Andy Florance - Chief Executive Officer, Founder Scott Wheeler - Chief Financial Officer Sarah Spray - Investor Relations.

Ladies and gentlemen, thank you for standing by, and welcome to the CoStar, Fourth Quarter Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions]. Also, today’s conference call is being recorded.

I would now like to turn the conference over to your host, Sarah Spray, Investor Relations for the CoStar Group. Please go ahead..

Thank you. Good evening and thank you all for joining us to discuss the fourth quarter and full year 2019 results for the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Scott Wheeler, our CFO, I would like to review the safe harbor statement which has some new language, so listen up.

Certain portions of the discussion today may contain forward-looking statements, which involve many risks and uncertainties that can cause actual results to differ materially from such statements.

Important factors that can cause actual results to differ include, but are not limited to those stated today in CoStar Group’s press release issued earlier today and in our filings with the SEC, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, under the heading Risk Factors.

All forward-looking statements are based on information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, further events or otherwise.

Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call, including EBITDA, adjusted EBITDA, non-GAAP income and forward-looking non-GAAP guidance are shown in detail in our press release issued today, along with definitions for these terms.

The press release is available on our website, located at CoStar Group under Press Room. As a reminder, today's conference call is being webcast and the link is also available on our website under Investor Relations. Please refer to today's press release on how to replay this call. Over to you operator.

No, sorry – actually, what am I saying? Actually, I would like to now turn the call over to our CEO, Andy Florance. Andy. .

Thank you very much Sarah. We are joined… [Technical Difficulty]. .

I am sorry we are now turning over to Andy Florance who is the CEO. Apologize for the short delay. .

Thank you, Sarah. Good evening. .

Sorry, this is the AT&T operator. We do not hear any sound. .

I'm sorry. .

Can you hear us?.

Can you hear us now?.

Yes. .

Okay, please let's continue..

Okay, we’ll get going here. So good evening and thank you for joining us in CoStar Group's fourth quarter and 2019 yearend earnings call. I'm very pleased that CoStar continued to deliver outstanding growth throughout 2019. CoStar Group’s total revenue grew 17% to $1.4 billion for 2019, adding $200 million of revenue in the full year.

We generate strong double digit growth across all our primary businesses with multi-family leading the way with 21% year-over-year growth. Fourth quarter revenue of $375 million was up 19% over the fourth quarter of 2018.

The fourth quarter includes results from STR for the first time, which contributed $9 million of revenue since our late October 2019 close. Net income for the year was $315 million, an increase of 32% over full year net income of 2018.

Our adjusted EBITDA crossed over the $0.5 billion mark this year and reached $507 million, an increase of 21% over the full year of 2018 with adjusted EBITDA margins improving to 36%, a 110 basis points increase over adjusted EBITDA margins in 2018.

If you like nice round numbers that you can remember long after the call, our fourth quarter revenue annualized was $1.5 billion and our fourth quarter EBITDA was $500 million or $500 million on $1.5 billion growing. We grew our earnings and profitability during the year, while continuing to invest for future growth.

In 2019 we increased the size of our CoStar field sales force by 20% and added 40 new midmarket sales positions in Richmond for multifamily. We increased the level of spending in digital marketing later in the year to grow our traffic and the lead flow of Apartments.com.

Our product teams completed new signature ad packages in LoopNet, as well as the new digital tools for small property owners in multifamily, both of which we start selling in the fourth quarter. The highlight metrics for 2019 and operations for CoStar group were impressive.

Users viewed 6.3 billion pages on Apartments.com, commercial real-estate professionals conducted 40 million searches on CoStar, potential tenants visited LoopNet 131 million times, our clients, our researchers and software teams added 2 billion pieces of new content to our database in 2019.

Looking ahead to 2020, we continue to invest in future growth. We're focused on the huge opportunity in the Apartments marketplaces, as well as LoopNet and the massive commercial real-estate market place.

We believe the addressable market for residential rental and commercial real-estate marketing alone is over 10 billion and we have a unique opportunity for growth in the early stages in these marketplaces. We are also focused on commercial real-estate hospitality, information, analytics and software services.

In 2020 we're also embracing and accelerating our international growth opportunity. We had an excellent sales year in 2019, adding nearly 210 million of net new bookings for the year, an increase of 24% over 2018. In the fourth quarter alone we added 52 million of net new bookings.

Our efforts to build online marketplaces and commercial real-estate are certainly paying off, with almost 62% of our sales in 2019 coming from Apartments.com, LoopNet and our other market places. A trend we can expect to continue into 2020. Our Apartments.com sales team had a remarkable year in 2019.

Following the integration of the ForRent acquisition in 2018, the team was at full strength and focused on growing throughout 2019. As a result, we ended the year with net new bookings up over 45%. Congratulations to Paige Forrest and the entire Apartments team on a great year. The fourth quarter was a particularly impressive sales quarter for LoopNet.

Historically the last quarter of the year has been the lowest seasonal quarter for share re-advertising. In fact when we acquired LoopNet the revenues typically fell in the fourth quarter.

While today revenues typically grow in the fourth quarter, over the past five years fourth quarter LoopNet bookings have dropped sequentially, an average of 43% for the third quarter bookings levels. That was certainly not the case this year.

As part of our rebuild and launch of the LoopNet signature ad products, we rolled out a sales contest for the fourth quarter that resulted in LoopNet bookings growing 80% over the third quarter of 2019 LoopNet sales. LoopNet signature ads grew almost 500% over the same quarter in the previous year. Obviously this is an outstanding result.

I believe this is only the beginning of the LoopNet growth opportunity ahead. Our LoopNet market place had the strongest year yet in 2019 and we expect LoopNet to be a significant contributor to our growth in 2020. LoopNet revenue was $150 million in 2019, growing 18% over full year 2018, with fourth quarter revenue growth reaching 20%.

Our strategy of rebuilding and launching LoopNet as a pure online marketplace is working. According to Google Analytics, average monthly unique visitors to LoopNet network reached 6.1 million in 2019, an increase of 16% over 2018. We believe that LoopNet has approximately 20x the monthly unique visitors of the second most trafficked sites.

In 2019 we redesigned and lost our dramatically improve signature ads for office space for lease. They're similar to the high-end quality ads on Apartments.com. Signature ads sort to the top of the results set are larger than the standard ads and contain much more marketing content than to the standard ads.

The signature ads are featured prominently across multiple CoStar Group's CRE marketplaces, information solutions and newsletters. We also retarget LoopNet visitors as they move across the web; it's coming out this quarter. Our signature ad diamond level delivers 24x more impressions than our basic ad tier.

The signature ads on LoopNet present very high quality architectural imagery, including photographs shot by our professional photographers, drone videos and 3D walkthroughs. Our marketing consultants curate and provide rich content for the signature ads.

In some the signature ad features dramatically expand the reach, frequency and brand impact of our clients’ property marketing. We're now working on building out similar detailed ad packages for the retail, industrial land, multifamily and investment sales sectors which we will launch across the year.

These advertisements provide exceptional value for owners of commercial properties that need to fill vacant space or sell a building. Remember that these buildings and the vacant space in them can be worth millions, hundreds of millions, and even billions of dollars.

By using Google Analytics and tracking the IP addresses of end users searching on LoopNet, we can see that many, if not most of the largest companies across the U.S. are regularly searching for space on LoopNet and then signing multimillion leases with our clients.

For example, we can see users originating from Amazon IP addresses and from IP addresses of similar mega companies viewing properties on LoopNet and then in the ensuing months we see them purchase or lease those properties. In some cases we see major tenants giving a property on LoopNet months before their tenant-rep brokers first view the property.

That suggested the tenant is finding the property first and sharing it with their broker. This should not surprise anyone, because that's exactly how the process now works today in residential real-estate. We believe that this is a seismic shift in how owners affectively market commercial properties.

An owner now needs an effective strategy to market their property directly to the tenant. Traditionally or historically in commercial real-estate the broker built a short list of potential properties for a major tenet to consider, and then closely accompanied that tenant on that all so important tour of those perspective properties.

Owners marketing efforts have focused on making sure they made that brokers shortlist. They spend billions each year to accomplish that. Now it appears tenants are building their own shortlist online by themselves on sites like LoopNet, and the first tour of the property occurs virtually online on LoopNet.

In many cases the tenant will spend dramatically more time exploring the property virtually online than they will spend physically touring it before they sign a lease. To be clear, tenants will continue to use brokers to represent them, but the marketing realities are shifting dramatically. These are huge industry changes.

We have thousands of examples, suggesting that tenants now find their space on LoopNet. We saw Facebook IPs viewing six new locations repeatedly on LoopNet and then Facebook later signed an estimated 670 million lease deals on those properties.

Similarly PwC executed seven lease deals on properties they viewed on LoopNet with a value of approximately $145 million. And there are many other examples, including a single ad on LoopNet for an office business park in Pennsylvania where we can see six of its new tenants viewed the properties on LoopNet first before they signed a lease.

We're investing a lot of effort into training our sales team on the best way to communicate the value of marketing on LoopNet. It’s often a good idea to run a contest to get a sales forces attention. In the fourth quarter of 2019, we ran a LoopNet sales contest that delivered very strong results.

Our field sales force shortly thereafter sold five times the number of signature ads value in Q4 than they did in the quarter prior year. A year ago our sales team was focused on selling relatively lower cost LoopNet listing plans to brokers.

Now they're shifting their focus to selling much more significant placements to the owners of the properties who have so much more to win from a successful lease.

When we acquired LoopNet, the marketing potential of LoopNet was an afterthought and non-differentiated ads were often given away for free or sold to brokers for as little as a few dollars a month. I believe the average ad was about $14 a month back in 2011.

We still sell very affordable and effective basic ads to brokers, but with the very valuable signature ads the average price point is averaging almost $3000 per month. To preserve the value and impact of a diamond or platinum signature ad, we capped the inventory to three or 10 respectively per submarket.

While this preserves their value, it also creates scarcity. As a result we're seeing some owners make some significant, but we would argue very wise investment in the signature ads in high profile submarkets for important buildings.

The Durst Organization owns and manages a fantastic 750,000 square foot office property in the Times Square submarket New York. They are currently marketing 470,000 square feet of really nice space there. They know that major tenants are searching for their next spare on LoopNet and that top brokers search for their tenant space on CoStar.

Durst wants to make sure that they have the biggest, most prominent presence on the internet for the best building in Times Square. They locked in one of three diamond ad slots in Times Square for $11,000 a month on a six month agreement. They've locked in a number of other slots for other great properties at similar price points.

You have to stop and think about that, that price point is almost 1000 times the old price point for lower quality, undifferentiated ads. But I would argue Durst knows exactly the value of effective leasing. Leasing that space on a 10 year deal could generate $300 million to $400 million of revenue for Durst.

Would you invest $66,000 for an effective marketing solution that could bring you a $400 million deal? The price points we're seeing for commercial office space ads on LoopNet are now thousands of dollars above the prior price points we achieve on Apartments.com; that makes sense.

Major apartment development and lease, may sign leases with the value of $10 million whereas a major commercial lease is worth hundreds of millions. There is a company based in Australia that we admire called REA Group that provides a commercial property market place there.

Their commercial and developer depths on subscriptions generated $134 million Australian dollars in 2019. I believe that's basically an equivalent of an Australian LoopNet. The U.S. economy is approximately 15x larger than Australia's. If you scale the REA commercial business pro rate, it implies a $1.3 billion addressable size of market in the U.S.

for LoopNet. Overall, we believe we are seeing clear evidence that LoopNet represents a multimillion growth opportunity. Our Apartments business delivered a stellar year, achieving 21% revenue growth in 2019, making this the fifth consecutive year of revenue growth over 20%.

According to ComScore, our apartments.com network had almost 650 million in 2019, a 22% increase over visits in ’18. We averaged over 20 million monthly unique visitors to our sites to ’19, an increase of 15%.

During the second half of the year, apartments.com moved ahead of the seller rentals and monthly unique visitors and continues to attract more visitors than Chile Rentals, Rent.com, HotPads Apartment list, StreetEasy, Apartment Guide, Zumper, RENTCafe, apartment rating's, rentals.com and many others that compete for renters in this space.

When we acquired apartments.com in 2014, they and the industry were largely focused on selling advertising to large apartment communities with more than 120 units. That was a huge loss, because approximately 65% of renters or rents and properties that are in buildings with less than 120 units. The industry was missing 65% of the potential market.

That strategy was an artifact of the old print world where your volume of ads were limited by the maximum number of pages glue could hold together in a book. Today apartments.com does not rely on glue, so we focus on selling marketing services to all sizes of rental properties. There’s three major ways in which we’re doing this.

First, we're building tools that enable an owner of a single rental or small apartment to buy via e-commerce ad placements and comprehensive digital leasing tools. Second, we're building a large Richmond based sales team focused on selling into the mid-market apartment opportunity and single rental opportunity.

And finally, we are accelerating our investment in apartments marketing to lift awareness for apartments.com across all of these segments, single, rental, mid-market and large.

In the fourth quarter of 2019 we began beta testing our online renter tools, which are aimed at facilitating and improving the customer and landlord experience for leasing smaller apartment buildings and rental homes.

Our new online leasing tools give landlords the ability to create a listing, perform credit and background checks, create an exchange and sign leases and provide a platform for deposits and rental payments.

These tools are offered free to landlords, independent owners as a way to drive consumer adoption and build a national network for digital leasing. In addition, we offer the option to purchase an ad on apartments.com, which provides better placement and twice the leads as a free basic listing does.

We launched a full national rollout on January 15, 2020. The uptake has been very encouraging. So far we already have nearly 17,000 active users of the digital tools. 2,000 landlords have purchased ads via E-commerce and over 2,000 potential rentals have completed online applications.

This is excellent adoption when you consider that we've yet to launch in any of our news supporting advertising campaign. I'm really pleased with the headway we're making and look forward to keeping you posted on our progress throughout the year.

Our Apartment field sales force is an excellent one, but is nowhere near large enough to sell into millions of rental units in properties that are smaller than 100 units. The current sales force is doing is excellent work generating huge revenue growth in the 100 unit plus world and we want them to keep doing that.

We've just launched the mid-market sales team in Richmond with 40 sales people. They are prospecting and selling into communities that are small, mid-sized or large in contrast to the field sales teams that are selling into huge communities. In the first few months, this new sales team is doubling their sales production each month.

At this point 84% of the team has achieved their first sales and 100% of the October 1 class is now selling. Top producer Morgan Rogers delivered 6,000 of net new monthly sales from last month, which is more than 90% that the field sales team was able to achieve in January. In total, the group has sold 200 property ads.

The vast majority of those properties they’ve sold were into properties with less than 50 units. Once we have the vast majority of this mid-market groups selling at their full potential, we plan to grow the team indefinitely, so long as it remains a clear positive ROI.

Back in October we announced that we’ll be stepping-up our apartments.com marketing spend by an incremental $100 million, to a spend level of approximately $250 million in 2020. Over the past few months our team RPA and Jeff Goldblum has been working hard to build our 2020 marketing program. The 20 campaign will clearly be our biggest ever.

Our plan is to deliver 10 billion impressions, and 800 million renter visits, a significant increase over the 6 billion impressions and 650 million renter visits we generate in 2019. The expanded campaign is expected to drive our unaided brand awareness higher over the long term.

We currently fluctuate in the low 30% range for unaided awareness when our media campaigns are running. Our goal is to reach over 40% unaided awareness this year and eventually 50% as we continue beyond 2020. Once again, we have Brad Bellflower inventory apart on Internet played by Jeff Goldblum leading our Apartments.com campaign.

We plan to double the investment in TV, launching in mid-March and stay on the air through November reaching 95% of households with more frequency than ever. We rent 10,000 TV spots in ‘19 and we plan to run 20,000 spots in 2020. We will air in Prime Time, Premieres, Finale’s and top rated sports events, including the summer Olympics and the NFL.

We will focus again on reaching the cord cutter audience with three times the video on demand through YouTube, Hulu and other streaming services. This year we have selected 37 of the top local apartment markets to provide increased local presence media and focus. These were the markets with the most growth opportunity for apartments.com.

We plan to increase our exposure in these key markets by 50% and include custom market specific TV versions of our advertisements. We will create our biggest digital presence targeting 2 billion impressions through display advertising and retargeting an increased presence on social media, making sure we're there whenever renters are online.

Our marketing message for the first half of the year will focus great lengths on apartments – we’ll be looking at the great lengths that apartments.com goes to, to make sure that renters will find their greatest number of rental options on apartments.com.

With 40 million people having found their next place on apartments.com, the campaign establishes apartments.com as the most popular site for renting an apartment. Beginning in July, we’ll launch the second half of our 2020 campaign, which will be focused on our new online renter applications tools, which we rolled out nationwide in January.

The message is one of simplicity, that you can now apply for a new home with a single click. In one commercial a man is devastated because the love of his life has just dumped him and told him to move out. A tear rolls down his cheek and lands on his iPhone hitting the rent-now button on apartments.com.

With the tear driven click he rents the perfect apartment as he moves in he finds the next real love of his life. Isn't life grand? In 2020 we expect to invest $110 million to $115 million in paid search, approximately twice the run rate of the spend in ‘19.

We are focusing on specific neighborhoods and appearing 95% of time in the top positions in Google searches. We've seen the benefit this has brought us in terms of increased traffic share over the past few months of ‘19. We intend to maintain this spend over the year. This magnitude of investment to keywords is efficient for three reasons.

First, with our massive branding campaign, renters recognize apartments.com and are more likely to click on it driving our cost per click down comparatively. Secondly, we currently appear in the number one SCO position on 20,000 important apartment keywords 90% of the time.

When renters see us in both top organic and top page placement, we believe they recognize us as an authority, resulting in 4x not 2x, the clicks you would expect from two placements.

Finally, we have a large number of apartment advertisers who are effectively pulling their resources through apartments.com in order to afford the very expensive best keywords on Google. Two weeks ago we announced our agreement to acquire RentPath from Chapter 11 bankruptcy.

The transaction is subject to the customary closing conditions, regulatory review, as well as approval by the bankruptcy at court. We are in the early days the process, which could last anywhere from three to 12 month.

I want to emphasize that we believe our acquisition of the RentPath business, especially our ability to invest in their product and marketing represents the best way forward for all stakeholders.

As we discussed earlier, giving its crippling debt burden, RentPath was simply not able to buy enough traffic from Google or to build a consumer marketing brand to give their sites a recognizable brand. Harvest.com, RentPath and Zillow, all rely to one degree or another on Google to drive traffic to their websites.

The price of many popular apartment rental key words or SCM has soared over the past two years, climbing several hundred percent. For example, in ‘18 the keyword for Downtown Los Angeles apartments could be purchased for $0.42. By 2020 it's reached $7.56 for an increase of 714%.

Apartments.com has enough budget resources, continuing to invest in these keywords and spread the cost out across a large customer base. By contrast RentPath was priced out and resorted to purchasing a volume of keywords such as apartments for rent under $500 in Los Angeles.

Out of 33,000 apartments for rent in LA, the other one I found for under $500 was an upper bunk in a group house in South Central LA. That is not the market institutional apartment advertisers are trying to reach with their dollar. In addition, RentPath number one supplier Google is also competing directly against them for the same business.

In contrast, we believe that synergies, efficiencies and scale we could gain from the combination will make it possible to continue to sustain more advertising and marketing to build more brand awareness and in turn generate an increased flow of quality leads for all of our customers.

It's important to building enough scale, that we can build more direct traffic to our sites that are not subject to Google price increases. From where we stand today, the proposed timeline is not changed versus two weeks ago and we look forward to being able to welcome the RentPath websites and their team to CoStart before the end of 2020.

RentPath has an excellent field sales team led by Arlene Mayfield. They've earned our respect as a very capable group of competitors with great relationships in the industry.

As we grow our sales force to meet the opportunities we have in LoopNet, the Apartments, Biz by Sell, Lands of America and other marketplaces, we look forward to joining with them and the rest of the RentPath team as colleagues.

This quarter we released a great new feature in CoStar that makes public record data on 33 million properties accessible through CoStar. This enables our users to see raw data on virtually every commercially zoned parcel in the US. They can search the public record data directly and see the record ownership, loan, valuation, data zoning and more.

In total there are 150 attributes. The public record date is connected to the CoStar data on the same properties making it convenient to cross reference the information. In the second quarter we plan to add the ability to search lenders and their loan activity.

In the third quarter we’ll integrate state corporation data to allow users to research who the people are behind the companies that own these properties. In the fourth quarter we’ll have permit, planning, and in lean searches.

This will allow users to monitor who is building the new properties, who is renovating and which companies are moving into new facilities or expanding. These features will be provided to our customers at no extra charge in order to enhance the value of our products, extend the reach of CoStar to more customers and renew more business.

Since closing the acquisition of STR in October, I'm more positive than ever that STR and CoStar together can create significant value for all partnered participants in the hospitality sector, and in the part of commercial real-estate that focuses on hospitality. We’ve had an overwhelmingly positive reaction from customers of both STR and CoStar.

The STR customers recognize the technology and integrated product expertise that CoStar can bring, and the CoStar multi-family customers would love to see STR create benchmarking products for the apartment industry.

In addition brokers, developers, lenders, appraisers and local government are excited about having access to high quality hospitality statistics within CoStar. It's great to see such a positive response, which further confirms our rationale for combining these two businesses. I’m also delighted by the enthusiasm and dedication of the STR team.

Amanda Hite, CEO of STR told me recently that the reaction of her staff has been ecstatic, and that they are all very confident about their future in the CoStar family. We are ecstatic as well. Combine the data and technology of STR with the data analytics and software from CoStar is one of our biggest development projects and priorities for 2020.

We're working hard on completing the technology integration by the end of 2020, which will position us to focus on growing the combined business, which we believe is a potential $500 million addressable market, as outlined when we announced the acquisition four months ago.

Finally, I'll conclude by reviewing where we stand in the commercial real-estate economy. Total investment to commercial and multi-family real-estate set a new record in ‘19 topping 650 billion for the first time. Fundamentals remain very healthy as well, with vacancy rates near record lows with limited construction.

Despite the lack of space available though, leasing activity continues to rise and all property types posted rent gains for a 10th consecutive year, although the pace of rent gains has slowed slightly. In the multi-family sector elevated supply continues to meet with strong demand, both from renters and investors.

The sector set a new record with nearly $190 billion investments in 2019 and the multi-family vacancy rate held steady at just about 6%. Many of these renters would likely have been home buyers in another time.

Today, those single family home construction remains at very low levels relative to population, and urban apartment development has largely replaced the suburban subdivision as the new model of American housing. At present we're tracking about 630,000 new apartment units under construction.

We believe that most of these units, as well as the 330,000 units that delivered last year will be advertised on apartments.com. In the office sector, large tech occupiers continue the least large blocks of space despite single digit vacancy rates and limited new supply.

However, the developments underway is largely concentrated in markets long considered to be supply constrained like New York, San Francisco, Boston, Washington DC.

In these markets, new office developments have fundamentally shifted the geography of office demand, with major tenants leaving aging space and traditional CBDs for new space in Hudson Yards, the Boston Seaport, South of Market in San Francisco, and the Capital River front to say nothing of National Landing in Washington, DC.

In the industrial sector demand slowed in ’19, but mostly because so little space is currently available. The vacancy rates rose over the year, but to just 5%, which is extremely low. Despite the ultra-low vacancies, leasing actually picked up anticipating the coming wave of supply.

Rent growth slowed, but at 5% it’s still really strong, and investments set a new record at more than $120 billion. In the retail sector, gloomy headlines obscure the reality that retail vacancy rates are at historic lows and rents are rising in most markets.

The wave of urban apartment development in markets large and small has left many downtown areas under retailed, relative to growing populations and in need of grocery stores and pharmacies to say nothing of restaurants and bars.

The little supply is underway and some markets are even seeing a net reduction space as the front big boxes or malls are repurposed. Economic conditions support ongoing commercial and multi-family real-estate activity at similar levels.

Economic uncertainty, particularly around trade, the coronavirus, and the 2020 election have brought interest rates back to historic lows, supporting investment real-estate even at very low cap rates, and ongoing economic growth and consistent job gains are driving demand for physical space.

CoStar’s Group products and services have become important tools for owners, managers and developers and investors to make quality choices and realize successful outcomes in any economic environment. Clearly, the coronavirus is becoming a factor in our economy.

As a company we're making preparations in the event the outbreak impacts in areas where we have significant operations. Fortunately, we do not have factory floors, nor do we have together clients’ physically to provide our services.

As we've already done in China, we're planning to disperse operations to work-at-home status if outbreaks occur in cities where we operate in.

Before I hand it over to Scott, who is less concern about that, I would like to acknowledge that our outstanding 2019 results would not have been possible without the hard work and dedication of all of our awesome CoStar team members.

No matter where you are around the world or what part of the business you support, I'm very proud of the people that make CoStar a great place to work. I will now turn the call over to our metrics obsessed CFO, Scott Wheeler. .

Thank you, Andy. Give me just a second. Before I take the microphone, I must disinfect it with this little wipe which I have here to display my concern of the virus and other issues. Alright, we had a great year in 2019.

We reached $1.4 billion in revenue, exceeded $500 million in adjusted EBITDA and delivered over $200 million of net new bookings for the year. In addition, we acquired STR and off-campus partners in 2019 and we recently announced an agreement to acquire RentPath.

It’s great to see that we continue our very successful strategy of both double digit organic growth, coupled with highly synergistic acquisition programs. We certainly don't see either of these growth strategies slowing down any time soon.

Our fourth quarter 2019 revenue was $375 million growing 19% year-over-year and coming at $9 million above the high-end of our guidance range. Revenue growth in the fourth quarter excluding STR was 16% year-over-year. STR contributed $9 million in revenue in the fourth quarter, which exceeded the $3 million to $4 million of STR revenue expected.

This is primarily the result of favorable outcomes from the deferred revenue purchase accounting adjustments. We've included the revenue from STR as part of our information services revenue sector.

Looking at our revenue performance by services, CoStar Suite revenue growth was 13% for the full year of 2019 as expected, and 14% in the fourth quarter of 2019 versus the fourth quarter of 2018.

As we head into 2020 we anticipate CoStar Suite revenue growth will moderate somewhat as we have shifted the focus of our sales teams to ramp up sales of the net signature asset that Andrew mentioned. The revenue growth rate for CoStar Suite in 2020 is expected to be approximately 11%.

As Andy discussed, it's important that our field sales team learns how to sell high value add packages directly to owners, even if it comes with a slight substitution effect in the near term on the CoStar side of the business.

Over time we believe the relationships that the sales team builds now selling LoopNet to owners, will pay off in sales of CoStar Suite subscriptions to those very same owners in the future.

On a combined basis, looking at CoStar Suite and LoopNet together, the incremental LoopNet revenue in 2020 is expected to more than offset the anticipated slower revenue growth in CoStar Suite. Revenue in information services for the full year of 2019 grew 31% to $88 million.

Excluding STR, the full year growth rate was 17% with CoStar Real Estate Manager growing 34% year-over-year. Revenue and information services for the fourth quarter of 2019 grew 52% versus the fourth quarter of 2018, which translates to around 3% revenue growth in the fourth quarter excluding STR.

We expect reported revenue from information services to grow at a rate of 60% to 64% in 2020 with STR expected to contribute approximately $61 million to $63 million in revenue in 2020. Multifamily revenue growth for the full year 2019 remained strong at 21% versus 2018 and fourth quarter 2019 grew 20% over the fourth quarter 2018.

Our multifamily revenue growth is split between an 11% increase in volume of properties advertising on the network and a 10% increase in average revenue per property. For the fourth quarter 2019 our average revenue per property reached $800 as our customers continued to buy higher value advertising packages for increased lead performance.

We did not increase list prices for any of our multifamily advertising in 2019. Looking forward we expect multifamily revenue growth to continue at approximately 20% for the full year of 2020.

Our forecast assumes continued strong growth from our field sales team, selling into larger communities, with a growing contribution throughout the year from our mid-market sales teams.

We assume minimal revenue contribution from smaller independent owners using our digital tools in 2020 as we focus on landlord adoption of these digital tools so we can build scale. Commercial property and land revenue grew 17% year-over-year for the full year of 2019 and 18% year-over-year in the fourth quarter.

Our LoopNet marketplace represents approximately 75% of the revenue in the commercial property and land products sector. As we continue to reposition LoopNet as a premium advertising solution to property owners, we're seeing growth rate accelerate.

In the fourth quarter of 2019 LoopNet advertising revenues grew 20%, which is double the rate that LoopNet revenue was growing in mid-2018. For 2020 we expect growth rates for LoopNet to move up over 25% in the second half of the year. Commercial property and land sector is expected to deliver approximately 22% revenue growth for the full year 2020.

Looking at our gross margins, we came in at 79% for 2019, up almost 2% versus 2018. This is a result of our very strong cost leverage. Our gross margin came in at 80% in the fourth quarter 2019, in-line with the margin we achieved in the third quarter of 2019. We expect our overall gross margins to move up to 81% in 2020.

Net income for the full year of 2019 was $315 million, a 32% increase compared to the prior year. Net income for the fourth quarter of 2019 was $88 million, an increase of 5% or $4 million compared to Q4 2018. Our effective tax rate in the fourth quarter was 23%, while our effective tax rate for the full year of 2019 was 19%.

Adjusted EBITDA for the full year of 2019 was $507 million, a 21% increase compared to adjusted EBITDA of $418 million for the full year of 2018. Adjusted EBITDA margins of 36% increased 110 basis points in 2019 compared to 2018.

I'm pleased with our ability to increase profitability for the year and at the same time increase investments in our new product developments and the apartment search marketing that we did in the second half of 2019. Our fourth quarter adjusted EBITDA of $142 million was approximately $7 million above the top end of our guidance range.

Favorable revenue of $5 million from STR related to purchase accounting and other revenue favorability has contributed to the positive variance. Non-GAAP net income for the full year of 2019 was $373 million or $10.19 per diluted share, above the high point of our guidance by $0.17 and an increase of 23% compared to full year 2018.

Non-GAAP net income for the fourth quarter 2019 increased to $103 million or $2.82 per diluted share. We received an insurance settlement of approximately $11 million related to the Xceligent litigation in the fourth quarter of 2019, which we recorded in other non-operating income. We adjusted this settlement gain out of the non-GAAP net income.

Non net GAAP net income also includes adjustments for stock based compensation and STR acquisition related expenses. Non GAAP net income for the fourth quarter assumes a tax rate of 25%, which does not include discrete items such as the impact of share based payment transactions.

Our cash investment balances were approximately $1.1 billion as of December 31, 2019, which is almost identical to our cash balance at the end of 2018. We generated a little over $450 million in cash from operations this year and then we plunked it all down to by STR; it was a great way to use cash I think.

Now, let's take a look at some performance metrics for the quarter, none of which include any performance metrics for STR, which we’ll add later in this year.

At the end of the fourth quarter 2019 our sales force totaled approximately 844 people, up about 24 people from the third quarter of 2019, and up over 100 people from the fourth quarter of 2018. The sales force growth in Q4 was primarily in our multifamily mid-market sales teams.

We expect to ramp up headcount in this team towards the target of 100 people later in 2020. We ended the year with approximately 275 sales people in our CoStar LoopNet sales team, an increase of 20% for the year, but a bit short of our goal to grow the team by 30% during the year.

We expect to reach approximately 300 field sales reps in this team sometime in the second quarter of 2020; hopefully earlier rather than later. The renewal rate on annual contracts for the fourth quarter 2019 was in-line with the rate achieved in the third quarter of 2019 at 90%.

Renewal rate for the quarter for customers who’ve been subscribers for five years or longer was 95%, in-line with the renewal rate of 95% in the third quarter of 2019. Finally, subscription revenue on annual contracts accounts for 83% of our revenue in the fourth quarter, up approximately 1 point compared to Q4 last year.

I'll now discuss our outlook for the full year and the first quarter of 2020. To be clear, our outlook does not include the impact of the proposed RentPath acquisition. However, we've included approximately $7 million of legal and other professional fees associated with the pending transaction.

It included these costs in the non-GAAP adjustments to EBITDA and net income. I'll begin with the outlook for STR. As we said previously, the business exited 2019 and a revenue run rate in the low $60 million range. We will lose a few million dollars of GAAP revenue in the initial quarters due to purchase accounting adjustments.

For 2020 we expect that STR will contribute approximately $14 million in revenue in the first quarter of 2020 and approximately $60 million to $63 million in revenue for the full year. The purchase accounting impacts to revenue and EBITDA primarily impact the fourth quarter 2019 and the first two quarters of 2020.

We expect EBITDA for STR to be between negative $7 million to negative $9 million for 2020, which includes significant retention bonuses paid by the seller, along with other acquisition related costs.

After adjusting for these costs and other typical items like stock compensation, we expect adjusted EBIDTDA for STR of between $7 million to $9 million for the year.

STR adjusted EBITDA is expected be roughly breakeven in the first half of the year and turning positive beginning in the third quarter, after we move past those purchase accounting adjustments. These estimated impacts to revenue and adjusted EBITDA from the acquisition of STR are included in the following consolidated outlook for 2020.

We expect revenue in the range of $1.65 billion to $1.665 billion for the full year of 2020. This implies an annual growth rate of 18% to 19% over 2019. Excluding STR we expect revenue growth rate of approximately 15% for the full year of 2019. We expect revenue for the first quarter of 2020 in the range of $387 million to $392 million.

This represents approximately 18% to 19% growth compared to the first quarter of last year, and approximately 14% to 15% growth excluding the first quarter revenue contributions from STR.

We expect adjusted EBITDA to be in a range of $520 million to $530 million for the full year of 2020, representing 3% to 4% growth versus the first full year of 2019.

As we discussed on our third quarter results call this past October, we plan to increase our marketing spend for multifamily by approximately $100 million in 2020, bringing our total multifamily marketing budget up to approximately $250 million.

Excluding the impact of STR which I just discussed, our organic adjusted EBITDA margin for 2020 is expected to be approximately 32%, down 400 basis points compared to 2019 as we discussed back in the October conference call. Adjusted EBITDA for the first quarter of 2020 is expected to be between $115 million to $120 million.

We expect second quarter adjusted EBITDA to decline from the first quarter as we've seen in the past years, as the department's media campaign ramps up during the peak rental season, with significant increases in adjusted EBITDA and margins in the third and fourth quarter.

We anticipate our adjusted EBITDA margin for the fourth quarter of 2020 will be at or above the 38% adjusted EBITDA margin we achieved in the fourth quarter of 2019. In terms of earnings, we expect full year non-GAAP net income per diluted share of $10.20 to $10.40 based on 36.8 million shares.

For the first quarter of 2020 we expect non-GAAP net income per diluted share in a range of $2.25 and $2.35 based on 36.7 million shares. In summary, we had a fantastic 2019 and we’ve set ourselves up for a great performance in 2020 and beyond.

We believe that by continuing to invest aggressively in our business in the form of new products, marketing and acquisitions, we’re positioning the company for years of strong growth and attractive EBITDA margins.

As I’ve said many times, our margin trajectory may vary considerably from year-to-year based on the timing of investments; however, I'm confident we're still on track to reach our long term goals of $3 billion in run rate revenue and 40% plus the adjusted EBITDA margins in 2023.

Having read all of those numbers, it is time to open up the call now for questions. .

So, we’ll now turn over to the operator who will give you instructions for logging on, but we would also ask that you limit your questions to one question per person. If we have time, we’ll cycle the queue back around. Operator, you may proceed. .

Thank you. [Operator Instructions] And our first question comes from Ryan Tomasello with KBW, please go ahead. .

Good evening everyone. Congrats on the strong finish to the year! I wanted to ask about apartments.com.

You know clearly the platform continues to see strong momentum and it seems that the push into the middle market and the low end of the market held its promise, but I was hoping Andy that you can give us some color on your thoughts around how you frame the risk of competitive pressures in the market for lead generation.

You know I think on the RentPath call you alluded to the position that Google has in that market in controlling renter traffic. So I was wondering you know if you see the risk of them increasing their stake in this market as a threat similar to what they've done in the online travel booking world. .

Sure. So certainly Google has a full position on controlling renter flow, the majority of renter flow. In the online travel world the OTA’s like Bookings.com or Expedia has spent – invested large sums of money to build direct traffic that are independent of Google intermediation.

You know frankly, while they have – those hotel OTA’s have taken a bit of a hit, they still have outstanding margins and very profitable businesses. So you know we think that Google is a competitive factor there, growing revenue in the apartment space.

People do make a decision between spending the money directly with Google or spending the money with apartments.com, but we believe we offer a number of advantages, have some strong client loyalty and we will continue to grow and thrive.

And while we look at Google as providing a competitive element to the company, we also look at them as a very important partner and we believe that our investments into Google keywords and other initiatives with them has been very fruitful. So you know nothing in life is without some risk, but we feel comfortable with it. .

Our next question comes from Sterling Auty with JPMorgan, please go ahead. .

Hey, thanks. Hi guys, this Jackson Ader on for Sterling tonight. .

Hello Jackson..

My question is on the middle market sales.

Now that that sales team is kind of up and running, how should we or how are you guys thinking about the unit economics for that particular segment?.

I believe it's running about an average of $320 per unit, something like that..

That was definitely in the Silver Ads and overall it's about $440 million what we sold so far and the largest mix of ads as we mentioned was in the silver level within some gold segments and platinum and diamonds then sold by the team..

But don't get excited, because there’s only tens of millions of opportunities down there in that segment. .

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

Hi, thanks, and that was a lot of detail. Andy, you know there was a brief comment in your prepared remarks that you plan to accelerate international growth this year, so I wanted to get some more detail on that. I know you've been gathering data in the U.K., I think Spain, Germany and France and have Realla in the U.K.

that you've talked about using to gather public data and parts of Europe, but I guess first, do you have an update of scale internationally to more meaningfully monetize it at this point. And second, is the plan here to accelerate; I guess data gathering maybe with STR's international footprint in EMEA and APAC. .

Yes, so STR does have a really strong international footprint you know leading with their leadership team then for HVAC and the 9Vietnam. It’s a strong group and it's a great foundation to grow in. You know what we're thinking about in 2020, I do not believe we’ll have a huge, negative financial impact to drag on earnings or a material one.

What it's really about is acknowledging the fact that we now have 500 staff and tens of thousands of users outside of the United States in multiple and dozens of different countries.

I think we have users in probably 60, 70 some countries at this point and so a lot of it is how we're thinking about providing the product and the service and delivering it. So as we pull STR and CoStar together, it's going to be important that both of those platforms support users in dozens of countries.

We want to continue the work we began with apartments.com and make all of our products polyglot [ph] ideally supporting both the English language and the local language in those products. We also want to make the movement between viewing data in various countries as seamless as possible.

So today a user in London or a user in Madrid may look at our product as being very local to that town, and we believe there would be value in just opening up that system. If they are subscribing to their local country, we would let them see the international network.

So that would be a pretty big change when an investment broker in London can see and compare a property in London, Edinburgh to a property in Toronto or Vancouver or New Mexico or Madrid. And so that will be the first big change and we think it will have a pretty positive impact. That's the way Bloomberg has segmented their products.

If you are a Bloomberg client you can see all over the world. We want to go that way, so people don't evaluate us as a single city player anywhere and that they can work in their native language. That's particularly valuable in investment sales area and in the analytics area where we think we can provide a lot of value. .

Our next question comes from Mario Cortellacci with Jefferies. Please go ahead. .

Hi, thanks for the time. Because you're shifting the sales force focus from going from CoStar Suite over to LoopNet, could you just update us on how many CoStar customers are using LoopNet and vice versa or maybe just give us a little more a quick update on how much runway still exists there. .

So in particular you are talking about – we were talking about the runway for both of them. I was talking about the runway for CoStar and the runway for LoopNet. I plan to live for a very, very, long time and I will not live long enough to ever see the end of runway for either CoStar or LoopNet.

So we just have – you know I’m back in the place where I'm feeling like our CoStar sales force is smaller than the opportunity they're selling into, because that CoStar sales forces is a CoStar and LoopNet sales force.

There is very high overlap between the people who we’re trying to sell CoStar to and to the people who would be – would benefit from marketing on a LoopNet. So very, very high overlap both ways. I would think I don't have a hard number on that, but I would believe it’s the majority.

Now, some of the new particularly valuable customers to us for CoStar – so an important area for us in CoStar is selling to owners that you know we are in the early stages of penetrating that opportunity, they have high value, they pay higher numbers for CoStar, but a great avenue to reach them is to provide a marketing solution for them in LoopNet that's unique, and new and different and allows us to build a relationship with them, and then ultimately to expand that relationship to ride them information analytics.

We believe that our offering is incredibly compelling to that owner universe on both sides. So I really mean that. I think it's a huge market. By the time we sell everybody in Czechoslovakia the CoStar subscription, we’ll be in like 2320. .

Our next question is from Brett Huff with Stephens. Please go ahead. .

Good evening guys. .

Hello Brett. .

My question is, it seems that the guidance implies organically about 15% growth and Scott I think you give us that number, and by my math I think you guys end up the year pretty close to that in ‘19 give or take. First of all, correct me if I’m off at all, but I think I’m close.

My question is, given that the ad spend is going ramp pretty dramatically through the year, why wouldn't we expect to see more revenue growth, especially in the back half of the year than we did say in 2019. .

I was asking Fred Saint and Paige Forrest the same question, but go ahead Scott. .

You’re correct, we have about a 15% organic growth rate scheduled out for the year. We certainly see solid growth starting into the year. We had a great year selling in apartments you know at the end of last year. We'll start to get the ramp-up in the marketing stand.

It starts in the mid to late March time frame and that's when our broadcast advertising will kick in, and then by the time we hit mid to late summer, we’ll start to advertise more around the use of our one-click you know digital rental tools that Andy was mentioning.

So we've built in really this year, we’ve built in a – the 20% growth is almost entirely from our large directions field sales team in large Apartments. The amount of revenue that we're forecasting right now on the inside sales team is very small and we're really forecasting nothing coming from the value in the market place.

So what we're doing this year is really building the brand, building the momentum, building the sales forces and those capabilities in mid-market and building the network in the small property space, with really revenue on to come.

We’d love to see those develop rapidly in the first half and really take off in the second, but at this stage we're planning on really taking the large market and decent momentum into the mid-markets, but really much beyond that in our forecast right now. .

Our next question comes from Pete Christiansen with Citi. Please go ahead..

Thank you, good evening; great momentum guys. I just want to follow-up on that last question.

I know you don't provide an outlook for bookings, but how should we think about the cadence throughout the year? Is it something that starts picking up in 2Q, 3Q and just building from there or is it more of a hump? I know there’s a lot of moving pieces hiring and all that other stuff, but how should we think about the cadence?.

I think the starts to really advise the cadence, particularly with the combined CoStar LoopNet sales force, and then later in the year your building that mid-market sales force. That's really what's different than maybe what we’ve seen in the past.

Otherwise you know we typically see, second quarter be a very strong sales quarter, third quarter a little bit less than that, and I think like we saw this year, fourth quarter which we just proved in the LoopNet we can actually sell advertising in the fourth quarter which hadn't really been the case in the past.

I think both in Apartments and LoopNet you’ll see fourth quarter strong quarters, and I think technically it would be our second strongest quarter in Apartments. So the bill will go in the sales headcount in general and then the others regular seasonality patterns will hold up for the year. .

Our next question comes from George Tong with Goldman Sachs. Please go ahead..

Hi, thanks. Good afternoon. You're going after the middle-market and I/O subsegments of the multifamily space this year. You talked about launching tools, targeting smaller properties, building out your Richmond sales team and then also accelerating investments into Apartments marketing.

Can you discuss how you plan to phase in these initiatives? How much growth acceleration in multi-family in general you expect from these initiatives, and then how your strategy aligns with your proposed acquisition of RentPath?.

Sure, so I don't think anyone ever taught me about phasing, we just do it all at once. Phasing is now. Sure, I’ll go on now. I mean we've been working on the I/O initiative for a long time, so that's been a year and a half or more of software development acquisitions and research.

So we ran the first focus groups on that I/O product over two years ago in tweaking and adjusting the business model. Now it's in the markets, its national and we're seeing great traction.

We are seeing revenue growth from it, because people are opting in a really good clip to e-commerce purchase of Advertising theses individual properties, buying an add-on on apartments.com. So that will track through the year. We are going to watch it really closely and grow it.

I have been out talking to a lot of leaders, the biggest clients in the multifamily industry over the last couple of weeks and I have been surprised by their interest in those leasing tools, and participating in those programs.

So we are going to also focus this year on potentially enabling more of our larger customers to put the leasing tools on apartments.com, so people can initiate a lease from apartments.com directly into our clients’ back-end system. So that would make that tool work throughout the spectrum. That would have a good impact on revenue throughout the year.

One of the highlights for me last week was I was meeting with one of our biggest customers, the President of one our biggest customers, who manages hundreds of thousands of units. He just bought a very small 10 unit property for himself, as a gaag I guess, I don’t know, and he said he was shocked at when we got this property.

He had no idea how to lease the property. He’s got thousands of people for his big business, but he doesn't have the leases on property. So he's actually becoming a client for our online leasing tools for small property owners, which is helpful as we try to move it upstream.

So the mid-market, we're being careful there because we're launching a new sales model. It involves bringing on a lot of relatively new people, both at the line sales person and the manager doing something kind of new. So we want to make sure they bring their skill sets fully up to development before we start scaling the group.

We want to be careful that it doesn't scale too quickly and that we lose control of quality and then struggle to bring it back.

So we're waiting till they're all up in producing at a good level and we’ve sort of worked out kinks and then we’ll begin slow a measured growth through the year there, but that really is a group that could go from 40 to 100, from 40 to 200, from 40 to 300 over time, as it has a good ROI.

Then how well that integrates in with what we are doing with the RentPath acquisition? Well, we had a lot of great products here with good growth and we are prospecting unfortunately a relatively – e-commerce solutions are working at the I/O side, but we are prospecting a relatively small percentage of our target market and with the RentPath acquisition that would bring more sales resources into our organization, for both selling as Apartment industry and then also into the other market places that we’re active in.

So with the Apartments sales conference, one of things we did is, we began to present training materials on LoopNet in order to familiarize the Apartment sales team with that and we ended up a lot of interest with people who want to move in there. So hopefully we are able to close the RentPath deal and move some more people into the apartment side.

The other thing RentPath helps support us with is that it enabled us – RentPath – probably the most important thing RentPath does for us is it enables us to enter a completely new market to us and that is this I/O market place, so the URL Rent.com is very valuable, in particular in our relationship and partnership with Google to build great SCO around words that people tend to associate with renting a townhouse, a house or a condo or a walk-up unit in a property.

So we'll use RentPath and rent.com in particular as a vehicle to enter this new, smaller property market in which we’re less than 1% penetrated right now. So that will be another helpful element to an acquisition there. .

Our next question comes from Andrew Jeffrey with SunTrust. Please go ahead. .

Hey, good afternoon guys. I appreciate you talking the question. Andy, when you look at STR and the revenue you're generating this year, I think you said on the call when you bought it that you ultimately can – that you can double the revenue growth there.

When I look at the information services segment, this year STR looks like it might be down a little bit.

I wonder if you can comment Andy or Scott on that and then sort of what that total segment growth should look like over time as STR ramps up?.

Yeah, let me cover the numbers on that sector. What you're seeing, which has been the fuel under info services has been real-estate manager for the last couple years. You may recall that that is comprised of both subscription revenue and then when they took all those big orders over the last 18 months they had a bunch of implementation revenue.

Right now the implementation revenue is running down since we're past that wave, and the subscription revenue is growing. So underlying, we're expecting to see anywhere between 15% and 20% continued growth in information services sector after we get past that run off, which I think by the end of 2020 we will be, so that is sort of STR.

But when we look at STR on a standalone basis, on a global enterprise they are growing around this 10% year-over-year, similar to what it was doing just before we bought it, and as you pointed out, we expect we’ll be able to grow that revenue 20% or more.

We’ll need the year to get the technology integration that Andy mentioned done and just start rolling out some of the new products in a more meaningful way and so post 2021 is when we’ll start to see that revenue ramp up, go higher in STR.

Now, keep in mind when that starts to happen and it's integrated into a CoStar Suite platform that those revenue growth will show up in CoStar Suite and not in info services.

So info services will continue in this 15% to 20% growth range with real-estate manager, risk analytics and a few other businesses powering that over the longer term and STR will start growing above 10% to 20%, but that that will shift up into CoStar Suite. .

So we’ve had a bit of time now to really get into the hood and work with the STR team, to really understand the opportunity better, and I think the product strategy is very clear and concise now.

So STR has built a fantastic company, focused intensely on their relationships with the major hoteliers around the world, as well as the accuracy clean list and privacy of the benchmarking and the quality of how they do the benchmarking.

And where there's a tremendous opportunity is to take a whole set of the spare tools that STR provides and pull them together into one seamless login, one interface, one system using a lot of technology that CoStar Group already has available to us, and also integrate that with the analytics, market analytics, market search functions, forecasting, property level data that CoStar Group has, put into one solution and you know as I look at that opportunity, I am very confident that when we go through that process, that technology path, we can produce a product that the customers will love, that will be an absolute next generation solution and hospitality information.

How and when we monetize that exactly will evolve, but if you build a great product, that it’s magnitude of order is more powerful and useful, it will pay off.

But one just you know tactical thing is, we'll be able to sell to the non-hospitality world, analytic solutions for people trying to appraise property, buy and sell hotels, great quality market data and our CoStar sales force will be able to carry that product, and there is just a lot of people in the CoStar sales force, so with just a lot more bandwidth that is a doubling factor right there.

But I feel very good about what we have right now there, but it’s just a lot work and we don’t mind that. .

[Operator Instructions] And we have a question from Mayank Tandon from Needham. Please go ahead. .

Hey, good evening. It’s actually Kyle Peterson on for Mayank. Thanks for talking the questions. So it's great to hear about the LoopNet bookings, the momentum in 4Q; definitely impressive sequential growth there.

I just want to see if you give us any color on kind of how the bookings momentum has been in January and February, just to kind of tease out, kind of how the momentum is – can you….

Hello, we lost our good friend Mayank..

I think we knew where he was going. He wanted to know if we had any insights on the booking momentum in the first quarter.

Unfortunately we can't talk about booking or booking momentum in the first quarter until our first quarter conference call, which will be the third week or fourth week of April, Tuesday evening 5:00 PM and we’ll be happy to update it then. Sorry, can't say much more than that. .

Alright, I'm going to let the cat out of the bag, we didn’t sell in that. We did sell in that – we solid some in January and we are still selling stuff in February. Okay, let's get our last question operator..

And our final question is from Bill Warmington with Wells Fargo. Please go ahead. .

Wow! Under the wire there. .

Very, close.

Hello Bill!.

How are you guys doing today?.

Great! How are you doing today?.

I'm doing okay, I'm doing okay. Is that the Andy, the operator Florance. Hey, I thought it was, I thought it was – so what's up? 54 minutes of prepared remarks.

You can't come up with another six minutes of material of make it – round it out to an hour, what's up with that?.

We are getting old. .

Alright, so a two part question if you will.

So one is to ask if you could give us a little color on the sales incentives, specific sales incentives that you're giving for the LoopNet sales for us in 2020, a little color there; and then also if you could talk about how far you are from being able to actually score a lead for the Apartments owners and managers. .

Okay. So in terms of how we incent the CoStar sales force on LoopNet production, I will take a shot at that. Its approximately 20% of their billing book, so whatever they've got billing in a given month they get approximately 20% of it.

And they get an accelerator towards their rate that they earned on their CoStar side once they cross – I think it's 20,000 of monthly bookings and so that motivates them, that motivates them to quickly get to that base point.

And, I think it doesn't count towards Presidents Club and things like that, but it's enough, it's an interlinked systems that’s pretty attractive to them, and they'll be able to do quite well with it and as the do well, we’ll do well too.

And then the second question, it was not authorized to ask, but we'll answer it anyhow as we always do; leads scoring well. At this point we are – you know one of the elements that we initially pursued with the online leasing tools was the fact that we could do better lead scoring. I think that is a long term investment for us.

As we see more and more renters goes through our online application process and more and more people participate, we can help people understand right off the bat as they fill out their application, which other properties they are likely to qualify for or not qualify for. Just say, several at a time and help someone get to the right solution faster.

And then you know that's sort of a win-direct way by educating the renter of scoring the leads coming in.

And untimely enough people are participating in this, especially as we meet the needs of millions of college students using off-campus partners and we try to bring these tools into that environment as students come out of university and began renting their first off-campus housing.

We’ll build up a fair amount of information about those leads as they go into our clients’ inbox. So the capabilities are there, but we're taking the long term on it. .

And there are no further questions in queue. Please continue. .

Bill, do you want to get back in line? With that we’ll end the conference call. Thank you very much for joining us. Next time we're hoping to get a 60 minute prepared remarks or maybe a 45 minute. Thank you very much. .

And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and you may now disconnect..