CoStar Group, Inc. (CSGP) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the CoStar Group Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rich Simonelli.

Thank you, operator, and good morning, everyone. Welcome to CoStar Group's Fourth Quarter and Year-end Results for 2012 Conference Call. We're delighted you have joined us. Before I turn the call over to Andy, I have some really important facts for you to listen to. 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 February 27, 2013, press release on the fourth quarter and year-end 2012 results, and in our filings with the SEC, including our Form 10-Q for the period ended September 30, 2012, and our Form-10K for the period ended December 31, 2011, 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, whether as a result of new information, future events or otherwise. As a reminder, today's conference call is also being broadcast live over the Internet at www.costar.com. A replay will be available live and in color approximately 1 hour after this call concludes and will be available until March 28, 2013. To listen to the replay, call (800) 475-6701 within the United States or Canada; or (320) 365-3844 outside the United States. The access code is 279285. A replay of this call will also be available on our website soon after the call concludes. So with that, I'd like to turn the call over to Andy Florance. Andy?

Thank you, Richard. Thank you, everyone, for joining us this morning. U.K. folks, thank you for joining us this afternoon, for the year-end 2012 and our fourth quarter earnings call. I'm very happy to report that in the fourth quarter, and for the first time in CoStar's history, we crossed the $100 million mark in quarterly revenue. This was a 51% increase year-over-year. We also achieved our highest quarter ever of EBITDA with $20.5 million in the fourth quarter, which is an increase of 86% year-over-year. And with that, I'll turn the conference call over for questions, dial -- No, no, we've got a couple more pages. Our successful acquisition of LoopNet and the realization of the strong cross-selling opportunity between CoStar and LoopNet has been a key driver of these strong results. Our core CoStar Group information business is showing real strength. During the fourth quarter 2012, we booked $8.5 million in annualized net new subscription revenue and added 1,292 new CoStar subscriber customers. For the second consecutive quarter, that is a record number of new subscribers. 3 of our top 5 customers, CB Richard Ellis, Newmark Grubb Knight Frank and Cushman & Wakefield, renewed or entered into new multiyear contracts with us. In 2012, our fastest growing markets based upon total revenue were Los Angeles, with $1.9 million in net new revenue; followed by Dallas, with $1.5 million; Chicago's $1.5 million; Northern New Jersey was $1.3 million; Orange County, $1.2 million; and Charlotte, with $1.1 million. Our fastest growing markets by year-over-year percentage growth were El Paso at 297%; Charlotte again at 99%; Louisville at 61%; Columbia, South Carolina, at 53%; Omaha at 53%; Memphis at 52%; and good old Milwaukee at 51%. Our subscription renewal rates remain at all time highs on the CoStar side. Our 12-month trailing renewal rate for annual subscription-based services moved higher again to 94.1%. And our renewal rate for the more than 5,000 customer firms that have been CoStar subscribers over 5 years was once again 99%. In the 10 months since we closed the acquisition of LoopNet, we have achieved $18 million of the $20 million in cost synergies we have targeted over originally a 24-month target period. So we're very close to achieving all those synergies. So focusing on LoopNet. And as we've previously stated, the cross-selling opportunity resulting from the LoopNet acquisition is substantial. There are 100,000 LoopNet members that we feel are prime targets for CoStar information products. And the vast majority of almost 100,000 individual clients at CoStar are not currently paying to advertise listings on LoopNet. While the additional annual revenue potential is very large, we've only scratched the surface of this opportunity at this early point. Through mid-February, we have closed 2,521 cross-selling deals, where we've either sold CoStar information products to LoopNet users or have sold LoopNet marketing services to CoStar clients. Since we began cross-selling, we have sold approximately $10 million in annual contract value of CoStar services to LoopNet members and approximately $1.7 million of LoopNet services to CoStar customers. We began selling the LoopNet services to CoStar customers later in the process, so that number we would expect to be a little bit lower. Overall, the total amount of revenue synergies is $14.6 million in annualized contract value, which that number also includes bundling LoopNet customers that went from monthly to annual contracts for LoopNet marketing. Before these cross-selling efforts, those LoopNet members, all those LoopNet members, only had a contract commitment of $273,000 with LoopNet. So from $273,000 to $14.6 million. The 2,335 contracts closed since the merger represent less than 2% of the total prospect pool we have to work with. I believe it is quite clear at this point that cross-selling is working and has a lot of potential. Now we're very focused on doing it more effectively. One challenge we face is the sheer size of the LoopNet membership base we need to meet with in order to upsell. Given the size of our field sales force at the time of the acquisition, at a rate of several meetings a week, it would take years to meet with all these LoopNet prospects. At the same time, our account executives are meeting with existing and other prospects. They've got a lot of demands on their time. To address this problem, we selected and transferred approximately 40 inside sales people, predominantly from LoopNet, to our CoStar field sales force. All of these former inside sales people are paired with more experienced sales reps, and each team works together in a specific sales territory across the country. These new field sales reps typically spend 2 days a week each in either of our Washington or San Francisco regional offices. And they spend their time arranging meetings, attending training classes or preparing contracts. They then travel to their respective markets with the goal of having 4 face-to-face meetings a day for several days each week. The program is working very well. These teams are outsigning the majority of our single-person teams and are converting a lot of business. We have taken a large number of quality sales people with high potential who are selling low ROI products and have moved them into much higher potential field product roles -- or field production rules. Our objective is to generate the highest close rate from the meetings we have with LoopNet members. Obviously, the higher close rates we drive, the higher sales numbers we'll get. But the reality is we get a very wide range of conversion rates between our various sales people. In order to improve our sales teams' conversion rates, we've conducted extensive surveys and focus groups with LoopNet members that we are meeting with in the field. So we're basically looking at those who both bought and those who didn't buy and asking them what drove their decision-making process. And I think we've gained an awful lot of valuable information and we'll be able to use it to produce even better cross-selling results going forward. Past surveys have clearly indicated that prospects will pay more to upgrade to higher-quality data with better analytics. Of the people who we recently upgraded to CoStar from LoopNet, 71% of those surveys said they did so to get better data. 71% of those surveyed said they did so to get better data. The second most frequently stated reason for upgrading given by 13% of LoopNet members surveyed was that CoStar helped them compete better in their markets, which could be closely correlated to the first reason given. Clearly, successful cross-selling is all about communicating the absolute fact that our CoStar service has dramatically higher data quality than our LoopNet service does. LoopNet is a much more effective way than CoStar to market a commercial listing to a broad audience, but CoStar has much higher quality data and analytics. Before the merger, surveys showed that only 9% of LoopNet information users thought that the LoopNet information presented significantly less listings than CoStar did. That means that 91% thought they were getting adequate data from LoopNet and had little motivation to pay more to switch to CoStar. After we conducted the initial thousands of demos, we resurveyed and found that only 13%, after all that, thought that LoopNet had significantly less data. Essentially, we only moved the perception needle 4 percentage points after demoing about 6% of the prospect list, yet that small movement generated approximately $10 million in high-margin sales. CoStar's data superiority is a fact. But if a broker has been using another source every day for 12 years, that broker's perceptions are not changed overnight. I'm very confident we can move the perceptions much farther and get higher sales growth. We now know that the first cross-selling demos we did post-merger covered too many points, including a lot of reinforcement of LoopNet's core value proposition of having a huge audience. This served to confuse many of those initial prospects. Now our demos focus directly on one core point, namely CoStar's data superiority. We have also added live, side-by-side comparison demos. We believe this will lead to higher close rates. I want to be very clear, I am extraordinarily pleased with our $10 million of cross-selling to date, but I really do believe we can do even better in 2013 and beyond. As we look closely at the members of loopnet.com, the vast majority of people coming to LoopNet are tenants or small investors with a once-a-decade need for information. These are not good prospects to buy CoStar information services. But we do believe that about 100,000 of LoopNet's repeat longer-term searcher members are great prospects for a cross-sell, upsell to CoStar. These repeat clients, and only these repeat clients who have intensive information needs, we're going to put an automated tool in front of them so that whenever they search LoopNet, they're going to get a live comparison of how many listings would meet that criteria in CoStar and how many would meet that criteria in LoopNet. That will let them see firsthand and in a relevant-to-them way, every single time they search, that CoStar has higher-quality data and will allow them to serve their customers better. We think that will help change perceptions nearly overnight. We tested a somewhat similar strategy a number of years ago in Orange County, California, and it really worked. The bottom line is we are very excited and optimistic about our future cross-sell and upsell potential as a result of the merger. We are every bit excited about the potential revenue growth we see in all of our marketplaces, including LoopNet, BizBuySell, Lands of America, SHOWCASE, Cityfeet, Land and Farm and BizQuest. These marketplaces are all about audience size and quality, and we achieved a tremendously important milestone in January 2013. According to our Google Analytics monitoring software, we hosted 10.2 million unique visitors in aggregate across all of our websites in the month of January. So that's a pretty big milestone for us. More than 1 million of these unique visitors were on mobile platforms. loopnet.com turned in a stunning draw performance with a surge to 5.2 million unique visitors in the month of January. Our businesses-for-sale websites in aggregate had more than 1 million unique visitors in January, as did our land-for-sale websites and our SHOWCASE websites. We believe that our BizBuySell website is a #1 website for businesses for sale and that Lands of America is the #1 website for rural lands and farms for sale. If any of you haven't seen our Lands of America website, it's a great place to look at all kinds of ways you could waste money on expensive second homes. I believe that the achievement of 10 million unique visitors in January is even more meaningful when you consider that these visitors are often coming to these websites looking to purchase assets valued in the millions of dollars. In aggregate, the offerings on these websites exceed $1 trillion in value. In order to give you a better picture of this or help you visualize the sort of traffic we're enjoying, I have set up a temporary website that will give you a good idea of the sort of intense activity our commercial real estate websites see. If you go to views.costar.com, you can see a map that shows all the properties anyone on LoopNet, CoStar or SHOWCASE is currently looking at. Blue pins are buildings CoStar users are looking at right now. Red pins are buildings LoopNet users are looking at. And green pins are properties SHOWCASE users are looking at. You will need Microsoft Silverlight installed in order to use this site. You can zoom in and out using the plus and minus keys and you can pan around the country to see our search activity in your city. So that website is views.costar.com. I feel that LoopNet's core strength and highest potentials in the advertising revenue-generating marketplace has been overlooked in the past, and that the website has much more potential than has been realized. LoopNet has 12 product lines and much of senior management's focus over the last number of years has been diverted away from the LoopNet Premium Lister product, which I believe has the highest revenue and earnings potential. Premium Lister has more than twice the revenue of Premium Searcher and has more revenue than the other remaining 10 products combined. We know that Premium Lister is approximately 10% penetrated in the listings market, and there are many opportunities to build additional site advertising opportunities, so I believe it is by no measure saturated and has very significant growth potential ahead of it. Premium Lister enjoys a significant competitive advantage over any of its direct competitors. In fact, according to compete.com, in January, LoopNet had 87,000% more unique visitors than Rofo and 682,000% more unique visitors than 42Floors or 42nd Floors or however that's said. In fact, I believe that LoopNet's biggest competitor is actually LoopNet's free basic membership marketing. Furthermore, I believe that the business model for some of LoopNet's products compete directly against one another on the same site. And that often, the customer experience choices emphasize products with lower revenue and margin potential over LoopNet's flagship product Premium Lister. LoopNet's sales channels were optimized more like business-to-consumer experiences rather than more like to B2B experiences, which might have been better and more optimal. I say this with the benefit of 20-20 hindsight. And I have nothing but the highest level of respect for the previous management team, who operated the company under a different set of conditions. But the fact is that I think that Premium Lister is the real diamond here in this company, and that's what we're focusing on. Because the Premium Lister, I think, received short shift, the net result was that Premium Lister revenue fell 21% from $51.2 million in 2008 to $40.4 million in 2011, the year before our merger. At the same time, other peer companies with similar real estate related advertising business models that focused their energies really 100% on their advertising marketplaces, like HomeAway, Trilla and Zillow, they all saw strong growth. So while Premium Lister fell 21% in that time period, HomeAway grew 179% from $82 million in 2008 to $230 million in 2011. Trilla grew 380% from $8 million in 2008 to $38.5 million in 2011. And Zillow grew 523% from $10.5 million in '08 to $66 million in '11. After we completed the merger, we reorganized LoopNet's business focus around Premium Lister in an effort to realize the much higher growth rates we believe are possible there. Already, we have increased the organic revenue growth rate of LoopNet Premium membership sales 140%, taking it from 5% in the fourth quarter of 2011 to 12% in the fourth quarter of 2012. Premium Lister, which fell from 2008 into the quarter we announced the merger, has begun growing again, and that growth is accelerating. Premium Lister's revenue run rate has grown 17% since its 2011 bottom. As many of you know, LoopNet's revenue growth rates have historically been very cyclical, typically with the strongest revenue growth in the first quarter of each year and each successive quarter weakening until the fourth quarter, which has the weakest growth. Most often, LoopNet's fourth quarter revenue growth is weaker than the third quarter. In 2012 though, fourth quarter LoopNet revenue growth was stronger than third quarter growth. In the fourth quarter 2011, Premium Lister's monthly revenue run rate contracted by $81,000, so same quarter last year, down $81,000. This is in sharp contrast to what we achieved in the fourth quarter of 2012 where that monthly revenue rate grew by $150,000. The fourth quarter 2012 growth of $150,000 increased 167% over the fourth -- third quarter of 2012 monthly revenue run rate growth of $56,000. So we're basically doing really quite well there with Premium Lister. On average, in December months of '08, '09, '10, '11, LoopNet Premium Lister's monthly revenue run rate has contracted or shrunk $76,000. But in December of 2012, it grew $43,000. On average, the fourth quarters of '08, '09, '10 and '11, Premium Lister monthly revenue run rate has contracted or gone down $150,000, but in the fourth quarter of 2012, it grew by $150,000. Sales for the month of January alone from Premium Lister were better than any other quarter at LoopNet prior to the acquisition. We've made a number of changes to get these better results. Some are very straightforward, like communicating to the LoopNet team that we think this is where we need to put our focus. Some are basic, like using the wealth of good contact information we have in CoStar to target Premium Lister prospects with a number of really good direct mail campaigns. And we've significant increased the level of marketing investment to support Premium Lister sales over what has been historically a very slim LoopNet marketing spend on it. We also changed the commission plans of our sales force so we now pay higher commission rates on the products that have higher average sales prices and higher renewal rates. That means that the sales force now earns higher commissions for selling higher priced, higher renewal rate products like Premium Lister than they do for selling a low average sales price and lower renewal rate LoopNet information product. Just after the merger in July of '12, 87% of LoopNet monthly net new sales came from LoopNet information products and only 13% came from Premium Lister. By January of this year, only 46% of LoopNet's net new sales were coming from the LoopNet information products and 54% was coming from Premium Lister. So it's been a big shift. The LoopNet information products have a monthly cancellation rate more than twice the monthly cancellation rates of Premium Lister. As we make this dramatic shift towards selling Premium Lister, we expect a trend toward lower overall cancellation rates from LoopNet. Another thing we're doing is shifting away from selling monthly contracts for LoopNet services to sign quarterly or annual agreements. Selling quarterly and annual agreements should result in lower cancellation rates. The typical commercial real estate lease listing is on the market for 400 days, so I'm not sure I understand why in the past, we focused on selling 30-day marketing plans for 400-day problems. Now we are paying our sales people much higher commission rates for annual deals than we are for quarterly deals and we pay no commissions on monthly sales. People can still buy it on our website but we don't pay commissions on it. In addition, we're giving discounts of up to 39% off the per-month price if customers commit to an annual contract rather than a month-to-month contract. As a result, we are seeing a major shift to quarterly and annual contracts. In May of 2012, when the merger closed, 99.6% of our Premium Listers were monthly. By January 2013, only 86% were monthly, 10% were quarterly and 4% were annual. That's a lot of progress on a pretty big client base in a pretty short period of time. Another important initiative we're undertaking is shifting our Premium Lister sales efforts from business-to-consumer-like sales to the individual broker and instead, we're focusing on a more business-to-business sale similar to CoStar, where we sell to the firm, not the individual. Individual brokers may see their listings come and go, but a collection of brokers or firm are more likely to have a more stable level of listings. As a result, a firm has a more stable demand for a marketing service from LoopNet and is less likely to cancel. We have adopted a pricing schedule to incentivize brokerage firms to buy firm-level deals by giving them significant volume discounts. Our firm-level sales of LoopNet Premium Lister are handled by our CoStar field sales force. In the month of January, for example, this year, 32% of Premium Lister sales were at the firm level on annual contracts sold by the CoStar field sales force. The remainder of January's Premium Lister sales were to individuals, with 34% sold by the traditional LoopNet inside sales team, 11% sold from the traditional CoStar Washington D.C. inside sales team and the remaining 23% sold via e-commerce. As we see a greater shift to firm-level sales and annual contracts, again, we expect our cancellation rate to decline. You can clearly see early evidence of our progress in reducing LoopNet's historically high cancellation rates. From the third quarter to the fourth quarter of 2012, we reduced the overall monthly premium membership cancellation rate from 6.1% to 5.6%. Our fourth quarter 2012 Premium Lister cancel rate of 3.8% monthly was the lowest level since the first quarter of 2008. And the December cancellation rate of 3.4% is the lowest monthly cancellation rate seen in 5 years, which I believe is the only monthly data we actually have. So it's a pretty good number compared to history. It will take several years for all these different initiatives to really roll through the whole system so we get the full benefit, but we're seeing it already in the first 2 quarters of the effort. So at the same time that we're lowering LoopNet cancellation rates, we are also achieving significantly higher average new sales prices. From the third quarter to the fourth quarter 2012, we increased the average new sales price for LoopNet premium membership 23% from $56 to $69 per month. From the third quarter to the fourth quarter 2012, we also increased the average new sales price for LoopNet Premium Lister 13% from $75 to $85 per month. We're also now having good success selling SHOWCASE bundled with LoopNet Premium Lister. We're able to achieve the LoopNet-Cityfeet newspaper distribution bundle add-on sales with a good price premium on approximately 30% of all of our PL sales. Historically, LoopNet has always forced anyone wishing to buy Premium Lister, which as you know is an advertising product, to also buy Premium Searcher with it, which is an information product. We believe that there are many potential subscribers for LoopNet's advertising service that have no need to search for property information or not premium property information. These prospects may be discouraged from buying because they face a high entry-level price point for Premium Lister because of the bundled information product. We intend to unbundle the Premium Searcher service from the Premium Lister service this year. We will still offer a discount to a client wishing to buy both. But for those clients with only one property who are only interested in generating exposure and leads for that property, we will be able to offer them a more aggressive price. An overwhelming majority of brokers panked [ph] market listings on LoopNet, only market a subset of listings they have because LoopNet's current pricing scheme charges the broker the most money to advertise their least valuable properties. So basically, we have very -- we have weak penetration into our own advertising-broker client base's listing pool. Currently, LoopNet Search purchased on a monthly contract costs $82.95 a month. If a broker needs LoopNet search service and has 2 listings they need to market, they might consider buying LoopNet's Premium Lister product, which as I mentioned, includes Premium Search, and will give them valuable marketing exposure for 1 or both of those listings. The 2 listings are not likely equal. One listing is likely to offer a higher or easier commission to earn, while the second usually is harder to sell or lease and might yield a lower commission. If the broker chooses to market just the more valuable listing, they will only need a Premium Lister One listing plan, which costs $89.95 a month. So effectively, they will be getting LoopNet Premium Lister exposure for that one listing for just $7 a month, which is the difference between Premium Searcher price and the Premium Lister 1 price. That's a phenomenal deal, especially if you're only paying $7 a month to market a $20 million asset sale. Now in order to get exposure for that second less valuable listing, the broker will need the next higher listing plan, which is the Premium Lister 4 listing plan, which costs $149.95 a month with a 1-month commitment. So effectively, they will pay $69 per month for their second less valuable listing when they only had to pay $7 a month for the first listing. LoopNet's pricing plan has the effect of charging you more for your less valuable listings, hence most brokers only advertise a subset of their properties. In 2013, we intend to offer a new pricing plan that allows you to advertise each successive listing at a lower price. We believe that such pricing will allow us to achieve higher penetration into the existing advertisers' pool of listings. Another opportunity we have to price the LoopNet's products more effectively is by addressing the longer-term clients, many of which have never received a price increase and many of whom pay less than half of the current list price. For example, though the list price for Premium Searcher is $82.95 a month, more than 2,700 LoopNet clients pay less than $30 a month for the service. Over the years, LoopNet has dramatically improved the product but has never put through even a CPI-level price increase, thereby effectively reducing their price each year while offering more and more service. Over the course of 2013, our sales teams are expected to contact these super discount clients and offer them new pricing plans that continue to extend a good discount but not such a large discount. We have a number of other improved pricing strategies or advertising opportunities we believe we can develop and sell in the LoopNet marketing platform. And we'll update you on these developments during the course of the year as we get closer to rolling them out. There really are some exciting and somewhat obvious things we can do, but I want to keep the call under 4 hours in length. I believe it's apparent that Premium Lister sales are going to significantly and positively impact CoStar Group's revenue growth and margin expansion going forward. Now that we have had 10 months to evaluate LoopNet's Property Comps and Property Facts information products, we do not feel with these products warrant significant future investment. Both of these products have cancellation rates approximately twice that of Premium Lister and achieve price points that are 1/2 of Premium Lister's. In focus groups and client meetings, we hear significant dissatisfaction with the quality of the unresearched data these products provide. We believe that because of client dissatisfaction with LoopNet's Comps and Facts products when they're sold in bundle with our core LoopNet products, Lister and Searcher, they have a drag-along cancellation rate that hurts the otherwise healthy products. Given the extremely low price point of the products, we do not see an exceptional ROI in investing and upgrading the research on these products. We have already stopped commissioning our sales teams on selling the products, and we plan to stop selling new accounts this year. We may eliminate the products altogether at some point in the next 12 months. We believe that though we may initially lose revenue if we shut down these products, we will be able to recapture most, if not more than all of that revenue, with CoStar COMPS and Property subscription sales. The recaptured revenue in CoStar products is expected to be at a much higher margin, and I believe that customers will be much more satisfied with the quality of the CoStar information products. I want to now turn to the United Kingdom where we've had some pretty important developments over the course of the last 4 months. In the fourth quarter, we introduced CoStarGo and CoStar's full suite of information products to a select group of our existing clients in the United Kingdom. We rolled out CoStar Suite and CoStarGo in many of the U.K. clients in 5 cities, reaching approximately 600 of the 1,100 users we authorized in about 100 client firms, which is about 6% of our U.K. client base. So it's basically a small prelaunch group. I have personally had the opportunity to present the product to at least 400 U.K. clients. And the initial reaction has been extremely positive, including really good accolades for CoStarGo, as well as for our high-quality, comprehensive data. I'm pleased to say that several months later, we can report that over the past 4 weeks, more than 600 of our U.K. clients are logging in and using either the new U.K. CoStar Suite or CoStarGo or both. That tells me that we have remarkable early adoption to the new product. In February, we began an aggressive sales and marketing campaign for the entire U.K. Our target audience consists of the remaining 1,400 or 94% of client firms we did not see in December and give a trial to, as well as 2,000 additional firms that are not currently clients. I believe that these groups represent over 20,000 prospective users. Over the course of the past few years, our annual revenue has been approximately $20 million in the U.K. We believe the U.K. market opportunity is 3x to 4x that, and we believe that we're the only firm well positioned to realize that opportunity. As CoStar continues to enjoy rapid growth, we're continuously developing and evolving our executive team to most effectively meet the opportunity we have. This quarter, we have a number of additions and promotions on our executive team. Now that we have acquired a number of firms in the United Kingdom, consolidated their operations, built a research product on par with the quality we have in the U.S., and have integrated the U.S. and U.K. software platform, our primary focus going forward is taking what we believe is the best-theory information platform available in the U.K. and maximizing sales of that product. Giles Newman, a sales-focused executive, is replacing Paul Marples as Managing Director of CoStar Europe. I feel Giles is the perfect person to take responsibility for the success of our U.K. operations and sales of CoStar across the United Kingdom and eventually, Europe. Giles has a wealth of experience operating at established, high growth companies, holding senior positions in various roles over 15 years. He joined CoStar from Informa, where he was Group Sales Director for the Business Information division. Prior to that, he was leading global sales for a major division of Thomson Reuters, with a team responsible for $400 million in sales right across 18 countries. Another name you might recognize, I'm pleased to announce that Frank Carchedi has been named Executive Vice President of Operations for CoStar. As Exec VP of Operation, Frank holds overall responsibility for the ongoing integration and operations of all of the CoStar business units. He will work closely with me to identify and achieve greater operational effectiveness across the entire organization. Frank believes that all spending is bad. As some of you know, Frank served as CoStar's Chief Financial Officer for 10 years. Most importantly, he served as Senior VP, Corporate Development, where he successfully closed, integrated and managed various company acquisitions. This past quarter, we also welcomed Donna Tanenbaum to CoStar as VP of HR. As a member of CoStar's senior leadership team, she will lead the organization's efforts to acquire, train, develop, retain the best talent capabilities that we need to meet the company's strategic growth plans. Most recently, Donna served as VP of Human Resources for Curtiss-Wright Flow Control Company, a $1 billion engineering and manufacturing business that more than doubled in size through organic and acquisitions during her tenure. She has a Master's Degree in Education, Organizational Behavior, from Harvard and a Bachelor of Science from Cornell. Fred Saint was named President of LoopNet. Fred is responsible for the company's product, marketing, business plan and product roadmap. Fred joined LoopNet in '07 with the acquisition of Cityfeet, where he was the CEO of that company. He holds an MBA in Finance and Real Estate from The Wharton School in the University of Pennsylvania, and he did his undergraduate at Wake Forest. Curtis Kroeker was promoted to President of Marketplace Verticals, that's BizBuySell and land marketplaces. He joined LoopNet as General Manager of BizBuySell in 2010 when he -- where he drove continued growth and success of the Internet's largest business-for-sale marketplace. Curtis formerly served as the General Manager of the Vehicles Business of eBay Motors. And he also was VP of Business Development for Wildfire Interactive and he's an old consultant with McKinsey & Company. He's actually pretty young, but that was his first job. He holds an MBA from Tuck Business School at Dartmouth College and a Bachelor of Commerce Degree from the University of Calgary. During the fourth quarter, we held a multi-day off-site planning meeting with all the developers from LoopNet and CoStar. I believe that, without a question, we have assembled the most formidable commercial real estate development team ever. It was a very positive and productive meeting focused on the continuing integration of CoStar and LoopNet systems, with a number of exciting and impactical major software initiatives that we had talked about for 2013 and beyond. Now that we're 10 months into the merger, it's clear that LoopNet development technical team is a major asset the combined company can draw on to fuel high-margin growth in the future. I had the opportunity to present our developers what I thought was very good, detailed multi-thousand page product specification design layout for what we're calling CoStar Fusion, which is basically the next generation of CoStar Property. Our goal is to create a highly integrated, customizable user interface that will allow you even better access to our massive property database, coupled with amazing analytics. Users will be able to access the entire CoStar family of services in one platform. Rather than 1 big bang launch date, we are working on a series of smaller enhancements for the integration of our service offerings. Each quarter or so, we plan to release one of these manageable upgrades, adding new features and functionality, new design, look and feels and integration improvements. Ultimately, after about a dozen or so releases, it'll form and entire top to bottom redesign of our product over the course of several years. We're also launching a new video tour service to help brokers and owners market their properties online. We have trained our CoStar field researchers, about 100 or so of them, to take high-quality video tours of the inside of properties. We plan to charge for these walk-through space tours. And in order to market them, they'll have to have a LoopNet Premium Lister account for the property. And at that point, the video will move throughout our network, SHOWCASE, Cityfeet, CoStar and LoopNet. I'll take a moment to update you on the commercial real estate recovery, because I think that's very important to our business. The recovery continues at a moderate pace, which is great for CoStar. For each of the 4 largest property sectors tracked by CoStar, including office, multifamily, industrial and retail, we saw steadily improving demand and double-digit gain in investment transaction activity on a year-over-year basis for all major property types during 2012. CoStar is the leading player in information analytics across all the biggest commercial property sectors today. Some brought in discussion of how the property sectors are faring in looking at the demand drivers for each sector, which will give us a good picture of the demand for these property types, and in turn, of how CoStar products should fare in that environment in 2013. Office sector continued its long march to recovery in 2012 with vacancy rates declining 0.2% in the fourth quarter and 0.6% for the year as a whole to end up at 12.3%. Demand was 24 million square feet in the fourth quarter, which was up from about 14 million square feet in the third quarter. And on a year-over-year basis, demand growth was solid at 59 million square feet, an increase of 19 million square feet over 2011. That's real positive momentum. The big increase in demand growth ties in with the primary demand driver for office space, office employment, which increased at a solid 2.1% annual pace in 2012. That is 30% higher than the 1.6% rate of job growth in the overall economy and better than in 2011. The high rate of job growth to the office sector is reflective of a broad, long-term shift in employment towards service and high value-add knowledge employment, which tends to be located in office buildings. So office-using employment growth that outstrips overall employment growth, that's good news for us. There is a lag between when a job is created and when a company decides to lease more space and look for it, lease it and finally move in. This lag between office employment growth and an increase in absorption is typically about 2 quarters. So the strong office job growth in 2012 bodes well for an increase in leasing activity in 2013. Overall, the recovery is very widespread now. Even in markets that were hardest hit by the recession, such as Atlanta and Phoenix, we are now seeing a sustained recovery in office absorption. I think we leased space in both of those markets this year, but it wasn't us. Improving occupancy in 2012 began to generate increasing rents, a welcome change for our clients who earn revenue based on commissions from rental rates. Office rents rose 1.7% with most of the growth concentrated in top tier buildings and locations. This is contributing to increased investor interest in office properties. Sales volumes are up 9% from last year. And CoStar's repeat sales index shows a solid 5% increase in office values over the past years. Turning to multifamily. As most of you know, CoStar launched coverage of the apartment market in late 2012. We believe our research is the most in-depth available from any research firm in the market and it's been very well received by our customers, which is great news. Our launch was well-timed as investors are very hot on multifamily investment and development right now. Over the course of the next 2 quarters, we plan to increase the amount of data and analytics available over the CoStar website. And I'm very excited about the insights we were able to provide managers, lenders and investors in multifamily properties. The fundamentals of the apartment sector closed 2012 at a very strong level, with net absorption totaling 130,000 units nationally. This marks a 5% demand increase from 127,000 units absorbed in 2011. For comparison, demand in 2012 was 25% above the long-term trend for multifamily, which is the only property sector with 2012 demand exceeding long-term averages. This strong growth in demand has pushed vacancy rates to 6.1% in '12, down by 40 basis points. In comparison, the long-term average vacancy rate for the sector is 6.3%. In fact, multifamily is the only sector to have vacancy rates below the long-term average. These tight vacancies in the apartment sector makes sense as the primary demand drivers for the multifamily sector, total employment and household formation, increased at nearly the same rate in 2011, and new construction has been very low for over 2 years. For the apartment sector, a new job typically translates to a newly rented apartment very quickly, so the lag between supply and demand is much shorter than it is for other property types. Also aiding apartment demand is a secular trend, the continued decline in national homeownership rate. That rate is 66.4% versus 69.2% during the housing boom. And the decline has been a key driver of the robust demand for rental housing over the last 2 years. Rent growth for multifamily was strong, with a 4% increase, again outperforming rent growth in all the other property types. Robust investor interest in multifamily pushed the CoStar repeat sales index prices up 7% in 2012 on top of the 17% rise in 2011. Multifamily sales increased by 28% over the year to $83 billion, which was double the growth rate for other property sectors. So we're really pleased to now have a strong product offering there to take advantage of this little boom here. The fundamentals for the overall industrial sector closed 2012 very much as they did 2011, with vacancy rates falling approximately 70 basis points in both years, from 10.4% to 9.6% in 2011, and then to 8.9% by the end of 2012. For warehouse property, properties vacancies are firm in the single digits, 8.4% at the end of the year 2012, down from 9.2%. So we're seeing a steady recovery in the industrial sector for both flex and warehouse properties. Net absorption for the warehouse sector totaled 123 million square feet in 2012, which is about 12 million square feet or 10% better than 2011. Much of the demand was back-loaded to the last quarter of the year. The industrial sector strongly correlated to the overall economy, and the weak recovery to date has led the industrial sector to grow below its potential. In 2012, demand for warehouse space was still 25% below the average of the previous recovery. Industrial rent growth was 1.7% in 2012, the first full year of rent growth in the sector since the recession. Investor interest has been moderate versus interest in offshore multifamily, with the repeat sales index showing a 2% increase in value. Total sales volume was only up 15% to $44 billion, which is about 1/3 shy of the record number seen in '07 but on par with the average trading volume of the previous 2 years, '05 and '06. Increases in sales volume often lead to price increases, as we've certainly seen in the for-sale housing market. So this increase in sales volume coupled with rising investor interest in the segment bodes well for 2013 value gains. Retail is finally showing significant signs of improvement. Retail properties on average are seeing accelerated absorption, declining vacancies and increasing volume of property sales. The fundamentals of the sector were soft but positive, with 34 million square feet of net absorption in 2011 -- 2012 and more than 50% increase from the roughly 22 million square feet posted in 2011. While this is good news, the retail sector is in a fairly deep hole right now, as the 2012 net absorption rate was only 1/3 of the long-term average. Retail real estate is facing headwinds from increased online shopping, with e-commerce posting average annual growth rate of roughly 16% over the past years. While e-commerce still only represents 7% of total retail sales, excluding auto and gas, retailers see the handwriting on the wall and are downsizing their formats and being very selective about opening new stores. So while e-commerce is good for consumers, it is not necessarily good for filling vacant retail space. The main driver of demand is the consumer and ultimately retail sales, which grew at a moderate pace, up 3.8% year-over-year in the fourth quarter. 3.8% is slower than the retail sales growth posted at the beginning of 2012 and helps explain the relatively weak absorption last year and probably foreshadows sluggish demand in 2013 for that sector. Fortunately, retail is not the biggest part of our business. But while the demand for space is weak, construction activity in retail is even weaker. Vacancy rates are declining modestly, down by 0.2% in the fourth quarter, 7.2%. Investor interest in the retail sector, though, is strong, with overall fundamentals -- with sales volumes up 13% to $70 billion. Retail pricing from the CoStar repeat sales index rose by 8% in 2012 versus 7% in 2011. Could be a little bit of a disconnect there. That may seem a little nonintuitive, but if you delve deeper into the data, you see the investors are buying the highest quality, well-occupied assets, particularly prime shopping malls. 2012, shopping malls accounted for 40% of retail investment dollars compared to an average of only 21% in '09 to '11. So overall, we are very happy with the current econ- -- despite the fact that we sit here in Washington D.C. with a potential sequester, we're overall very happy with where the commercial real estate economy is right now. And it's, I would consider, a positive environment for continued sales growth. So in conclusion -- I'm going to wake Brian up here, and conclude. Surpassing the $100 million revenue mark in 1 quarter was a great milestone for us to reach. But its true importance is as a proof point of the enormous size of the market we've been describing to you for many years. I'm confident that we're on our way to reaching our goal of a $500 million annual revenue run rate and 30% to 35% margins when we exit 2014. In fact, we believe $1 billion in annual revenue is a very achievable number in the foreseeable future for CoStar Group. At this point, I'm going to turn the call over to Brian Radecki, our Chief Financial Officer.

Wow. Thank you, Andy, I think that was a new record. Just like when we used to present. Okay, I'll try to go fast here. As Andy mentioned, we're very pleased with our performance during the fourth quarter and full year. Ongoing progress with LoopNet integration has had a very positive impact on the financial results for the quarter and the year. Starting with CoStar Group's results for the fourth quarter of '12, the company recorded $100.1 million of revenue, an increase of $33.9 million or 51% compared to the $66.2 million for the fourth quarter of 2011. Full year revenues were $349.9 million, an increase of $98.2 million or approximately 39% over revenues of $251.7 million for the full year of 2011. Now looking at pro forma organic revenue growth. CoStar's organic revenue growth was approximately 11% for the full year of 2011 and has now grown to over 13% for the fourth quarter of 2012, mostly due to the strong cross sales of CoStar services into LoopNet customer base. While LoopNet's organic revenue growth was in the 10% to 11% range prior to the acquisition, it has now grown to almost 13% in the fourth quarter of 2012, helped by the site-level Premium Lister sales by the CoStar field sales force and the other changes that Andy outlined in detail. Therefore the overall pro forma organic growth rate for the company grew from approximately 11% in 2011 to 13% in 2012, and that growth was driven by the cross-sales efforts. As we have stated over the past few quarters, we believe it could take several years to systematically move through this massive pool of leads. And therefore, we believe we can maintain double-digit organic revenue growth in that range of 11% to 13%, or possibly higher, over the -- of course, over a much larger and growing subscription revenue base, for the next 3 to 5 years. We expect it will be a sustained and consistent pattern of double-digit revenue growth versus a one-time pop in the growth rate. EBITDA increased 86% year-over-year to $20.5 million in the fourth quarter of 2012, up from $11 million in the fourth quarter of 2011. We reported adjusted EBITDA of $25.1 million for the fourth quarter of 2012, an increase of $9.1 million or 57% compared to the $16 million for the fourth of 2011. And adjusted EBITDA margins are starting to climb at $25.1 million in the fourth quarter of 2012 versus $24.1 million in the fourth quarter of 2011. We believe the earnings potential of the combined business is evident, and I expect continued strong earnings growth in 2013 as we take further actions to capitalize on revenue opportunities and cost synergies from the LoopNet acquisition. As Andy stated, as of today, we've achieved approximately $18 million in annualized cost synergies and have additional initiatives already in process, which will bring us over the $20 million. Obviously, we have obtained these synergies much, much earlier than the 24 months we discussed at the time we announced the acquisition. Non-GAAP net income in the fourth quarter of 2012 of $12.6 million or $0.46 per diluted share, was a 50% increase over the $8.4 million or 33% -- $0.33 per diluted share in the fourth quarter of 2011. Net income of $4.7 million in the fourth quarter of 2012 reflects an increase in amortization and interest associated with the LoopNet acquisition. Reconciliation of non-GAAP net income EBITDA and adjusted EBITDA and all the non-GAAP financial metrics discussed on this call to their GAAP basis results are shown in detail, along with definitions for those terms, in our press release issued yesterday and are available on our website at www.costar.com. And I'm sure that's a little bit more exciting than Andy's website. Cash and investments increased $25.9 million to $177.7 million as of December 31, 2012, up from $151 million at the end of the third quarter 2012. Cash and investments exceeded total short-term and long-term debt of $170.6 million as of December 31, 2012. Cash flow from operating activities was a very strong $29.6 million in the fourth quarter of 2012 and $86.1 million for the 12 months ended December 31, 2012, which demonstrates the strong cash flow profile of our business. Cash flow from operation activities was a very strong $29.6 million -- oh, wait. Sorry, I already read that. At this point, I'm going to give you some operating metrics for the combined business as highlighted in our strong performance for the quarter. Annualized net new subscription sales for the entire company totaled $10.9 million in the fourth quarter of 2012, up 27% from the $8.6 million in the fourth quarter of 2011. Consistent with last quarter, this metric includes only net new subscription sales from annual contracts and does not include monthly or quarterly subscriptions. Revenue from subscriptions on annual contracts was $72 million for the fourth quarter or 72% of revenue, up from 71% last quarter, and we expect that to continue to rise as we sell annual contracts. For the trailing 12 months ended December 31, 2012, subscription revenue totaled $271.2 million, up 15% from $235.7 million for the 12-month period ended 12/31/2011. At this point, we have approximately 72% of our revenue coming from annual subscriptions, with the remaining 28% primarily made up of revenue from marketing services including LoopNet premium Lister on monthly or quarterly agreements, CoStar's SHOWCASE, as well as revenue from advertising across both platforms. We continue to make progress cross-selling LoopNet subscriptions on the 1-year contracts. And again, we expect the increase in the amount of marketing revenue to be included in our subscription revenue metric moving forward. Renewal rates on annual subscriptions remained very high during the quarter. 12-month trailing renewal for CoStar subscription-based revenue remained at 94%, consistent with the all-time high we reached in the third quarter of 2012. 94% is about a 1% improvement from 93% 1 year ago. The renewal rate for CoStar subscribers who have been with us for 5 years or longer remained at a remarkable 99%, matching the all-time high we've reported the last 2 quarters. In previous calls, I mentioned the pending negotiations with Grubb & Ellis, with the Grubb & Ellis contract that was in bankruptcy. In January, we reached an agreement with Newmark Grubb Knight Frank for a new 2-year commitment, which is expected to only have a small impact on our revenue and renewal rates. At the end of the fourth quarter, the existing CoStar business had 97,193 subscribers, up from 93,396 in the fourth quarter of 2011, an increase of 1,625 subscribers from the third quarter of 2012. Total number of subscriber sites in the existing CoStar business increased to 20,211 in the fourth quarter of 2012, up from 18,183 in the fourth quarter of 2011, an increase of 833 sites from the third quarter of 2012. Little update on the sales force. Last quarter, we spoke in detail about the evolution of the sales force, the creation of the HQAE role, with the intent of getting more sellers in the field. In total, we ended 2012 with 355 sales reps, a 4% increase over the third quarter. So the field plus anyone who's teamed and adds, are essentially 186 sales people now inside, with 25 on the East Coast and 118 at LoopNet, total of 143. We've got about 18 in the U.K. and 8 in various other parts to equal the 355. Again, we'll plan on continuing to move more people from inside to the field. For all the Loopsters still on the call, the LoopNet Marketplace continues to be the premier website for marketing commercial real estate. The number of LoopNet premium members for the fourth quarter of 2012 increased to 81,396, up 7,846 compared to the fourth quarter of 2011. The average revenue per paying subscriber or, my favorite term, ARPU, was $66.73 for the fourth quarter. As noted in our press release, the ARPU for new premium subscribers was $69 in the fourth quarter, up from $56 in the prior quarter. LoopNet registered users, including basic and premium -- this is Jon Coleman's favorite number -- totaled 6.7 million as of December 31, 2012, up 21% from the fourth quarter of 2011. And now, a legal update from our General Counsel, Jonathan Coleman. This is about the 7th inning stretch, so if you want to go to the bathroom, you want to take a break, you guys can do that now. In January 2012, LoopNet was sued for patent infringement by CIVIX, which is a nonpracticing entity or something called "a patent troll." I'm not sure what trolls look like, but this is what Jon wrote. CoStar inherited this lawsuit with the acquisition of LoopNet when it was finalized. In a response to CIVIX' allegations CoStar's products also infringed on the patent, CoStar has since filed its own lawsuit seeking a declaratory judgment against CIVIX. These cases, as well as another lawsuit CIVIX filed against LoopNet, are now pending. CoStar intends to defend itself vigorously against these claims and believes neither the company nor LoopNet has infringed on the CIVIX patents and that the patents are invalid. Now just one quick point note on the income statement, and then I'll move on to the outlook to keep this moving. People should note, gross margin percentage was 68.5% in the fourth quarter of 2012, a 1.8% increase year-over-year compared to the fourth quarter 2011. Again, I eventually sort of will expect to see that number climb over the 70% mark. Just a phenomenal number. The outlook. I'll now discuss the outlook for the first quarter and full year. Our guidance takes into account recent trends, growth rates, renewal rates, and may be impacted by the overall economy, conditions in commercial real estate or the global economy. Actual results may vary from the estimates. We expect revenue for the first quarter of 2013 in the range of $101 million to $103 million. And for the full year, we expect revenue of approximately $424 million to $429 million. This range equates to about 21% to 23% year-over-year revenue growth. And included in that is the similar 11%, 12%, 13% organic growth on a much larger base, as I stated earlier, which we believe we can maintain this sort of growth rate for years and years to come. In prior quarters, I've discussed plans to consider alternatives for certain services for the 2 companies that overlap or create confusions for our customers. As Andy mentioned, we began looking at that process in '12, and we expect to continue to deemphasize or eliminate some of those services in '13, as Andy mentioned. We expect the impact -- the near-term impact to reduce our 23 revenues -- 2013 revenues by $5 million to $7 million, with an annualized impact of $10 million to $12 million 2014. While these decisions are expected to lead to the short-term impacts in revenue and earnings in the current year, we remain confident, in the long term, these will be accretive over time as we'll convert many of these customers to higher-value, more profitable annual subscription services. Our guidance on the impact of foreign currency fluctuations, I had this a few years ago, on our top line results remains consistent. I do not try to predict foreign currency fluctuations. Our guidance assumes little or no volatility to the current rate. The average exchange rate from the U.K. in the fourth quarter 2012 was 1.6 and that's what I put in my budget and that's what my guidance is based on. If exchange rate remain at the current level of $1.50 to GBP 1, I would expect an impact on the revenue line of $1 million to $1.2 million, which is accounted for in the range. Obviously, if that rate went crazy like it did back in, when was it, 2008, it can have a bigger impact, but I'm not trying to budget for that each quarter so you guys can figure that out. In terms of earnings, we expect the first quarter 2013 fully diluted non-GAAP net income per share of approximately $0.41 to $0.45 based on 27.8 million shares. For our business, the first quarter expenses include, as we've talked about many times, seasonally higher costs related to our annual sales conference, increased marketing expenses to support the LoopNet cross-sell efforts and sort of annual increases for personnel expenses. We assume a 38% tax rate in the long-term effective rate. For the full year 2013, we expect non-GAAP net income per diluted share of $2.08 to $2.20, based on 27.8 million shares. The outlook does include the reduction of approximately $0.08 to $0.12 in non-GAAP net income per diluted share for deemphasizing or eliminating these services I mentioned. Additionally, we expect to continue to invest in improving our services marketing and further evolving the field sales force. As mentioned in the earnings release, the company may begin to occur additional equity comp expense related to the issuance of performance stock ramps issued in early 2012, which vest upon achievement of certain performances earnings goals. The accounting for this type of stock requires that we start recognizing the expense when achievement of the performance goals becomes probable based on management estimates. We expect a onetime catch-up expense of approximately $10 million to $15 million beginning in the initial quarter we determine achievement of the performance goal is probably, and on a straight-line expense of $2 million, $3 million over the expected remaining quarters. The stock-based compensation does not impact our non-GAAP net income per diluted share or adjusted EBIT numbers for the guidance I just put out. In summary, I'm very pleased with our 2013 results, which include 8 months of LoopNet operations that provide insight into the strong revenue and earnings potential of the combined business. With our integration activities already directly contributing to strong earnings, we are well on our way to delivering the synergies we expected, both cost and revenue, when we announced the deal. More importantly, based on accelerating cross-sell activities, we remain confident in the revenue opportunities that are achievable by integrating these 2 great businesses. We see the enormous potential for growth as the industry's leading platform for commercial real estate, the most complete and growing set of services for the industry. Based on the revenue and earnings results for the fourth quarter and full year, I believe we are well on our way to the medium-term goal of $500 million run rate in annual revenues by the end of 2014 with adjusted EBITDA margins of 30% to 35%. Just to convert that for you --

That was my line.

That was your line. But just to convert that for you, that means that Q4 2014, a $125 million quarter. So not $500 million for the year but $125 million quarter by '14. Now more than ever, we believe this is an achievable benchmark that sets us on a realistic path for the long-term $1 billion in high-margin revenue. As always, I look forward to sharing that progress with you in coming quarters. We'll now open it up for questions now that we've closed the last chapter of War and Peace.

[Operator Instructions] And our first question is from Brandon Dobell. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: I had like 3 questions but I forgot them all. A couple quick ones. From a commercial real estate brokerage point of view, how concerned are you guys about kind of the middle of the market? Small firms are obviously doing quite well, large firms are taking share. How exposed are you to firms in the middle, which seem to be where you find the most trouble or most attrition these days?

Well, we've been seeing that trend for over a decade now. So looking at brokerage rankings back -- in various city levels back 14 years ago, there used to be a middle-tier [indiscernible], they've been disappearing consistently. So obviously, we're getting good traction with the majors with those big renewals. And significant growth on the CB side associated with growth in their business. And then a lot of these LoopNet conversions we're getting are actually the smallest players. So the biggest single category we're getting is the 1-man, 2-man shop, so we're doing fantastic there. The 20-person shops on the LoopNet side are actually the slower conversion point. So it's sort of been our operating environment for a long time so we're not terribly concerned about it. We obviously work with those mid-level clients, try to help them progress, but not a big factor. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Okay. And then as you look at the upsell, cross-sell kind of conversion opportunities, what's your strategy around people who initially push back or don't do anything? Is there kind of a hey-we-keep-coming-back-at-them kind of mentality? And what's been the kind of most common reason you've heard from people who don't want to do anything different versus what they have? I guess, what's reason right now, especially LoopNet users?

Yes. It's a fantastic question. So there is a decent pool of several thousand folks who we -- our sales people went and met with and tried to show the benefits of upgrading to CoStar Property. The ones who -- typically, where you get the slower sales cycle is with the 5- to 20-person firm. We are seeing those close, they're just taking a bit longer. Also we're going to get a chance to get 4, 5, 6 bites of this apple because we keep putting out upgrades of our software on the CoStar property side. We're bundling them together to have a number of interesting new features in each release so that gives us a reason to go talk to these people again. And then remember, we're talking to these people virtually every single day because they're in one of our websites everyday. We know who they are. We're tying the CRM systems together. And we can send marketing messaging to them. And again, this thing where -- it's really hard to understand for me, I imagine it's hard to understand for anyone on the call, but even though we're the same company and we're connecting these databases, they don't get that we've got twice as many listings in CoStar Property. If they got that, I believe that 60% of them would end up upgrading. We have time to basically move to that conclusion, especially with automated comparisons when they search online. So we are -- we sort of have a mantra at CoStar, which is, eventually they're going to buy. And we've always had that and we don't ever really go away. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Okay. And then a couple quick ones for Brian. Should we think that the extra stock comp or incentive comp, does that change how we think about the share count? And I guess, my broader question, as you guys keep generating a lot of free cash, should we expect further delevering or do you think you have the right capital structure right now for the business?

Yes. So basically, on the performance shares, yes, I mean, eventually -- I think, there are 300,000, 400,000 or something like that. So those will come into the share count when we earn them. So that will come into the share count when we earn them. Essentially right now, I mean, I believe if we continue to achieve the earnings targets we've set out here for '13 and in '14 that we've discussed with you guys many times and you guys know how confident we are in that, we'll meet this performance goal at some point in that time period. So yes, that'd come in then. And then the second question was -- remind me. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Just using free cash for delevering, buying back stock or how do you think about the capital structure right now?

Yes, I mean, that's something we're going to evaluate each quarter this year and talk about with the board. I mean, obviously, we just closed the deal. Cash flow is obviously even stronger than we thought. It's hard to imagine $29.6 million in the fourth quarter. So that's something that we're going to evaluate and we'll get back to you guys on. I mean, obviously, we're sort of open to the discussion on all of the different various levers that you can pull in the capital structure. So we'll evaluate that and update you guys as the year progresses.

And at this point, given our workload, we have no short-term plans or even intermediate plans to do any significant acquisitions, but looking at our 2-decade track record, it's quite likely something could come up in the next several years that might impact our decision about capital structure.

And our next question is from Brett Huff.

It's John Campbell in for Brett Huff. So if you guys could just provide just maybe a little bit more color on the U.K. market and just, I guess, profitability, near-term, in general. I mean, last quarter, you guys said that you've hit some pretty major milestones in the form of like database migrations and whatnot. And then just given you guys have seen some, I guess, nice success in the recent launch, I mean, is it fair to say that most of the investment and incremental spend should be just kind of tapering here and are we just any closer to that profitability inflection point near-term?

Yes, so I'll take a shot and let Brian jump in as well. We spent -- it's not dissimilar from what happened in the United States. So as we were ramping up in the United States, we invested, made significant investments into research ahead of subscriptions building up to cover that fixed cost nut. We were doing that in the United Kingdom over the last 4 or 5 years where they had 18 researchers and we ramped it up to probably 170 from 18 to build up the right quality of data. The nice thing is we now have credit for that in the marketplace. They're saying we definitely have the only outstanding source of data in the marketplace. That 170, probably about 50 of those folks are temporary employees and that will come on back down midyear. So down to a stable state somewhere in the 100-and-some zone. Also the software developers that we search and we're allocating a lot to the United States, the United Kingdom, along with a generous markup under GAAP rules, those folks are now moving over to other projects and other priorities in the United States. So that spend is coming way down. At the same time, we began moving off the initial install towards betas and trying to build a reference set to actually selling the product in February. And we have some promising early results in some of the product. I have a lot of confidence. I feel the sales team is making some good progress and I think we'll get some good sales number this year. And I think we will be able to, and as we move out of '13 into '14, start to show a return of investment, the same way we did in the United States after a big investment.

And just the short version of that is that essentially, you've got a lot of costs dropping off, we're increasing the revenue and sales. Obviously, the Giles promotion, that's focusing them on sales. My expectation would be that they will get to breakeven in profits over the next 12 to 18 months. So they'll still be a little bit negative this year but they will be positive next year and be contributing to EBITDA. So they should get to breakeven again in the next 12 to 18 months and be positive in '14 is the expectation and there's nothing less than that.

Okay, great. And then just my next question is back to the future Loop cross-sells. Can you guys just give us any kind of information or direction as far as when you might -- when we might expect that next release of leads?

When we might release more leads to the sales force?

Right.

They're now actually -- once we increase the territory set and define a bigger territory set and did those teams, we actually released the whole set to them probably, I don't know, maybe 2 months ago, 3 months ago. And there's still 100,000 folks in the pool. I think we still have, very approximately, 94,000 we have not met with. So we have full employment over here at CoStar sales.

Okay, great. And then just the last question here. Andy, I think you said in mid-February, you guys closed about 2,500 cross-sell bills. If you could just maybe parse out how many of those were CoStar cross-sales to Loop users?

It was $10 million worth, and I -- do you have an actual number for that? I think it was 1,500, something like that. I don't want to give you a wrong number.

Yes, I think it was around 1,500 and we can follow up with the exact number on that.

I'd take an estimate of 1,500. We began focusing on the Premium Lister sales to CoStar, I think, probably about 3 or 4 months after -- I think 4 months after we started focusing on selling CoStar to LoopNet. And so that's just still ramping up.

So the 3 pieces, real quick, is $10 million of annual contracts, information services to Loop customers, $1.7 million of Loop marketing service to CoStar clients and then in addition to that, we had another $2.9 million successfully converting about 900 customers on annual site level PLs. So sort of total synergy revenue of $14.6 million, which converts to a total of like 1,500 or so customer -- paying customers. So pretty strong numbers at a short period time.

Yes. So using it as a rule of thumb on the average price, you come out to about 1,550.

Next question is from Bill Warmington. William A. Warmington - Raymond James & Associates, Inc., Research Division: The long question for you on the fourth quarter annualized new contract revenue, $8.5 million that you reported. Now I seem to remember there were some onetime items in the fourth quarter that were likely going to depress that a little bit. And I just wanted to know -- you already covered the Grubb & Ellis as being one thing that could have done that. But I also wanted to ask about the RMS contract, to try to get to, I guess, what I would call a more normalized, what that number would have been without the RMS contract.

When Andy mentioned that, he was talking about just the CoStar business, so I think I put in mine it's the $10.9 million was the fourth quarter number. So that's a $10.9 million. And that accounts for everything. I would say that there was enough things going in each direction with Grubb & Ellis and RMS and everything else, so I actually think that the $10.9 million is a pretty good number. And that's up 26% year-over-year, so that's a great number. William A. Warmington - Raymond James & Associates, Inc., Research Division: And then your thoughts, and since we're 2/3 the way through the first quarter, your thoughts on where the annualized net contract revenue is likely to come in for the first quarter? Does it come in, in that basically $12 million to $13 million a quarter level? Or are we still going to be below the $12 million level?

Well, I'm not sure I want to give guidance on the fact that we're 2/3 of the way through the quarter, but that number was $10.8 million. If I read back the last 4 quarters, it was $10.8 million, $9.3 million, $7.9 million. So it's been growing. I'm not going to give a projection on that, but obviously we gave pretty strong healthy guidance for the year at 21% and 23%. In the first quarter, we do have sort of the resolution of the Newmark Knight Frank Grubb thing, we've got a lot of stuff in there. And then we will be -- we've already started, as Andy mentioned, to deemphasize some of these services. We don't sell some of these services in our sales groups anymore, so they're just on the Web. So throughout the year, we're sort of overcoming that and we're still going to come up with, I think, a very strong organic growth number. So we're excited. I think it's, like I said, 20% -- 21% to 23% revenue growth is a pretty good year. William A. Warmington - Raymond James & Associates, Inc., Research Division: And then I wanted to ask about -- you gave some detail on the organic growth at 13% for the CoStar piece and just under 13% for LoopNet piece. You've given some additional detail in the past. I just wanted to see if you could give us any additional color on those numbers?

Yes, I mean -- they're great numbers. So we closed '11 at around 11% and so obviously, taking it up over a 13% is a great year, especially on a much bigger base. Again, a lot of that is the strong cross-sell, I mean, that we talked about in the LoopNet base. You got $10 million come in. Again, LoopNet prior to the acquisition, growing in that 10% to 11% range. Again, all the efforts that we've done and all the things that Andy talked about getting that up to almost 13%. So I think it was a sort of great organic year. And I've said this many times to people, as we've explained to you guys, that this is a huge lead list that we've met with 6% of barely, this is something that's going to roll out over years. This isn't a onetime pop and a big number and growth rates are going to go up by 3% or 4% or 5% and then dip back down. And because you got the bigger base, you actually have to produce another 1.5% to 2% every single year. So I feel very confident over the next few years in the medium term with this cross-sell opportunity being able to stay in that 11%, 12%, 13% range, even though the base is getting much bigger. And maybe we can do better than that but I think it's -- we feel very confident in that. And I think that's why we feel confident when we talk about $125 million fourth quarter of '14 or $500 million run rate. Going from $100 million in the fourth quarter this year to $125 million, I mean, I think it's a great goal.

Next question is from Suzi Stein.

You talked about the fact that you've achieved $18 million of the $20 million of cost synergies. And I guess the $20 million always struck me as kind of a low number. But how much over the $20 million do you think you can go? And I guess, more specifically, what are you experiencing in terms of savings that you didn't forecast prior to the merger?

Yes. Suzi, it's Brian. So yes, I think, we actually spent quite a bit of time prior to the merger. So I think most of the things that we expected to come in have been coming in sort of as expected. I think they've just come in much faster than we expected. I think we've done a great job on the integration. I'd mentioned it on prior calls. I mean, we renegotiated insurance and we saved $0.5 million, $0.75 million. We still have other contracts, data agreements and things that they sort of signed up for that are already sort of in the pipe that will fall off. And that's why when I talk about the $18 million, I think we're essentially already at the $20 million with things that we already have sort of in process that will fall off. So the question is what can that be? Can it be a couple million dollars better than that? Yes, I think it can continue to get better. I don't think I'd put that in my guidance right now. I think we want to keep working through it. And the one thing that we talked about prior to the acquisition is that this deal, the $20 million or plus more than that of cost synergies wasn't the core driver behind the deal. What we always talked about was we thought we had multiples of that on the revenue side. And having already captured $14.6 million, I think we're sort of hopefully proving that concept out. And I think that's the true value in the deal is that, if you can do that number and you can sell on that lead list for the next 3 to 5 years and continue with double-digit revenue growth, and you look at lots of other peer companies and they're all in the single digits. I'm seeing like great quarters for companies with 3% and 4% and 5% organic growth rates. And I truly do believe we'll continue in these higher growth rate ranges. So we're pretty excited.

So then I guess the other question is just as you think about achieving these revenue synergies, you talked about the retraining and redeploying and I guess hiring of sales people to do that. How should we think about modeling selling and marketing over the longer term? So how long do you think it will remain at sort of an elevated level? And when does it normalize and what does it normalize to? If you're willing to talk about that.

I mean, we can't -- it's difficult for us at this point to tell you what's going to happen in '14 with that sales force, or '15, because we're going to want to get further down the road and get a better feel for what's working. But we are going to be seeing a fair amount of revenue -- we believe we're going to be seeing a fair amount of revenue growth here, a much larger customer base. We now have the ability to operate more efficiently in the field with a bigger scale. We are emphasizing more in-the-field sales presence. So we're going up towards the 200 field sales people mark with a reduction through attrition on some of the centralized sales. And then we'll evaluate it again there. And it's always going to be based upon what kind of return are we getting on each sales person. Are we getting a phenomenal return? We can look at that and feel pretty good about where we are at this level, and we'll evaluate again at the end of the year.

And just in dollars, Suzi, to give you a little color if you're talking about modeling it, obviously, it's going to grow in dollars because you're paying out sales commissions and we all expect to have -- I mean, I would hope we pay out lots of sales commissions, I'm sure there's a lot of sales people are loving to hear that, based on these growth numbers that we're talking about. So in dollars, it's going to grow but I do expect to see efficiencies and see it reduce as sort of a percent of revenue as you move forward. So hopefully, that will help you with your model a little bit.

Next question is from Marc Fuller.

Just kind of a quick question here. I'm trying to understand in terms of, so this quarter, you sold $10 million in annual contract value information services to LoopNet, who had previously only had $160,000 commitment? And then last quarter, I believe you said you kind of had sold $4 million in that to people who had previously committed $37,000? Is that right?

That is -- the $10 million number is since the merger. So we began the cross-selling probably, I don't know, 2 months after -- aggressively doing the cross-selling 2 months after the merger, something like that, July, August timeframe. So the first number, it's a cumulative number. So the first number of $4 million is where we were when we did the last earnings calls and we have incremented to $10 million since that last earnings call. So it's not a $10 million per quarter. It's cumulative.

Yes, so got that. So then the difference would be kind of 120,000 to $6 million, right? 120,000 can bring you to $6 million for a total of $10 million?

Yes.

And just real quick, this is Brian. The total amount was $4.6 million. As Andy said, we didn't start some of the other pieces, the LoopNet marketing services, existing CoStar clients. So some of that's just starting. If you just look at in total, you're going from your $4 million to $14.6 million. And again, the $14.6 million was in total so the $4 million is included in that. So that should give you a little bit better color on those numbers.

Got it, got it. Okay. So that makes a little more sense. Okay. And then just a quick -- I think I missed it, but what were the redundant services you were cutting that are included in that $5 million to $7 million?

Yes. I mean, right now, we're deemphasizing several services. I don't know, I won't get into a ton of detail on it, but I think Andy talked about Property, COMPS and Facts. We no longer sell-through our sales force, it's still available online. So those would be a couple of things. CoStar had some services, CMLS and e-COMPS that are no longer being sold on the web. So there's several -- I mean, we've been evaluating this since the deal closed. So we've actually been doing this, we just -- I'm not sure we've talked specifically about it til now. So there's several services that we're just no longer selling.

[Operator Instructions] We do have a question from Todd Lukasik.

Just a question on the first quarter revenue guidance. I guess, $100 million this quarter, $101 million at the low end for next quarter. If you assume the net new sales kind of came in through the quarter, barring some kind of seasonality or other decline somewhere else, it seems like $101 million is a pretty easy bar to hit. Is there something going on there with seasonality or lost revenue otherwise that would account for that?

No, no. I mean, if you look, I did the same thing last quarter, essentially I raised it up $1 million over what we did and gave it a $2 million range. So I think it's just me being consistent and conservative. Obviously, I feel very comfortable with the low end of the range. So it's just more -- that's just more the way I guide. I'd rather be conservative on the guidance than be aggressive. And in the first quarter, we will have sort of workout of the Newmark, Knight Frank and some other things in there. But essentially, I think -- obviously, we expect pretty strong numbers for the year, so I'm pretty confident in that range.

Okay. And then 100,000 prospects, and I think you mentioned you pitched 6,000 so far. How many do you think the sales team is pitching per quarter? Is that sort of around 4,000, 5,000 or what's a good number to think about there?

That's a good question. Hang on one second. He's got the calculator out. Yes, about -- roughly about 5,000.

Okay. And then at this point, is the entire sales team sort of ramped up on the sales pitch and I guess, were they in the fourth quarter, or is there still some expected efficiency you get out of the sales force from here?

I do expect an efficiency gain from the sales force from here. So again, while the initial result exceeded our expectations, I am now in this weird place where I'm like, that wasn't good enough, we can do better. And I look at the nature of our sales presentation to these folks at this point and I see so much room for improvement. We began working on that really hard at the sales conference. And I expect that we can achieve higher close rates and it will take -- you're dealing with 2 audiences, both ingrained with 15-year behavior. So you've got the CoStar sales force who've been doing a particular kind of sales pitch for 10 or 15 years. And when they go into that LoopNet upsell situation, they have to completely change up their presentation and do it differently than they normally do it. That takes some behavior modification, which will probably take us a total of 12 months to really get them into. At the same time, they're going in and meeting with people who have really perceived something a certain way for 10 or 15 years, and you've got to reach them. So I think each quarter during 2013, you'll see improving close rates as we get better at this.

[Operator Instructions]

I think we're going to go ahead here at 4 hours and 20 minutes into the call to take the chance to wrap it up. Thank you very much for joining us today on the call. We do apologize for running long, it is my fault. We'll try to keep it a little brief next time, we had a lot of things we wanted to talk about. But thank you very much. We look forward to updating you on our progress with the next quarter conference call. Thank you.