Ladies and gentlemen thank you for standing by and welcome to the CoStar Group’s third quarter 2010 conference call. At this time all lines are in a listen-only mode. Later we will conduct a question-and-answer session and instruction will be given at that time. (Operators Instructions). As a reminder, today’s conference is being recorded. Speaking on today's call, CoStar Group Founder and Chief Executive Officer, Andrew Florance; Chief Financial Officer, Brian Radecki; and Communications Director, Tim Trainor. At this time, I will turn the call conference over to Mr. Trainor. Please go ahead.

Thank you and good morning everyone. Welcome to CoStar Group's third quarter 2010 conference call. Before I turn the call over to our CEO, Andrew Florance, let me state that certain portions of this discussion 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 in our press release on CoStar's third quarter 2010 results and in CoStar's filings with the SEC, including its Form 10-K for the year ended December 31, 2009, and its Form 10-Q for the period ended June 30, 2010, under the heading risk factors. All forward-looking statements are based on information available to CoStar on the date of this call, and CoStar assumes no obligation to update these statements. As a reminder, today's conference call is all being broadcast live over the internet at www.costar.com/corporate/investor. And a replay will be available on our website one hour after this call concludes. Thank you for joining us. I will now turn the call over to Andy.

Thank you very much Tim, and welcome CoStar Group’s third quarter 2010 conference call. I am pleased to report to you during this past quarter CoStar observed improving commercial real estate market conditions and in that environment we achieved raising sales and extremely high renewal rates. While the key headlines for CoStar Group this quarter, is that we can now report that both the US office vacancy and availability rates have clearly stopped climbing and are now improving. These key fundamental industry indicators historically are highly correlated with our sales growth and renewal rates. During the third quarter of 2010 CoStar Group posted $57.1 million in quarterly revenue, an increase of 2.3% or $1.3 million over our second quarter 2010 revenue of $55.8 million. Revenues increased $3.6 million or over third quarter 2009 revenues of $53.6 million. $57.1 million is the highest quarterly revenue level that CoStar Group has yet achieved. Net new sales during the past quarter reached the highest level scene since the second quarter of 2008. This is the fourth consecutive quarter in which we are reporting increasing sales productivity. For the third quarter of 2010 company wide quarterly net new sales totaled $4.6 million and nearly $1 million improvement over second quarter new sales of approximately $3.7 million. The third quarter net new sales of $4.6 million is a $3 million improvement over the first quarter of 2010 net new sales figure, $1.6 million. We are obviously very pleased to be able to report that net new sales in the third quarter of 2010 nearly tripled over net new sales in the first quarter of 2010. Our core product, the US CoStar Property Professional information suite was the biggest driver of our strengthening third quarter organic revenue growth. Our great progress in sales this past quarter…

As Andy mentioned, we are very pleased with the third quarter 2010 results. We achieved accelerating organic revenue growth for the fourth consecutive quarter and saw a positive momentum continue in almost all areas of our business. Today I am principally focused on sequential results for the third quarter 2010 compared to second quarter 2010 and also on our outlook for the fourth quarter in full year 2010. We believe that sequential trends offer the most insight into the performance of our business as we continue to progress through the current economic and commercial real estate cycle. Our third quarter revenues came in stronger than anticipated that $57.1 million, an increase of a $1.3 million over this quarter 2010 and an increase to $3.6 million compared to the third quarter 2009. Our record revenue performance during the quarter was primarily driven by strong net new subscription sales for our core CoStar suite service offerings as well as the high renewal rates for our subscription services. International revenue on a functional currency basis was approximately $3.1 million pounds in the third quarter of 2010 essentially flat compared to the second quarter of 2010. International revenues were approximately 8.4% for the company total revenues in third quarter. Subscription revenues for the third quarter accounted for approximately 94% of our total revenues with their 12 months trailing renewal rate which everybody know that the measure of renewing subscription revenue was approximately 90%. We believe this is a very important measure for the strength of our business and are very excited to see the 12 months trailing renewal rate move back towards historical average of 90% and let me remind everybody this is two to three quarters ahead of where we originally projected. As I publicly stated on earnings call for over two years…

So at this point we’ll take any question we’ve got in the queue.

(Operators Instructions) Our first question is going to come from the line of Jon Maietta with Needham & Company. Please go ahead. Jon Maietta - Needham & Company: The first question I had was around your expectation for growth and Andy may be you can talk a little bit about the would you expect it to come from so obviously it will have a portion from the existing client base who will start to add, see if their business improved, you will see a piece from new services, incremental services and then you will have a piece obviously that comes from brand new client logos and I just hope that you can help me think about that mix?

I actually look at this and I think the greatest driver for the next five years, four to five years we will new logos. There is an of a awful lot of customer based to go, prospect based to go after here in the United States, so we still have a North of 10,000 meaningful to sell our products and service to here in the United States. We have got a 1000 of retailers to sell our products to services too, there are 7000 plus banks with commercial real estate assets in their portfolio. Our successful compose product is only sold about 25 some units, we've got several total 100 on the CoStar property side but you still have 1000s to go there. And I think institutional space is one of the biggest opportunities for our business over the next the five years. So, big picture as the economy recovers and these prospects are more open to considering new affective investments we think we will able to pick up tractions in new logos organic growth. There certainly is a lot of opportunity for cross-selling in the existing customer base that’s always been half of our sales activity and I expect that to continue to be the case. As you know, we have begun to institute some minor price increases that keep us abreast or keep us a pace with any CPI activity that’s going on. But the main thing we are focused on as we know that there are thousands of good companies out there that would benefit from our products and it's a penetration story, it's a story that going after those names and those companies. Jon Maietta - Needham & Company: And then could you just remind us where you are in terms of, you talked about the lower end bundling on the quarterly call last quarter just maybe where we are in that cycle and would you kind of saying there early days?

Sure. The program begin last quarter focusing on bundling our Swedish services to these like the fourth tier markets into the summer smaller firms out there, so provide them with a tremendous value proposition for relatively low cost, and not doing that through our field sales force but instead using our centralized lower cost headquarter base sales force, that has gone well, it is I know that we are peaking up I believe hundreds of people that lower level and that group is internal sales group is a strong contributor to our sales growth right now but that is sort of a blocking and tackling things something we are doing but our real focus is probably at the middle to upper end of the marketplace, institutional marketplace the banks, the leading brokerage. So that's where the most of the revenue dollars can be pushed. Jon Maietta - Needham & Company: And Brian just last question from me. If you could I don't see at the number but operating cash flow on the quarter and see the CapEx number as well?

Sure. Yeah. That CapEx number was about $6 million for the quarters and about $10 million to the year. I am sure there are a lot of CapEx related to our new facilities and we believe the operating cash flow is about $27 million for the year I think it’s above the $7 million mark for the third quarter.

Next question comes from the line of Tim Connor with William Blair. Please go ahead. Tim Connor - William Blair & Company: Couple of questions, first just wanted to ask about price impact on renewals and on new business?

The best of my knowledge there has been zero impact. I have not heard a single comment from anyone of our sales organization about any prospect whatsoever any of this price increase. I think the CoStar Group took a very, very client focused conservative stands going into the downturn when we proactively, immediately stopped a new price increases anywhere even the one that we could contractually take, so I think the costumers are certainly comfortable with our pricing policies and for us to re-institute our price increases that just got us back to CPI from the last year, so I think there is zero push back I haven’t heard a single thing out in branch or anything either. Tim Connor - William Blair & Company: No push back on.

No it’s going well. Tim Connor - William Blair & Company: Would you say that’s a function of just their improving business or it is something else?

I think it’s definitely a function of their improving business and the fact that CoStar Group services are really risky important tool for them to be able to productively go and do what they do and do they make money. So what they pay for our services is relatively small compared to the value they are getting from and as long as we have a reputation of being fair in the marketplace, you are getting pushed back in. And we’ve been doing this for a long time now, so I think that it’s certainly a good sense of when the customers are going feel they are getting pushed and they are not feel they are being crushed right now. Tim Connor - William Blair & Company: Okay and one more customer question on DSO trends. How far do you think those can continue and anecdotally would you think?

I am sorry repeat that again. Tim Connor - William Blair & Company: So customer payment behavior, DSO trends had been improving. How far do you think you see those coming and do you have any anecdotal stories on that?

Sure. I think that the payment trends continue to improve, DSOs continue to improve and our aging has just, I mean I compare it to last year it’s like night and day, and it really what if this goes to the overall how the client and the business and really sort of you know we talked about in prior call sort of the client that were unhealthy we really lost in the past year, I think now that’s why you see the renewal rates going up you see improved collections you know bad debt you know half of what it was last year so I will continue to expect that to move in a positive direction I don’t see anything on the radar screen right now, unless something significant changes in the global economy to really move to dial over there next few quarters there. So, it’s very positive.

I think he saying a sandbag, any CFO worth his salt can give DSOs to four days. Tim Connor - William Blair & Company: And then stashing levels are you comfortable with these and then plans for your future on this?

Right now we are coupled with our staffing levels. I think we are reasonably stable in our research staffing levels. We might have one or two relatively minor initiatives which would represent single digit percentage in research staff in order to pursue a few new initiatives. We out of our 2011 we might become a little bit more aggressive with some software development initiatives, but we are by and large fairly comfortable where we are right now and there is some big trends towards some cost efficiencies as we get rid of these multiple facilities. They kind of (inaudible) any mentions as before we are training process in the 10 to 20 range that we happen to be at the end of the quarter and actually as we moved, we actually pushed the training class into the next quarter so that’s why you saw that dip a little bit. So I think you will see that go back up and we will see that continue to be around the 200 plus and minus a little bit pretty consistently moving forward. Tim Connor - William Blair & Company: Okay, thanks and then one final one. analytics programs, PPR integration and putting that on top of the data base. Just could you discuss this generally what the plans are for that going forward.

Sure, some day I want to be more like and only talk about new products when I am on the stage when we actually them shipping tomorrow. But its going well again getting everyone under roof in Boston is great because you have got a great technology team over a result, you got a very innovative group with PPR and then put under one facility its much easier to work on a integrations so we are pursuing a deeply integrated set of products between everything we re doing. From compass to portfolio maximize or to request to DCF to analytics and forecasting and in property data we envision something that is tightly integrated one interface for the customer, one looking field, one login and that's we're going to be pursuing and we're probably not going to give a lot of color on specifically what we're doing until we actually are delivering the product to our clients. (inaudible) had a reasons.

Next question comes from the line of Jim Wilson, JPMorgan Securities. Please go ahead.

Andy I was wondering if you could give little more color on deal mainly what -- at anyone tell a dollar amount probably but what change and what was added from the last contract you had with them?

This is actually wells real I think wells trying I believe there is a client but the one it was specifically mentioned it was wells real estate and that we're just been that was has been a new customer acquisition that would be something where they would have been I believe using a different competing service for their analytics information, their market forecast and when they looked at being able to get the highly granular detail that a CoStar provides coupled with the great market analytics in the right hubs and forecasting the PPR provides, they thought that was a more effective solution so they basically our new (inaudible) for us.

Okay, I see. All right and then maybe other one would be you working to both cross sale the analytics and then what you will produce on the combine desktop, so do you maybe the traveler little are highlight the coupled two, three main things that customers tells you about this is what we really want from you, can you do this, will you do this or when will you be able to do this?

Okay so I think two things lets focus on three things. One is the customer who is attending our PPR conference in the Cape and getting high level overviews of forecast and vacancy rates and run rates and discussions which metrics to be investing in commercial real estate. One will be able to access that information and online they customize that information very high level analytics on macro. Macro trends in US commercial real estate but they want to be able to go from there down to the asset level and see what’s actually happening in specific assets and these people have assets, they like to look and have directly competing assets and performing compared to their assets and they want that all be in a same system with their macro economies resize and they want to be able to go back and forth between the two. The other thing is they want to get too more granular economic, analytics and economic forecast. They want to be able to get a very specific analytics and breakouts on how one submarket and micro market is likely to perform compared to another macro market so its not good enough to talk about what’s happening in office space and mid-town Manhattan you need to be talking about what’s happening in the Plaza district distinctly different from what’s happening in the Grand Central area. So getting into greater granular and that’s part of our initiatives but economist in each local market and really get into the detail there. We think there is a huge market there, there are more than a 100, 200, 300 developers and owners who have multi-billion dollar portfolios only at the local level and that appeals to them in particular. The other thing I think is very interesting is being able to take the customers information, the customers have a wealth of information about their portfolios from accounting information to lease management systems to forecasting systems being able to take that information help them organize it but then present and mind the relevant information in our database analytics and forecast and set against what's relevant and important to them based upon their data and help them soar through this billions of piece of data to find out which ten pieces of data is important to them. So those are the three big trends are going out. We are having a blast doing it’s a fun project. It’s very ambitious but that’s what the customers are saying and we are very happy to pursue solution that sort of matches with the customers are asking for I guess we are nerds.

Your next question comes from the line of Chris Ramon, Deutsche Bank. Please go ahead.

Hi, this is (inaudible) for Chris. Can you talk about what excess capacity you install basis clients might have currently in terms of a new subscription ID and how that may impact an incremental spend with an outline basis towards the recovery?

Certainly like the CoStar shadow vacancy rate or something. It’s actually relatively low, our sales force is compensated fairly heavily and we actually shifted our compensation structure at the beginning of the downturn to centralize our sales force to proactively pursue inactive user ids and try to make them active. We call it going creating green bar users, so, in our internal tracking system if you are using our product heavily you are green user. They have earned hundreds of thousands of dollars if not millions of dollars in commissions over the last two years. Going after these dormant ids these people have the legal or subscribers but don’t our product and getting them to use the product, so we are probably when the history of our company at one of the better places we have ever been in terms of having these high percentage of user ids active. And then actually the sales people actually get a loose commissions on new sales as they have a high ratio of dormant ids. So they are right on top of it and the positive evidence of that effort is the fact that these new customers, these customers that have been our customers less then five years right now, they jumped from 74% renewal rate to 87% in the course of one year and that’s because we chased down the dormant ideas. So, I think our company is in the strongest place it’s ever been in terms of percentage of active user ids.

Thanks, and just as a clarification if there is a headcount reduction at any of your book or client does that id go away or are they still paying for it and they might have a lot backlog of that which they might need to use before they start buying new ids from start?

Well, that was really a sort of story from last year and the year before when people were reducing brokerage headcount. So, as we went into the downturn like third quarter '07, '08, '09 (inaudible) reducing headcount there were many disruptions were actually probably little bit authorize a lot meant, so there was a lot of recall it and right downs in '08 and '09 associated with down side and then it's the right number by these I don't expect that could be a major factor going forward, I think we're now moving into an expansion phase in brokerage and I think that we're probably as I understand from our sales management team we're seeing a lot of seat adds right now, to now lot of see reductions.

(Operator Instructions) Our next question comes from the line of Bill Warmington, Raymond James. Please go ahead.

Good morning. Question for you on adjusted EBITDA margins, and you saw some improvement quarter-to-quarter and year-over-year there and time-to-time the number of 30% achievable target is come up and the question for you that, how should we think about that margin going forward, what kind of the timeframe should we have for getting toward 30% type number and how should we think about the incremental operating margin between now and there?

Sure. Hi, Bill, it's Brian. I think that we obviously giving guidance on next year this call, but I think we're very, very well positioned to see expansion in that number. I think, I kind of point people back to the 2007 (inaudible) to the end of the third quarter 2008 time period which that time period was great after we completed a major expansion in pretty much every quarter you saw revenue drop from the top line to the bottom line, sometimes at 50% sometimes at 79% sometimes at 100% so I think we are staring to move back into that phase, we have had a lot of things we have done this year with the acquisition of PPR reserves, the integration of those businesses they are moving in the headquarters. We saw some of that noise coming through in the fourth quarter maybe at just the (inaudible) in the first quarter by believing as you certainly get to the middle of next year, the end of next year I think you will see that number expand and I think it will look a lot more similar to that 2007-2008 time period I think if we continue at the rates that we are at, we can get through a 30% margin, I believe fairly quickly and I guess at this point everybody back to hat time period and you can see the figured out based on your own revenue growth projections

Alright the other question for you how the acquisition pipeline is looking?

The acquisition pipeline is robust there are a number of potential things out there that we are any given time dialoguing with half a dozen different companies and there is no lack of potential deals out there. I think we are realistically – the consolidation of the headquarters, all the Boston office, result PPR as capital busy as (inaudible) software planning so probably we are moving into a season with little bit of accelerated operation like (inaudible)

Okay. And I wanted to also ask about that -- what you think that shiny new building is worth today versus what you paid for it. And whether you had any plans to unlock that value.

Yeah its always difficult much you actually have a transaction you don’t really expecting [waving] I guess we paid [41.2], $230 per sq foot it does not, its got a long term land lease out of the property there has been a trends towards institutional investor really wanting to find yield that may look at class A Asset and first year cities as being good alternatives to low yielding debt instrument, cause its pretty much taken up a bond from a company back by high quality real estate so we seen some deals we picked up (inaudible) 230 something a foot 240 something a foot we seen some deals within a couple of blocks of here in the 600, 700 range we are not long term investors in commercial real estate we provide services people who do that so we are always open to, unlocking the value in that and deploying the capital in other probably other users are more core to our business, so was that a good non answer.

I think it’s at least worth of a couple of bucks, (inaudible) tax, but anyway thank you very much

Your next question comes from the line of [Toni Kathryn] from Morgan Stanley please go ahead

Hi guys thanks for taking my question, just a quick question on your traction in the retail marketing how it’s progressing and the initiate you have to sort up the customer base in that market, thanks a lot

Thank you for question Tony we have had some good traction so we now have a lot recognizable retailers as customer using our services for above evaluating their properties and also opening new store we now have I believe in the relatively short period that we have been in retail information and I believe we have 10 of the top 10 retail, nine of the top 10 retail owner developers now as customers so that’s been very successful. To be honest with you I think we are overdue for some product enhancements and upgrades so we have been extraordinarily successful on this space. We have been successful in gaining the trust of the industry and they are using our platform to communicate their offerings listings properties for sale and they are doing it and I guess we've seen multi 100% growth in the number of listings moving through our system. So I think we are at the early stages of developing a product for the retail community and as we get to version two, three and four I think we will be able to get some really solid growth in that space. So, we want to get to next year's ICSC where I think some product upgrades responsible what we know about the industry what we can do for them. I mean these are not really expensive upgrades by the way I should say, this is not involved hiring hundreds of people involves couple of software developers.

Speaking of this time we have no further questions in queue.

Okay. And just wanted to thank you all for joining us for the third quarter call and we look forward to I guess next call of the year end results numbers and we are really glad to be in a strong market with some attraction sales and we hope all the other earnings call goes well. Thank you.

Ladies and gentlemen that does conclude our conference for today. Today's conference will be available for replay, as it will be available starting today at 2:00 pm Eastern going through November 4, 2010 at midnight. You may access AT&T replay system by dialing 1800-475-6701 and then entering the access code 173086. International participants may dial into United States and then 320-365-3844, those numbers again 1800-475-6701 and international is 320-365-3844 with the access code 173086. That does conclude the conference. I want to thank you for your participation. You may now disconnect.