Operator: Good day and thank you for standing by. Welcome to the Q3 2024 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Rich Simonelli: Hello, and thank you all for joining us to discuss the third quarter 2024 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our CFO, I'd like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements including the company's outlook and expectations for the fourth quarter and full year 2024 based on current beliefs and assumptions. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that could cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's press release issued earlier today 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, and CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure of any non-GAAP financial measure discussed on this call are shown in detail in our press release issued today, along with the definitions for these terms. The press release is available on our website located at costargroup.com under Press Room. As a reminder, and since many of you already logged in already, today's conference call is being webcast live and in color and the link is also available on our website under Investors. Please refer to today's 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.

Andrew Florance: Thank you for joining CoStar Group's third quarter earnings call. Welcome back, Rich. I noticed you missed a few earnings calls.

Rich Simonelli: Yes, I was enjoying myself on the Eastern Shore.

Andrew Florance: You were working remote?

Rich Simonelli: Yes.

Andrew Florance: And now you're back working a real job?

Rich Simonelli: Well, you should be when you're in the office business, you should be in the office.

Andrew Florance: That's right. Welcome back.

Rich Simonelli: Thank you.

Andrew Florance: We achieved another strong quarter of financial results. Third quarter 2024 revenue was $693 million, an 11% increase year-over-year and in line with our guidance. This is the 54th consecutive quarter of double-digit growth for CoStar Group. Our core businesses are strong industry leaders. I'm extremely pleased that each of our billion-dollar businesses, CoStar and Apartments continued to grow revenue 10% and 16%, respectively. We are on track for 17% revenue growth in multifamily in 2024, a business that's now approaching $1.1 billion in run rate revenue. We grew net income in the quarter to $53 million, up from $7 million in Q1 '24. We grew EBITDA in the quarter to $51 million, up from negative $13 million in Q1 '24. Our adjusted EBITDA of $76 million in the quarter was well ahead of our guidance range of $47 million to $52 million. The early part of 2024 was our most intensive investment period into Homes.com. The profit margin of our commercial information and marketplace businesses remained strong, increasing to 43% in the quarter. Our average monthly unique visitors to our global websites reached 163 million in the third quarter of 2024, according to Google Analytics, which is up 28% year-over-year. Company net new bookings were $44 million in the third quarter of '24. We launched Homes.com earlier this year. And when we did, we only had 41 dedicated salespeople to selling Homes.com. At the scale of the product, we need a much larger sales force to take advantage of the opportunity. So we asked all the sales teams across CoStar Group to help sell the new Homes.com product. They did successfully sell a significant volume of Homes.com but it came at the price of selling less of their core product. The reality of pivoting the entire sales force to new product is that they are all rookies in selling the new product. This means lower productivity, lower service skills and suboptimal command and value propositions. That causes lower overall productivity and renewal rates in the early sales process. But it's worth it for launching a major new product with long-term potential. We have been ramping the dedicated sales teams quickly and now all but 200 the dedicated home sales teams quickly -- and now all but 200 of the overall CoStar Group, CoStar apartments and LoopNet salespeople are back to selling their respective products as they're only in core focus. It takes about one to two quarters to completely refill these pipelines. So I expect an improvement in net new bookings in Q4 and throughout 2025. We are already seeing an upturn. September was the strongest month in net new sales in our CoStar product in the past year. While we are growing at dedicated homes.com sales force, we are concurrently investing to grow the sales teams of CoStar, LoopNet and Apartments.com as well by more than 100 sales reps each. We believe there's more than enough market opportunity to productively engage the additional sales headcount. In the four years since the COVID lockdown in March 2020, we have experienced the worst commercial real estate market in a generation. Even considering these significant headwinds, CoStar continues to be the preeminent source of information and analytics for the industry and grow revenue. Our CRE business has performed remarkably well during this time, having steadily grown subscribers and prices while maintaining an incredible 93% renewal rate in the third quarter of 2024. We also launched new products for institutional clients, namely owners and lenders as institutional sales are a major part of our net new sales. Our sales force Net Promoter Scores are now the highest they've ever been for CoStar. We have seen much success with our lender product, which our customers use to meet banking regulatory requirements. We've experienced 36% growth since Q3 2023 and $50 million in annualized lender product revenue with only a 12.5% penetration into what we believe is a TAM of $400 million for that product area. On our last call, we announced that we had just released our owner module, which presents the largest owners of commercial real estate in an aggregate view. The product enables the user to see the company, its subsidiaries, funds and real estate assets, leasing and sales transaction history, brokerage relationships, tenants, tenant mixes and availabilities. Users of CoStar now have a comprehensive view of global owners with portfolios greater than 25 properties. CoStar will become even more valuable as the resetting of commercial property values begins to kick in '25 and '26. [$930 billion] of loans are due in '24 with approximately 30% of this total extended from last year. CMBS delinquency rates remain elevated and office delinquencies have increased notably to 7.7%. Simultaneously, I believe that there are green shoots in the office market fundamentals that may motivate buyers looking for opportunistic value. As a result, I believe you will see more transactions on 10x in the year ahead. We continue to see increased CoStar product activity engagement from our 237,000 subscribers, nearly 0.25 million but not quite. Property searches neared 73 million in the third quarter of 2024, a 17% increase year-over-year. Overall CoStar activity counts increased 29% over the same time last year. Our distinct logins have increased every month, and we set a new high mark in September with more than 164,000 distinct logins. We serve subscribers with -- for CoStar in 112 countries now. STR is an excellent addition to our CoStar product, adding powerful hospitality data and analytics for CoStar subscribers. The hotel asset class is $3 trillion in value. In August, we released analytics for more than 400 new global hospitality markets, an additional 1,200 new hospitality submarkets. With this release, we have delivered the remaining global markets that were covered by STR before the integration. We have over 85,000 properties in STR representing 11 million rooms contributing data to our platform. We track over 300,000 hospitality properties from 180 countries. We believe CoStar is the only source of this comprehensive analytic data, giving our users detailed supply and demand and hotel performance insight around the globe. Apartments.com turned in another strong quarter. Revenue was $272 million for the third quarter of '24. We continue to add new customers with properties of all unit counts to our marketplace at a rapid pace, with over 75,000 paying communities on our network, including over 10,000 in the five to 50-unit range. In the below 20-unit market, we delivered a record inventory of House condo and townhouse listings in Q3. We have seen strong growth in the rental tools business that supports independent owners with all aspects of managing the rental portfolio. Q3 posted a record number of paid user entered listings, and we processed $1.3 billion in rent payments. Single-family rental listings have boosted lead count by more than 4x for our Homes.com member engines. We had nearly 0.25 billion of total visits in Q3 with 43 million average monthly unique visitors to our Apartments.com site with exceptionally strong unaided awareness from apartment seekers at 67%. In Canada, Apartments.com generated the most unique visitors of any site according to comScore. Our marketing campaigns continue to deliver with top programming venues like the SB Awards, NBC Olympic Zone, the NFL season opener and Jimmy Kimmel Live with Jeff Goldblum as the host. Jeff Goldblum even included Apartments.com in his opening song. If this doesn't work out, he said, I still have Apartments.com, and he's always welcome home to his apartment. Apartments.com competitive position remains strong in the multifamily segment. When we bought Apartments.com in 2014, we had approximately $85 million in revenue, and we were way back to the pack at a very crowded field, which included Zillow, who had entered the market years before us. We have now moved into the clear leadership position and our revenue growth has grown about 1,200% from that point. Today, our multifamily revenue is 2.5x bigger than Zillow. And importantly, our revenue is subscription-based with outstanding customer satisfaction and very high renewal rates. When we purchased ForRent.com, I had the chance to spend some time to discussing industry dynamics with their leaders who had a few more decades of experience than I in the multifamily space. I asked them what happened to a business like Apartments.com when a bad market came about, there was a downturn. They were surprised. They stopped me and said, the question was off because we were currently in a low vacancy rate market, which was, in fact, what they considered to be a bad market. They explained that the number one player like Apartments.com does really well in both a high vacancy or low vacancy market because apartment communities will always continuously advertise on the number one platform. But that second tier player suffered during low vacancy markets because the apartment communities need less leads and cut back spend on second-tier sites or backup sites. They explained that when vacancies rise and the market becomes soft, that's when the second tier sites could grow their business as communities supplement their advertising on the primary site like Apartments.com with spend on second-tier sites. So remember, when a site start showing higher growth rates in a high vacancy market, it's a confirmation that the site is an also ran second-tier player. We are now exceeding 175,000 quality client interactions per quarter. This, along with a great product, results in a satisfied customer base, which gives us a 94 NPS rating with a 92.6% renewal rate in Q3, really a remarkable NPS rating. Congratulations to the Apartments.com team. In the third quarter of '24, LoopNet had its best net new sales quarter since Q3 '23 as the LoopNet sales force returned its focus to selling LoopNet. Despite the market's difficult conditions in the third quarter '24, total paid listings are up 4%, September also saw the highest number of meetings with clients and prospects in two years. Our traffic numbers continue to be impressive. Over the past 12 months, LoopNet had a massive 72x the unique visitors of the average competitor according to Semrush. Internationally, the Canadian LoopNet network, which is relatively new, also dominates the nearest competitor with nearly 4x the traffic according to Semrush. I'm also pleased with our progress in the U.K. as the LoopNet network delivered twice the traffic of our nearest commercial only competitor, again, according to Semrush. We are still in the bottom of the first inning when it comes to launching the new Homes.com. We effectively launched the Homes.com site in mid-February of this year. So we are now seven months into building this mega new product area for the company. Thousands of our talented staff have put tremendous effort into creating the best residential real estate portal to win over hundreds of millions of homebuyers and sellers so that ultimately, we can monetize with one million agents. With success in the U.S., our mission will be to expand globally. Many will try and read the team leaves and discern within hours, days and months with the outcome of the years ahead will be. I've been fortunate to have the opportunity to work on several large-scale projects like this, and I know the outcomes only become clear to everybody in the public over the course of several years. I feel really great about where we are -- what we're accomplishing already, and I'm highly confident that we can win major share revenue and EBITDA in this segment. We continue to hear directly from agents and focus groups brokerage industry leaders that they definitely prefer our business model of your listing your lead. Agents and brokerage firms are becoming more frustrated. They're forced to put their listings into the MLS and they have their listings sold off into lead diversion models such as Zillow and Realtor which means the seller's agent lose control over the listing and loses potential business from those diverted leads, those non-permission diverted leads. Buyers want to see who the listing agent is that they can reach out for a quick question without getting the hard sell from half a dozen buyer brokers. Sellers want the agent they hired and worked hard to find to work the leads for their homes effective sale. I believe that our business model is clearly superior to our competitors and that it will be the future model. In the U.S., our marketing campaign for Homes.com continues to deliver strong results. Year-to-date, we have delivered 15 billion impressions with nearly 5 billion in Q3. We have run more than 25,000 commercials, including spots in the Super Bowl, the Olympics, the NFL, the Grammys and most recently at the Emmys, which was hosted by our spokesperson, Dan Levy, along with his father. It was phenomenal to have new commercial content running in the Emmy's using the actors that we're hosting or an actor that was hosting them as it was a great moment for Homes.com. With SEM and digital, we're on track to generate 80 billion impressions this year for Homes.com. You, like 90% of Americans have likely seen Homes.com ads. We have four great new creatives running, which highlight how clean and beautiful the site is, the benefit of seeing the real listing age in all listing, the fact that Homes.com has been completely rebuilt to be the best and the positive impact that agents have on homebuyers and sellers lives. We monitor third-party surveys who ask homebuyers and sellers to name residential real estate portals from the top of their mind. This is unaided awareness. As your unaided awareness grows, your site traffic and value to ages can grow. Homes.com unaided awareness has risen from 4% before the marketing campaign launched in February to 33% in the most recent months. So from 4% to 33% more than a significant increase. While we have not yet achieved higher unaided awareness of the brands that have been around for decades, we're certainly closing on them quickly, and that's an important indicator. For perspective, both Apartments.com and homes had similar unaided awareness just prior to launch. In the eight months post launch, Homes.com with 33% unaided awareness has outperformed where apartments got to, which was 20% unaided awareness in its eighth month. So we're growing awareness faster for Homes.com than we did for apartments. This is particularly remarkable because homes.com is growing this share into a much more competitive segment with entrenched competitors who've been investing heavily in marketing for an extended period of time. Another unaided survey question asks home sellers and buyers, which site they plan to use Homes.com unaided intention has grown 500% this year from 4% prelaunch to 20% today. The survey also asked home sellers and buyers their likelihood to recommend Homes.com and that generates our Net Promoter Score. Here, we've done particularly well. Prior to launch, Homes.com NPS was 44, and it steadily climbed to 75% in less than a year. The Homes.com delivered 130 million average delivered 130 million average monthly unique visitors for the third quarter, according to Google Analytics, which was an increase of 17% over the same quarter last year. Homes.com had 85 million average monthly unique visitors in the third quarter, an increase of 38% year-over-year. Based on the latest data we have, we believe that -- that the Homes.com network of residential sites is now the second most heavily traffic U.S. residential portal. Homes.com creates value for agents and their home sellers by intensively marketing their listings and services. I do not believe that there's a better way to market a home for sale today than by leveraging the unique marketing power of Homes.com. According to NAR, 100% of home shoppers turn to the Internet to find their next home, making the Internet the most important marketing arena for home buying. Portals like Realtor and Zillow turn the Internet against agents by stripping away the leads from the listing agents. In contrast, Homes.com makes internet work for agents with our your listing your lead principle. Members gain advantage on homes.com because they're listing sort to the top of results. These listings are presented across many different sections of the Homes.com site highlighted in millions of e-mails and are extensively retargeted to home shoppers across the Internet. On average, Homes.com members listings are viewed on the site, 120,000 times per month, each which is 46x more than the 2,600 times a nonmember listings are viewed. So that's giving the members listings a massive amount of exposure and value to the home seller. So these members listings that are getting more exposure, they're shared 343% more often than basic listings, they're favored at 600% more often than basic listings. On average, member listings sell faster and for more money. Our member agents sell this fact in their presentations to potential home sellers and that allows them to win more valuable listing assignments. Our data shows that Homes.com members are winning 50% more listings after they become members than when the time period was before they became members. So they're winning 50% more listings, that is a very compelling potential ROI for them. Homes.com markets brokerages, brands and agents where other sites strip their identities or make them nearly invisible from the Internet. Zillow strips the brokerage of the brand, the agent from the listing and replaces it with a button contact agent, which really means contact Zillow. It's not hard to imagine why brokers and agents love homes.com since we show their name on their listings and the leads go directly to them. I estimate that homebuyers and sellers will see an agent and their brokerage name on Homes.com 272 billion times across the year. So they're not invisible on our site. They're highly promoted. The ultimate customer is the home seller paying hundreds of billions and commissions and what they want is to market their home for sale and sell it faster and for more money. That's what we help them do. When you innovate with a better business model and it's different than what has been offered in the past two decades, it takes a little time for people to understand that something is different and better. We generated another Net Promoter Score for the likelihood that a client or a member agent would recommend another agent get a membership to Homes.com. Each month, we have seen significant improvement in that NPS. Our NPS climbed 35 points between May and September or actually between May and June, and inclined 8.7 points between Jan, July, 1.4 points July to August and 6 point -- 1 point from August to September. So it keeps climbing month after month as people learn about the value proposition. Our NPS score is already good, but we hope to eventually reach the incredibly high NPS of Apartments.com. We now offer Matterport 3D tours as part of the Homes.com membership in 94 markets. Properties with 3D tours sort to the top of the list in searches and contribute to more consumer engagement. We know that Apartments.com that apartments with matter ports have 134% more time on site. It also improves the quality of a lead when consumers have more visual information about the property before they submit the lead. We believe that as more of our members use Matterport, it will increase the velocity at which they can sell their clients' homes. Homes.com is outperforming Apartments.com in revenue generation at the same relative time post launch. In the two full quarters post launch, Apartments.com generated $28 million in annualized revenue. Homes.com has nearly doubled that performance, generating $54.8 million in annualized revenues in the first two quarters post launch. As I mentioned, each time we launch a major new product, we leverage the scale of the existing sales force to bring more resources to the brand-new sales effort. As soon as practical, we build out a dedicated sales force for the new product. In this case, our top priority today is building out a dedicated sales force for Homes.com. At the point we launched the new Homes.com at this year's Super Bowl, we had 41 Dedicated Homes.com salespeople in production. We hired 28 in the second quarter and 108 in the third quarter. By September this year, we had 113 in production with 192 hired, but some still in training. Our goal is to have more than 275 salespeople hired in production by year-end. We hope to double that sales force again in '25 and bring it closer to 600 salespeople by year-end. At this point, we have a very capable sales leader for Homes.com and Andrew Stearns, and I have confidence that he can meet this key result. No pressure, Andrew. Currently, the average Homes.com salesperson with four months of experience is selling 2,108 gross monthly new sales and 1,641 net new monthly sales. That equates to 236,000 annualized billings after a year of selling at that average pace. We ramp up to 600 salespeople. We could add $142 million in annualized billings on an annualized basis. I would hope to beat that level as we continue to grow the brand and the product. On the market, our U.K. residential real estate portal continues to make great progress. We have grown year-over-year traffic by 212%, unique visitors by 348%, listing agents by 27%, sales leads by 76% and total stock by 45%. It is hard to believe that CoStar acquired on the market only 12 months ago with so much progress. Agents in the United Kingdom expressed overwhelmingly to me that they're dissatisfied with the way pricing works there with competitors. Rightmove has already publicly suggested it will increase prices by 35% in the next couple of years, and that follows a track record of years of price increases. This could create a great opportunity for -- on the market to grow in the United Kingdom. There's an extraordinary amount of change in the residential real estate market. We believe homes.com is well positioned to capitalize on this rapid transformation in the U.S. market. Generally speaking, the brokerage firms are unhappy. Post the NAR settlement in March earlier this year, more than 100 brokerage firms, including industry giants anywhere in COMPASS, have gone public wanting to take back control of their listings that their agents work hard to get. Consumers aren't happy and are becoming more aware. Under the guise of transparency, those portals have utilized the legacy MLS system to leverage sellers' listings as at to monetize diverted leads to the highest buyer agent bidder and away from the listing agent who's working on behalf of the seller. In many cases, these leads are sold to multiple buyer agent bidders. The Zillow Flex and realtor.com shared lead models unleashed multiple agents contacting unsuspecting buyers that to this day, believe that they're reaching out to the listing agent when they were clicking on the house, they were interested in. This is not only misleading. It's a terrible consumer experience. Due to the NAR settlement, MLS rules now require the buyer agents working with a buyer enter into a written agreement before even taking them on a tour, specifying the amount the agent will be compensated and who will be paying for it, the home seller or the buyer. I believe that this new rule will create significant friction and pose a painful challenge to realtor in Zillow. The buyer goes to an open house or Homes.com where you're always putting touch directly with listing agent, there is no friction as no buyer's agent agreement is needed to go see the house, that's another benefit of the -- you're listing your lead model. Of course, 90% of home shoppers will still use a buyer's agent, but they want to do so on their own terms with transparency, honesty and with their own timing. CoStar has always invested back into the business to help us grow and gain the synergies that occur from building out more products that reach more real estate customer segments across more geography. So we're a company that's always reinvested into growth. I look at a model like REA Group or Rightmove that has historically remained primarily focused on achieving the highest possible margins rather than reinvesting in growth. They're both successful businesses, very successful businesses, but may offer less long-term shareholder value growth. I believe REA Group has primarily grown by increasing pricing on a per agent basis. According to data from online marketplaces, which I believe is run by a former CEO of REA Group. So according to a reasonable authority, according to data from online marketplaces in 2009, REA Group was generating 500 pounds of revenue per month per agent. Yet by 2024, they were generating 4,500 pounds per month per agent. That's a 15% compound annual growth in fees per agent. This is a usurious $70,000 per agent annually. So generating $70,000 per agent annually. Looking forward, if REA Group continues with that value creation strategy and increases their fees per agent by 15% compound annual growth rate for the next 15 years as they did for the last 15, they'll be seeking $700,000 in fees per agent in '39. That's not possible. Things that cannot continue will not continue. I believe that they understand this problem, which is why they made the recent failed attempt to acquire Rightmove in the U.K. in seeking alternative growth. In sharp contrast, CoStar has historically made significant investments to continuously expand our customer base rather than to use a smaller one. And therefore, we've created sustainable long-term shareholder value. Our investments in buying and growing LoopNet Apartments.com were initially somewhat unpopular with investors. It's probably an understatement for those of who that are there for that. We were a $1 billion market cap business when we bought LoopNet in 2011. And just three years later, in 2014, we were a $4.5 billion market cap business when we bought Apartments.com. And certainly Zillow was the same size as we were in 2014 with a $4 billion market cap. Today, we're a $30 billion market cap business and more than double the size of Zillow's market cap. Our investment as a percentage of market cap in Apartments.com was significantly higher than the investment were today making in Homes.com. The Homes.com opportunity is bigger than the apartments and the commercial real estate information opportunities combined. Today, boom - so you may have seen just recently a press release cost, in addition to the earnings press release. And so today, we announced a definitive agreement to acquire Visual Lease. The strategic acquisition is expected to enhance CoStar Group's real estate manager business line and provide additional lease management and accounting services to current Visual Lease customers. CoStar Real Estate Manager used by large enterprise-level customers, providing vital lease administration reporting compliance services, ensuring seamless workflows between real estate and accounting teams. By combining CoStar Group's resources with Visual Lease's diverse customer base, best-in-class customer retention, deep lease portfolio management expertise at a user-centric design. We're well positioned to offer a more comprehensive service offering, and continuing growth growing both nationally and internationally in this segment. Finally, I want to touch on the economy and what we're seeing in the real estate economy. The commercial real estate economy, has started to show signs of potential improvement, from what I think is probably a cycle bottom. Office prices are down 18% over the past year, and currently sit 43% below their peak level. It'd be a little worse if we were doing that in real dollars. Multifamily prices are down 11% over the past year, and are 25% off from their peak. Industrial and retail prices never saw as big a decline, and are down only 5% from their peaks. The multifamily sector continued its recent trend of better-than-expected renter demand, with 174,000 units being absorbed. This puts absorption for the year on pace to be double last year's levels, and to be near the record levels last seen in 2021. But with the wave of new construction that the sector has seen, strong absorption was not enough to match deliveries, and vacancies remained at elevated levels currently at 7.9%, and would increase a bit. With 720,000 units still under construction, those vacancy rates, I think, will remain at upper levels for quite some time. The office sector hit an all-time high in vacancy this quarter, but I'm becoming somewhat optimistic that we're about to see a turn. The rate of increase in vacancy is slowing to a crawl. One important lead indicator, sublet vacancy is now clearly falling. Another leading indicator, total availability is already falling. The spread between vacancy and availability is shrinking, usually indication of early signs of recovery. Leasing volume is back to pre-pandemic levels, though with smaller average lease size, suggesting a larger number of overall leases being signed. New construction underway at 82 million square feet, is the lowest level seen since 2013 and not far from the lowest levels ever seen. These low levels will eventually translate into shrinking vacancies, and rising rates - rents, back up the truck and load up on quality distressed office buildings on 10x that, was a little commercial inserted to build earnings call. The industrial sector contained the trend of recent quarters, with modest positive demand being matched by even more supply as the historic way of construction in the sector continues to play out. Absorption last quarter was 32 million square feet. Deliveries were almost double that at 63 million square feet, vacancy rose a bit at 15 basis points. Industrial vacancy currently sits pretty stable at 6.6%. The retail sector, which has been relative supply/demand equilibrium for the past two years, continued that trend last quarter with normal vacancy rates. The hospitality sector saw overall improved performance this past quarter. Over the past year, upper scale hotels have seen - occupancies grow up 1%, while lower scale hotels have dropped 2%. In the residential sector, mortgage rates have eased from their peak a year ago, and are down 170 basis points, but are still high enough levels to prevent a significant increase in home sales, with most homeowners sitting on mortgages below 4%. The thought of having to move to a mortgage rate of over 6%, is not appealing and it's preventing homeowners, from selling their house and buying another one. This meant fewer homes being offered for sale, which is propping prices up a bit and keeping affordability at near record lows. In summary, despite macroeconomic headwinds, we continue to demonstrate the strength of our commercial real estate and multifamily business, with continued double-digit growth and strong EBITDA margins. Our residential portals are benefiting from our product enhancements, strong marketing campaigns, growing consumer awareness, growing site traffic and revenue growth on both sides of the pond. Given the huge total addressable market, opportunities across our product offering, we believe investing in our sales forces across the board, will allow us to invigorate sales in '25, and solid revenue growth in 2016 and beyond. At this point, I'm going to turn the call over to Christopher, our CFO. Over to you, Chris.

Chris Lown: Thank you, Andy. Good evening. I'm happy to report that CoStar Group's, revenue grew 11% year-over-year in the third quarter, in line with our guidance and marking our 54th consecutive quarter of double-digit revenue growth. Net new bookings for the quarter were $44 million. As Andy mentioned, we began migrating the sales force back to their core brands late in the third quarter, and we expect sales reps to rebuild pipelines in the fourth quarter, and return to higher levels of productivity in early 2025. Our core business is strong, and the total addressable market is billions of dollars. Given the size of this opportunity, we have already begun to invest in increasing the size of our sales teams in CoStar, Apartments.com and LoopNet. Looking first at our CoStar product. Revenue grew 10% in the third quarter, in line with our guidance. We are maintaining our previous full year guidance of 10% growth. Importantly, we have grown our customer base through an incredibly challenging commercial real estate market, and have continued to enhance, develop and expand the product. A key example of this is our lender product. As the former CFO, of one of the largest real estate finance companies in the U.S. I believe CoStar's lender product is the most sophisticated products, for real estate lenders on the market today. Given its strong position and leading capabilities, Lender continued to see robust growth in the third quarter, posting impressive 36% revenue growth year-over-year. Apartments.com third quarter revenue growth came in at 16%, and we are maintaining our full year guidance of 17% revenue growth. LoopNet revenue grew 5% in the third quarter, in line with our guidance and we are maintaining our full year revenue outlook, for LoopNet of mid-single-digit growth. Residential revenue came in at $28 million in the third quarter, and we now expect full year 2024 revenue, to approximate $100 million. Over the past seven months, we have continuously fine-tuned our sales strategy, and our customer service analytics for Homes.com agent members, to help inform agents of the tremendous benefits of Homes.com membership. Additionally, we are rapidly growing the dedicated Homes.com sales force. Revenue from Information Services dropped 26% year-over-year, due to the continued transition of STR into CoStar. We are now guiding for annual revenue to be modestly higher than the $130 million. Other marketplaces revenue was $32 million in the third quarter, and we now expect fourth quarter revenues, to be similar to those in the third quarter. On a consolidated basis, adjusted EBITDA for the third quarter was $76 million, producing an 11% margin, which is well ahead of our 7% guidance. We were able to successfully manage our expenses, given the current climate and our commercial information and marketplaces businesses, delivered a profit margin of 43% in the third quarter. Our sales force totaled approximately 1,340 people at the end of the third quarter, a 19% year-over-year increase, and approximately 100% more than last quarter. Our contract renewal rate was 91% for the third quarter, with the renewal rate for customers who have been subscribers for five years, or longer at 95%. Subscription revenue on annual contracts was 80% for the third quarter of 2024. We continue to have a fortress balance sheet with $4.9 billion in cash, which earned net interest income of $56 million, a 5% rate of return. With our pending Matterport acquisition, expected to now close either in the fourth quarter of 2024, or the first quarter of 2025. Our guidance does not reflect any financial impact from this transaction. In addition, as Andy mentioned, we recently announced the $272.5 million acquisition of Visual Lease. Our guidance also does not reflect - any financial impact from this transaction, which we expect to close in the fourth quarter of 2024, and we expect it to be accretive to earnings in 2025. Our full year 2024 revenue outlook, is now in the $2.72 billion to $2.73 billion range, representing growth of 11%. The modest adjustment to our revenue guidance range, reflects our adjusted residential guidance and less favorable property market conditions in the third quarter. We anticipate adjusted EBITDA for the year in the range of $205 million to $215 million, which is $10 million higher than our second quarter guidance. I will now turn the call back over to our operator, to open the lines for questions.

Operator: Thank you. [Operator Instructions] Our first question comes from Stephen Sheldon with William Blair. You may proceed.

Stephen Sheldon: Hi, thanks for taking my questions. It seems like your commercial real estate backdrop, is improving as we speak. So how are you thinking about the growth outlook in 2025, for businesses like the Suite and LoopNet? Should we be expecting some notable acceleration there, especially as you move past the Homes.com sales distractions this year, the sales capacity sounds like you're adding? And then, just given the more favorable backdrop, how are you generally thinking about it?

Andrew Florance: Yes. So as we continue to grow the product, so a couple of different approaches to that. One is, yes, we - it's remarkable that we've done as well as we have, in this sort of difficult market. And so, when the pressure starts to ease off a bit. And again, I'm observing these improvements in, say, the office market pretty early in the cycle. I think, it will become more evident in the next quarter or two. But that will switch that from a headwind to a tailwind, which should give us a benefit. When I look at our penetration rates into brokers, corporations, owners, institutions, banks, there is plenty of room to grow and that growth is going to be easier in a better market. I feel that LoopNet's growth is a little more neutral to that environment. But I think that the fundamentals in LoopNet of growing the sales force, improving the pricing model, that will all give us some headwind. As we've grown our revenue through the years, you have to keep growing your sales force at the same productivity level, in order to cover what would be a normal very low cancellation rate. So if you're only seeing 7% annual cancels in CoStar that, still is a nut you have to sell past to continue to grow subscription revenue. So as we grow the sales force, that will give us a little tailwind, too. So optimistic about how those all look in the year to come, barring any sort of external event that occurs that we can anticipate.

Operator: Thank you. Our next question comes from Jeff Meuler with Baird. You may proceed.

Jeff Meuler: Yes. Thank you. So early in the call, you made a reference Andy, to starting to see an upturn as you reprioritize sales resources, back to their core responsibilities. Can you just go into more detail on what you're seeing? And maybe why was the distraction greater than you were kind of expecting? Because I think when you set out on this dual sales responsibilities, you tried to structure the comp plans to protect the core bookings? Thank you.

Andrew Florance: Sure. So we have seen an uptick in, say, CoStar sales in the most recent month, which is basically directly attributable to people putting more of their attention into their core product. So as they - as salespeople went into selling Homes.com inevitably, like them to keep selling both products, but I think they ended up spending a little more time in the home side. And they were not as experienced as selling that new product, the value propositions were not as clear to them. So, they pretty much were slowing down a little bit, as they moved into semi rookie status in a new product area. So I really appreciate their efforts in helping that Homes.com get off to a good start. But the reality is their time was just limited. And between the two, they couldn't maintain growth in homes, and the same level of production in their core products. So this is - this is one of the dilemmas of - that you always face when you're starting a major new product area that you hope to be a $1 billion business one day. You just don't have a sales force for a $1 billion product before you begin. So we're - the pace of ramping up the dedicated home sales force that we mentioned is ambitious. It's hard work, but I think that we're making really good progress for it. And I wish I could take you, on a tour through the sales floor in Richmond, where these hundreds of home salespeople are beginning to build a really highly energized, strong sales force. And I think they'll be able to grow, into carrying that load completely on their own. And by '25, 100% of the legacy core sales teams will be back focused on their products, and that will reenergize growth. So it's a price you pay, as you launch a new potential $1 billion product line. But I think it's well worth it. It's always painful when you're doing this, but it's worth it.

Operator: Thank you. Our next question comes from Pete Christiansen with Citi. You may proceed.

Peter Christiansen: Good evening. Thanks for the question. Andy, I was just wondering if you could talk to the potential of the homes business, and the seasonality. I would imagine some of the shorter-term contracts, maybe the renewals part so great after six months, given the low in the season. Do you think that's going to be a feature of the business? And what can you do to save that off?

Andrew Florance: Pete, I don't really think that what - I think the primary issue there was that - as you put 1,300 people into selling a new product with a day or two of training, which is all you have when you're trying to move that many people into that product area. They were selling the product without - a solidly refined value proposition, as you want to see and they we're also not as experienced in providing follow-up sales training after - at the training after the sale, or product support after the sale. And so, there was a significant number of folks who thought they were buying a buyer agent lead diversion product, which is not what they were really buying, or they even though it wasn't sold that way in some cases, they perceived that's what they were buying, because that's all that you could buy in the industry for the last two decades. I feel very comfortable about the - what we're selling as a value proposition, which is the ability to win new listings in a competitive market, at a rate greater than you were before. And what we're showing is 50% improvement in win rate on new listings. That more than gives you an adequate ROI to justify the product. And when I mentioned that constantly improving NPS score, through the year on the product with members, that shows that members are beginning to understand that value proposition. It's resonating and we're getting better and better NPS scores. So, I believe that over time, people will look at this as an annual subscription. I don't think our product - I think for people that have consistent listings, and a lot of people do, like in residential real estate, you've got 1,000,006 folks, or where the number is, of which about 450,000 are actually in the business. And they're - and doing it full time to support themselves, and probably 400 and some thousand have a consistent inventory of listings. Those folks with a consistent inventory of listings, I think, are year round continuous high renewal rate subscribers to Homes.com. The folks who don't have any listings, many of them who bought into Homes.com early on. They're not going to get the same benefit from homes, just because they don't really win a lot of listings no matter what tools they have. So that - I think that's really more what happened early on, not cycle. That's too long a question. But Pete, didn't you like Chris' line about being CFO or CEO, whatever, of a major financial institution in loving the lender product. Yes, that was strong.

Peter Christiansen: Very strong. Thank you.

Operator: Thank you. Our next question comes from Ryan Tomasello with KBW. You may proceed.

Ryan Tomasello: Hi, everyone. Thanks for taking the questions. Can you say what the revised annual guidance this year includes for residential spend, and the nonresidential EBITDA margin for the full year? And just given all the moving pieces, Andy, with respect to residential and Homes.com, I think it would be helpful if you were willing to provide some early indication of how next year's investment levels might trend at least relative to this year, just to give some folks reassurance around how that might impact margins, over the near term? Thanks.

Andrew Florance: So I'll answer the second part first, and then Chris can answer the first part second. So I think that we are already - we launched Homes.com, with a very aggressive investment level that, I think is appropriate for a product opportunity this scale and size. So the good news - the bad news is that was a big investment. The good news is, it's at a level that I think it sustains us. So I don't see a need to increase our investment in marketing, or in Homes.com as we go into next year. So I think that improvement in EBITDA you've seen through the year, is sort of indicative of the fact that we saw a low point in net investment, in the EBITDA associated with that investment. So, I'll have Chris answer the second part.

Chris Lown: Yes. And I think to the second point, we're still on track to spend the amount we have discussed throughout the year in residential, and we continue to see continued growth in margins in the commercial businesses that we've discussed. So I think we're on track by for the numbers that we discussed historically, and no real change.

Operator: Thank you. Our next question comes from George Tong with Goldman Sachs. You may proceed.

George Tong: Hi, thanks. Good afternoon. I wanted to also ask about the resi business. Can you elaborate on how much of your reduction to the residential guide is, due to the sales force productivity issues you mentioned versus client demand? And discuss how overall client demand for Homes.com memberships, is tracking relative to your internal expectations?

Andrew Florance: So I would say that, I would say that it's more - it's not so much about client demand. It is about sales force mechanics. It's about how many people you put - you can put onto the product and training cycle up, at what pace? So what we're seeing is, as we hire a significant number of - I don't want to say junior, but not senior salespeople. We're hiring a number of salespeople successfully into the homes sales force. A very high percentage of them are ramping up very quickly to a production level that, covers their cost in their first year [technical difficulty] with the company. And then moves them into being very profitable in out years. So it's not so much like they're all - like we're finding plenty of demand. It's more of a question of how many people do you have approaching the opportunity? And how fast can you hire people? I mean there's a limit to how many people you can hire into a sales - role like that, before you start to lose quality, or the things begin to rattle too much. So adding 108 people in a quarter is pretty good, but we wouldn't want to go too far ahead of that, because that's just a lot of people are bringing on board.

Operator: Thank you. Our next question comes from John Campbell with Stephens Inc. You may proceed.

John Campbell: Hi guys, thanks for the question. I know there's some seasonality in the spin, particularly with marketing spend that's typically higher in the front half, but - it looks like sales and marketing dropped sequentially pretty sharply. That was the first, I think, sequential drop you guys have seen in 3Q since maybe 2019. So kind of related to Ryan's question here, as you think about the resi investment next year? Andy, it sounds like you don't expect that to go up. But my question is, could that initially go lower from a growth standpoint. I would imagine you're not probably doing the same amount of Super Bowl commercials, I would imagine the step down, and spend probably was a little bit less SEM, so you're still seeing good traffic at lower levels of spend. So I'm just curious about, if there's a potential for it to actually go lower next year?

Andrew Florance: Well, I'll give you one glimpse. we are anticipating a 33% reduction in Homes Super Bowl ads this year. So that gives you some indication. But again, we remain bullish about the opportunity and what we're accomplishing. We see indicators that make us feel good about where we're going with this opportunity. So, we are likely to continue to push on it into next year, and don't see us pulling back dramatically from where we were this year, nor accelerating from where we were this year.

Chris Lown: And I think it's important to remember, we will be growing the sales force pretty meaningfully. So actually, that sales force increase will drive expenses and will be partially offset by some lower marketing spend. So there will be some change in the mix, but inevitably, it probably ends up at the same level.

Operator: Thank you. Our next question comes from Surinder Thind with Jefferies. You may proceed.

Surinder Thind: Thank you. Hi Andy, just a big picture question here. As you think about the Homes.com product and just conceptually, you can make the argument that it's possible to build a perfect product, execute perfectly on our product, but for maybe factors beyond your control, it just doesn't work out. So how are you thinking about, some of the metrics beyond just like a net bookings number, to kind of understand the decision-making and how patient that you're willing to be, or how patient investors should be?

Andrew Florance: Well, again, you have this phenomena where people in seven months want a conclusive result, and that doesn't happen. You don't build a $1 billion product in seven months. And - but what we're looking at is we're looking at, our growth in consumer awareness, our ability to bring people to our site preference for our site, which we're seeing a clear preference for our site. And we are watching a shift in the industry, away from buyer agency lead diversion to something, where folks are looking to have the portals do what they do in the rest of the world, which is to market the home for sale, which is the whole point to begin with. So, we're pretty excited about everything that's occurring despite the fact that it's hard to launch it. And the fact that it requires a little bit of patience, and that it requires capital to be able to pursue an opportunity like this. So, when I look at the sales metrics at the micro level, and we just sum it up. And we look at the people we're bringing in, and what they're achieving and the growth in NPS scores just mechanically, it lays out to a good result and a good time period. Now, when does it become obvious to everybody that it is going in the right direction, it's not this year. It would be - it's difficult for me to tell when it becomes obvious that it's working, but it's probably next year.

Operator: Thank you. Our next question comes from Ashish Sabadra with RBC. You may proceed.

Ashish Sabadra: Hi. Thanks for taking my question. The core bookings were down 34% in the quarter. They're being down 38% year-to-date. How should we think about the impact of weak bookings going into next year? And how do we think about the puts and takes, to help offset that headwinds from the vehicle booking?

Andrew Florance: Yes. So inevitably, in a subscription business, net bookings ultimately translate into revenue in the following year. And so, it's fairly mechanical that we - at the third quarter, we have our net bookings, they're sort of in the ground and they'll roll forward to 2025. I think what Andy has talked about, is getting the sales force reengaged, but also investing in the sales force. So really pay attention to net bookings in 4Q, 1Q, 2Q of next year, which will then roll into a '26 growth. So again, I think it's a mechanical exercise. We have three quarters in the ground. You can roll it forward, but really pay attention to our net bookings over the coming quarters, to really get - line of sight on the second half of '25 growth into '26.

Operator: Thank you. I would now like to turn the call back over to Rich Simonelli for any closing remarks.

Andrew Florance: I'm actually going to grab those closing remarks from Rich. So I should...

Rich Simonelli: Yes.

Andrew Florance: So, I just want to thank everyone for joining us on this earnings call. I look forward to updating you shortly here. If you have any additional questions following the call, please reach out to our very musically talented IR professional Rich Simonelli at getrich@costar.com. Thank you for joining us. Look forward to talking to you next quarter.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.