asset light version of that where you are or it's more like a 10 acts and less actually putting on your balance sheet, but facilitate transactions certainly there's inefficiencies in the market with 20 people show up to bid on an asset.

Scott Wheeler: So I wanted to be on Resistend a little bit more. Sounds like you're committed to continue spending on homes.com. So just kind of curious at a high level, more qualitatively, how the areas spin could change as we head into 2024. So when do you think brand marketing spend for homes.com could pick up could the budget for that be covered, covered from reduced spend on SCM this year, reallocations from brand marketing on other assets.

It's not digitized I mean that I think that's a lost opportunity for the seller to to get the highest price possible and also it's a lost opportunity for the sellers to fairly participate in trying to put the best offer out there. So tenex can bring value there.

Scott Wheeler: And then on the content side, will you be building out different content next year versus a lot of the neighborhood and community content been building out for the last year or so. So just curious where your areas investments might be changing.

Elements of what <unk> has worked on like deal room documents that sort of stuff that may occur in 2024, but right now.

Scott Wheeler: Sure. On the content side, we will be continuing to build out and evolve neighborhood content well into 2024. We will be initiating more general blog content, park content, school more school content. So it'll be a shifting mix with some of the same in the first half of the year and then some some evolutions in the year out. In terms of the mix of what is on branding versus what is on SCM versus what is on content, that will absolutely shift from quarter to quarter.

We are excited about and have very robust product plans going into 2024 that we think will deliver real value and <unk> would be a little bit further out there.

Okay. That's very helpful. Thank you guys.

Okay.

We will take our next question from Jeff Mueller with Baird.

Yes. Thank you. So just first it looks like the EBITDA guidance, maybe comes down $27 million at the midpoint I think you said Scott that the increase.

<unk> initiative spend is around 30, so can you just confirm it.

Our consolidated EBITDA guidance change is almost entirely just the increased homes investment.

Yeah.

A little bit of drop through obviously from the revenue. So the poems investment number was probably smaller than the 30 by a little bit somewhere in the mid twenty's, possibly but youre kind of in the ballpark.

Scott Wheeler: Clearly, we have to build the unade brand awareness. So we've got a great site. We've got some great traffic. We have some great return visitors. We feel very strong. We feel very confident about our roadmap going forward, but you have to have the unade awareness number growth. So there will be there will be some shifting and changes in what we're doing, but we have not done a we certainly have not done our 2024 budgets. We can't really comment specifically.

Okay and then.

See the great traffic numbers I.

I guess how.

Me think through.

Anything further on like what Youre seeing in terms of quality of homes Dot com traffic. There was some metric like a 900% increase in and revisit or something but.

What are the other.

Benefit so I'm thinking about like the ability to market a big traffic number as you launch products any sort of future SCO and SCM.

<unk> sees that could come from a lot of traffic flowing through your site ahead of some of those additional investments things like that.

Scott Wheeler: Great. Thank you. And we can get your copy of that William Blair report if you want.

Scott Wheeler: Sounds good.

Yeah.

John Campbell: What's your next question from John Campbell with Steven Zink. Hey guys, good evening and congrats on the homes.com traffic gains and depending on the market deal. Those are pretty exciting developments.

I think when we put the number in there about the really outstanding numbers for return traffic.

As a key point because.

John Campbell: I've got just sure I've got two questions that follow up to two other questions you guys already received, but first on the resident spend. If you could maybe just kind of put us, you know, just pinpoint this just for now, but I'm curious about what the kind of breakout or the mix of spin looks like today for content versus marketing versus software. I can give you a directional marketing is going to be the top category content generation would be the second technology would be the third, but that's probably as much information and I'll probably give on the components for now, John.

We are seeing significant growth in return traffic, which means in my mind that people come into the site like the experience like the layout like the fact that it can reach agents directly not go to a call center and not get reroute around sold.

John Campbell: Okay, that's helpful. That's pretty big. Okay, and then on the marketing side, I mean, if I'm hearing you correctly, it sounds like the majority of that's probably FEM performance marketing this year. And then, you know, the softer brand side TV, radio print, all that's going to be what essentially ramps into next year. It's a combination of a number of things for marketing. So we're doing a lot of industry marketing as well. So it's a mix. But yes, moving into next year, there will be more brand development, which would be important. So you will see a mix of the marketing change as we go forward. Okay, that's helpful.

So we think that that number shows.

Exactly.

What we want to see which is.

The fact that we're winning over some consumers so that's exciting.

The.

Certainly.

We don't want to go into too much detail on what we're doing on any given day, but certainly you work the blend of SCM SCO and branding on different at different points in different phases to get the optimal result, we're doing the things you would do at this point in time, we're getting I.

I think we constantly say we're at double.

The traffic that we expected to have at this point. So we're happy with what we're doing right now.

And I look forward to being able to do the next steps, which.

Optimize the site even further.

I think one of the metrics, that's probably not coming up but.

But I believe is there it's a little tougher to measure, but we're seeing some of it is.

We're getting some really good lead flow numbers. So I think that a significant number of consumers have figured out that if they are interested in a property when they come to homes dot com they get directly connected to the person who knows the most about the listing and we believe that's the best consumer experience.

Andy Florance: And then the other question on the Rezzi strategy. I mean, clearly it seems to me that the chess pieces are kind of put in place where you would benefit from, you know, the kind of the happenings or potential ripple effects from the commission suits now. So Andy, I'm curious if you can, yeah, exactly. So if you could maybe talk to how you envision, particularly how you envision home, excuse me, 10X kind of fitting into the mix.

And.

And they know that on some of the alternative sites.

They are going to go through a wringer of a sales process to be sold a buyer agent theyre not going to get.

A quick answer.

Andy Florance: It seems like it might have a place and, you know, helping filled offers or organized offers or maybe even serving does that final kind of cash register in the late stages of the transaction. Sure. I mean, I think the best, I mean, we are very focused right now. We are working very hard on many, many fronts on building out the site and our monetization strategy, our brand development strategy, this quarter, next quarter, 2024.

About the property they were expressing interest. So I think we are seeing it's early to tell but I think we are seeing a significant advantage.

And traffic to lead flow ratio compared to some of the other players out there I do believe that even though we are not monetizing today I believe it's quite possible that we are perhaps D. Monetizing some other sites because if a lead comes through.

Andy Florance: At 10X will not enter into the residential mix in the next 12 to 18 months, but I wouldn't say that it won't ever enter into the mix. When various players moved into asset heavy participation and, you know, basically, I buying, it struck me that there's an asset light version of that where it's more like a 10X and less actually putting on your balance sheet, but facilitating transactions. Certainly, there's inefficiencies in the market when 20 people show up to bid on an asset and it's not digitized.

<unk> two homes dot com that lead may no longer be available to go to another site, even though we're not charging for it.

Got it you know we'd go on there's lots of different metrics out there, but I think lead flow is a good one and you can tell from apartments dot com and our track record there were very good at thinking about those leads and the quality of the leads and Knott's spring chunk leads that people not in optimizing the experience and reducing the friction when people actually want to.

Expressed interest in a particular property.

Got it thank you.

And a reminder, everyone that is star one to ask a question we will take our next question from Nicholas Jones with JMP Securities.

Andy Florance: I mean, I think that's a lost opportunity for the seller to get the highest price possible. And also, it's a lost opportunity for the sellers to fairly participate in trying to put the best offer out there. So 10X can bring value there. I think elements of what 10X has worked on, like, deal room documents, that sort of stuff that may occur in 2024. But right now, we are excited about and have very robust product plans going into 2024 that we think will deliver real value and 10X would be a little bit further out there.

Great. Thanks for taking the questions I guess, maybe kind of double clicking on lead quality homes Dot com.

Andy Florance: Okay, that's very helpful.

Can you kind of speak to the uniqueness of the leads.

Jeff Mueller: Thank you, guys.

There are people, who are maybe coming through and maybe the average response time isn't fast enough and then theyre kind of abandoning and going to other sites, where they can kind of get on demand tours.

Can you kind of speak to the difference I guess in response time and maybe than what the uniqueness is in the leads to.

To the agent based on kind of what the consumer need as they may I have a question that's very specific to the property or are they just maybe wanted to get a tour quickly and theyre looking for kind of a quick response.

Are you asking when I stopped beating my dog.

Jeff Mueller: We'll take our next question from Jeff Mueller with Baird. Yeah, thank you. So just first, it looks like the EBITDAG guidance maybe comes down 27.5 million at the midpoint. I think you've got the increased homes initiative spend is around 30. So can you just confirm if the consolidate EBITDAG guidance change is almost entirely just the increased homes investment. Yeah, and you know, a little bit of drop through obviously from the revenue.

[laughter] I've never beaten my dog and we don't think that we have a slow response time on leads on homes Dot Com. In fact, we I would believe we have a better response time and that if you are reaching out to the person. That's got the listing they know the most about the listing and can respond quickly.

You get a single point of contact typically as opposed to a turn of sites you might get many people respond that you might get four or five agents, calling you back about one house you expressed interest and we feel confident that the experience we're giving the consumers.

Jeff Mueller: So the home's investment numbers probably smaller than the 30 by a little bit, somewhere in the mid 20s, possibly, but you're kind of in the ballpark. Okay, and then, you know, I see like the great traffic numbers. I guess, help me think through anything further on like what you're seeing in terms of quality of homes dot com traffic. There was some metrics, like a 900% increase in in revisits or something, but what are the other benefits I'm thinking about like the ability to market a big traffic number as you launch products, any sort of future SEO and SEM efficiencies that could come from a lot of traffic.

Is.

A solid experience and we think.

You know when you when you talk to a leader in portals over in Europe, and you explain.

The legacy models work in the United States, and how homes Dot Com works the United States.

People have operated portals for 20 years and they do it the way homes like they they listen to what I am explaining about how it works the United States and they go well gosh, that's really obvious the consumer would prefer to contact the person who has the listing and knows the property rather than contact someone who doesn't have the <unk>.

Jeff Mueller: Going through your site ahead of some of those additional investments, things like that. I think what we put the number in there about the really outstanding numbers for return traffic as a key point because we are seeing significant growth and return traffic, which means in my mind, that people come into this site, like the experience, like the layout. Like the fact they can reach agents directly, not go to a call center, not get rerout around old.

Listing and doesn't know the property and so in the eyes of someone that's not been exposed to it our lead or lead process would appear to be the obviously superior process.

Great. Thank you I'm not sure if that answered the question or not.

Theyre actually does.

Okay great.

We'll take our next question from Ashish <unk> with RBC capital markets.

Well thanks for taking my question. So just wanted to ask about the international M&A.

Jeff Mueller: So we think that that number shows exactly what we want to see, which is the fact that we're winning over some consumers. So that's exciting. Certainly, you know, we don't want to go into too much detail what we're doing on any given day, but certainly you work the blend of SEM SEO and branding on different points and different phases to get the optimal result. We're doing the things you would do at this point in time.

Upon communities.

You've talked about on the market and organic investments debt, but would you also consider doing more tuck in strategic acquisitions to build out the Pan European platform and then would you also look at other opportunities outside of Europe.

In particular, you called out how you necessarily are not interested in the number one property, but going off the good properties.

<unk> applied the same approach when you think about <unk>.

Jeff Mueller: We're getting, I think we can comfortably say we're at double the traffic that we expected to have at this point. So we're happy with what we're doing right now. And I look forward to being able to do the next steps, which optimize the site even further. I think one of the metrics is probably not coming up, but I believe as there, it's a little tougher to measure, but we're seeing some of it is we're getting some really good lead flow numbers.

Many outside Europe.

In Europe or outside of.

And does it include assets. Thanks.

Sure I would just.

I know I forget the answer that in the proper order, but I would say that I wouldn't say that we're not interested in the number one asset in a market.

Whenever we would be interested in number one asset in the market.

What we're what we want to avoid is we want to avoid overpaying materially for something and one of the things we do and we look at a particular portal as we consider.

Jeff Mueller: So I think that significant number of consumers have figured out that they're interested in a property when they come to homes.com, they get directly connected to the person who knows the most about the listing. And we believe that's the best consumer experience. And they know that on some of the alternative sites, they are going to go through a ringer of a sales process to be sold a buyer agent. They're not going to get a quick answer about the property they were expressing interest.

You know if there are three portals and a marketer for portals and a market. We will look at what the what the traffic is on the lead portal. The number two portal number three number four portal, we look at the potential cost or value.

Acquisition costs of each those portals.

And we'll also be mindful of.

How we can change the outcome. So if it if we think that we can build traffic on a given portal up to the number one position. If we can take a portal for number four to number one.

Jeff Mueller: So I think we are seeing, it's early to tell, but I think we are seeing a significant advantage in traffic to lead flow ratio compared to some of the other players out there. I do believe that even though we are not monetizing today, I believe it's quite possible that we are perhaps demonetizing some other sites. Because if a lead comes through to homes.com, that lead may no longer be available to go to another site, even though we're not charging, for it.

We can estimate the cost of what it takes to do that and we know the cost of bringing the technology and we balance that against the cost of buying the number one portal and so if it's cheaper to build versus buy.

We'll build but build from the context of acquire and invest as opposed.

As opposed to acquire number one.

And try to hold that normal position. So I think sometimes you can do the calculation in various European markets and determined that it would be it would take US 60 years to get a payback relative to the cost is simply buying and building the traffic up so youre looking for a better return.

Jeff Mueller: You know, we go on. There's lots of different metrics out there, but I think lead flow is a good one. You can tell from apartments.com and our track record there were very good at thinking about those leads and the quality of the leads and not spraying junk leads at people, not optimizing the experience and reducing the friction when people actually want to express interest in a particular property. Thank you. I'll remind everyone that a star one to ask a question.

So we look at it through that lens.

The value get for the price you're paying there is a mindset that you have heard that people believe that all all of these 80 portals are.

Set and locked in their stack rank.

Nicholas Jones: We'll take our next question from Nicholas Jones with JMP Securities. Great. Thanks for taking the questions. I guess maybe kind of double clicking on lead quality on homes.com. Can you kind of speak to the uniqueness of the leads? I mean, are there people who are maybe coming through and maybe the average response time isn't fast enough. And then they're kind of abandoning and going to other sites where they can kind of get on demand tours.

And that Theres no value to technology in any of these digital portals I think that's wrong I think the positions will move is always have moved if you look at who was number one five years ago. It's different than it was number goes number one seven years ago. So its more dynamic than people appreciate and.

Nicholas Jones: Can you kind of speak to the difference? I guess in response time and maybe then what the uniqueness is in the leads to the agents based on kind of what the consumer needed. They may have a question that's very specific to the property or they just may want to get a tour quickly and they're looking for kind of a quick response.

We just carefully.

Our meeting some wonderful people in Europe getting to know them getting to know their companies with a lot of people would love to work with but we want to make sure that our shareholders dollar goes as far as possible and that we arent.

And there were optimizing the investments we're making.

Andy Florance: Are you asking when I stop beating my dog? I've never beaten my dog. And we don't think that we have a slow response time on leads on homes.com. In fact, I would believe we have a better response time in that if you are reaching out to the person that's got the listing, they know the most about the listing and can respond quickly. And you get a single point of contact, typically as a poise to alternative sites.

Got it that's very helpful color and I was just wondering if you can comment on aspirations for Rajiv.

And what is the strategy outside of Europe.

Thanks.

I've been doing this for a while and the longer you do it the more you appreciate that it's basically all pretty much the same everywhere and when you get wrapped around an axle around the minor differences from one market to another you're missing the similarities.

Andy Florance: You might get many people responding. You might get four or five agents calling you back about one house you expressed interest in. We feel confident that the experience we're giving the consumers is a solid experience. And we think when you talk to a leader in portals over in Europe and you explain how the legacy models work in the United States. And how homes.com works the United States. People have operated portals for 20 years and they do it the way homes that like they they listen to what I'm explaining about how it works the United States and they go, well gosh, that's really obvious.

You know like a Steve.

As Steve jobs would've been very definitive that human beings are very similar from Singapore to Brazil to.

South Africa and to obsess about.

The cultural differences in delivering technology as opposed to the similarities would be a mistake.

That's great color. Thanks again.

Uh huh.

And there are no further questions at this time, so let's turn it back to Andy to wrap up.

Well I'd like to thank everyone for joining us on this third quarter earnings call and we look forward to having you join US again, where he can share results with you on I believe February 20th at five P. M. Eastern standard time.

Andy Florance: The consumer would prefer to contact the person who has the listing and knows the property rather than contact someone who doesn't have the listing and doesn't know the property. And so in the eyes of someone who's not been exposed to it, our lead process would appear to be the obviously superior process. Great, thank you. I'm not sure if that answered the question or not. It directly does. Okay, great.

Two P M Pacific time on February 20th 2024.

So thank you for joining us and thank you for participating we enjoyed the questions. Thank you very much have a good evening.

And this concludes today's conference call you may now disconnect.

Yeah.

Okay.

Hum.

Andy Florance: We'll take our next question from Ashish Sabadra with RBC capital markets. But thanks for taking my question. So I just wanted to ask about the international MNA opportunities. Obviously, you've talked about on the market and organic investments there, but would you also consider doing more tokens of strategic acquisitions to build out the pan European platform. And then would you also look at other opportunities outside of Europe in particular, you called out how you necessarily are not interested in the number one property, but going after good properties.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.

Andy Florance: I would use apply the same approach when you think about MNA outside of Europe as in Europe or outside of Europe for residential assets. Sure, I would just I don't know if I'll get that answer that in the proper order, but I would say that I wouldn't say that we're not interested in the number one asset in a market whenever we would be interested in the number one asset in the market.

Andy Florance: What we want to avoid is we want to avoid overpaying materially for something, and one of the things we do and we look at a particular portal is we consider if there are three portals in a market or four portals in a market, we will look at what the traffic is on the lead portal, the number two portal, number three, number four portal. We look at the potential cost or value acquisition cost of each of those portals, and we'll also be mindful of how we can change the outcome.

Andy Florance: So if we think that we can build traffic on a given portal up to the number one position, if we can take a portal for number four to number one, we can estimate the cost of what it takes to do that, and we know the cost of bringing the technology in, we balance that against the cost of buying the number one portal. And so if it's cheaper to build versus buy, we'll build, but build from the context of acquire and invest as opposed to acquire number one and try to hold that number one position.

Andy Florance: So I think sometimes, you know, you can do the calculation in various European markets and you determine that it would take you 60 years to get a payback relative to the cost of simply buying and building the traffic up. So you're looking for a better return, so we look at it through that lens, the value get for the price you're paying. There is a mindset that you've heard that people believe that all these 80 portals are set and locked in their stack rank, and that there's no value to technology in any of these digital portals.

Andy Florance: I think that's wrong, I think the positions will move, they'll always have moved. If you look at who was number one five years ago, it's different than who was number goes number one seven years ago. So it's more dynamic than people appreciate, and we just carefully are meeting some wonderful people in Europe, getting to know them, going to know their companies. We a lot of people we love to work with, but we want to make sure that our shareholders dollar goes as far as possible, and that we aren't, and they were optimizing the investments we're making.

Ashish Sabadra: That, that's very helpful color, and I was just wondering if you can comment on aspirations for resident international, resident strategy outside of Europe as well. Thanks. I've been doing this for a while, and the longer you do it, the more you appreciate that it's basically all pretty much the same everywhere, and when you get wrapped around an axle around the minor differences from one market to another, you're missing the similarities. You know, like Steve Jobs would have been very definitive, that human beings are very similar from Singapore to Brazil to South Africa, and to obsess about the cultural differences in delivering technology as opposed to the similarities would be. Stake. That's great color. Thanks again.

Andy Florance: And there are no further questions at this time. We'll turn it back to Andy to wrap up. Well, I'd like to thank everyone for joining us on this third quarter earnings call. And we look forward to having you join us again. We can share results with you on, I believe February 20th at 5 p.m. Eastern Standard Time, 2 p.m. Pacific Time on February 24th, 2024. So thank you for joining us and thank you for participating. We enjoyed the questions. Thank you very much. Have a good evening.

Lisa: And this concludes today's conference call. You may now