CoStar Group, Inc. (CSGP) Q2 2015 Earnings Report, Transcript and Summary

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

Thank you, operator, and good morning everyone. Welcome to CoStar Group's second quarter 2015 conference call. Before I turn the call over to Andy, I want to have a second to talk to you about some really important facts. 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 July 29, 2015 press release on our second quarter results, and in CoStar's filings with the SEC, including our most recent annual report on Form 10-K, and quarterly report on Form 10-Q, under the heading Risk Factors. All forward-looking statements are based on information available to CoStar on the date of this call, 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 call is being broadcast live and in color over the Internet, at www.costargroup.com, where you can also find our investor relations page. A replay will be available approximately 1 hour after the call today, and will be available for approximately 30 days thereafter. To listen, call (800)475-6701 within the U.S. or Canada or 320-36-53844 outside the U.S. The access code is 364170, and it'll be available within an hour. So I'd like to turn the call over to Andy Florance.

Good morning, and thank you for joining us today for our second quarter earnings call. I'm sorry for the slight delay in getting going this morning, but the city began jack-hammering outside my office right at 5 of 11:00, so we'll keep it moving. And as you know, I always keep these calls very short. As we reach the midpoint of the year, I feel that we can say that our expanded focus investment into the multifamily sector is clearly succeeding. In fact, while our acquisition of LoopNet was widely heralded as a major success, I believe that we are potentially having an even greater success meeting the marketing and information needs of the multi-trillion dollar multifamily industry. In a relatively short period of time we have changed the competitive apartment Internet services landscape for both the companies seeking to provide marketing solutions, and for the companies seeking to provide information analytics solutions. I believe we have brought a greater level of commitment and conviction than our competitors have. We are using the playbook we capitalized on with the LoopNet CoStar merger, integrating and leveraging a powerful information solution to build a superior marketing platform and vice versa. And accordingly we are achieving dramatic selling success. To price optimally, the multifamily owner needs daily competitive rental information, which none of the legacy information providers are adequately supplying. With the benefit of our research and technical expertise in our Apartments.com marketplace, we are providing the users deep content with daily pricing on tens of thousands of apartment communities. To minimize vacancy losses, the multifamily owner needs a steady stream of qualified leads, and to achieve that they need to reach the largest possible audience of renters. By leveraging our technology and content, and by initiating the first ever significant business consumer apartment marketing campaign, reaching tens of millions of potential renters, we have built the most heavily trafficked apartment Web site. We believe we have the best-in-class information and marketing solutions, and by packaging them together we offer the most compelling lowest-cost solution. With that powerful combination, we are taking a lot of business from a range of competitors. We hit the ball out of the park on second quarter sales. We achieved our highest sales quarter, with 34 million in companywide net bookings. That's a 95% year-over-year increase in net bookings over the second quarter of 2014. And we're up 66% sequentially over net bookings of 21 million in the first quarter of 2015. This marks two consecutive quarters in which we have achieved tremendous sales levels. Net new sales on annual subscription contracts were 25 million for the second quarter of 2015, up 59% over the second quarter of 2014. This was by far our strongest quarter of annual subscription sales in our company's history. Our revenue increased 16% year-over-year, to 171 million in the second quarter 2015, compared to 148 million in the second quarter of 2014. Our annual subscription business continues to enjoy a very high trailing 12 months renewal rate of 91%. We closed the acquisition of ApartmentFinder on June 1st. Like Apartments.com, ApartmentFinder is one of the leading digital marketplaces serving millions of renters looking to connect with apartments. ApartmentFinder's service offerings include digital advertising on ApartmentFinder.com, with approximately 13,400 properties advertised on its Web site. ApartmentFinder's core marketplace revenue was approximately 68 million to 70 million for the fiscal ended -- ending in March 2015. ApartmentFinder will remain a distinct complementary brand to Apartments.com, with a unique user interface, but will be similarly powered by CoStar's information. The brand will focus on the sizable component of renters who are focused primarily on finding the best financial deal possible. And these are people at all different sorts of income levels. We know from various studies that most apartment hunters use the Internet to look for an apartment, and most of those renters visit multiple sites in their search for an apartment. By offering multiple online marketing solutions, we believe property managers and owners will get more exposure for the listings; more leads cast a wider net. CoStar expects, by the end of this year, to have integrated the back ends of Apartments.com, CoStar, and ApartmentFinder, thereby leveraging the same research, systems, support, and sales platform to power Apartments.com, ApartmentHomeLiving, CoStar, and ApartmentFinder.com. We anticipate that this will create cost synergies and greater operating efficiencies. Work on this integration is well underway, and we expect to complete it this year. ApartmentFinder has approximately 110 field sales representatives located across the United States. CoStar has combined its sales forces, and already the advertising sales forces are cross selling all of our apartment marketing solutions. I've had the opportunity to spend a significant amount of time with the ApartmentFinder sales force, and I feel that they are a very valuable addition to our sales force, with tremendous selling capabilities and customer relationships. As previously mentioned in other calls, we are in the process of eliminating the print component of ApartmentFinder. Print is a less and less effective way to market apartments nowadays. Print produces a very small percentage of ApartmentFinder's leads, and is disproportionately laborious and expensive. We plan to eliminate these costs or those costs this year, and invest an equivalent amount into digital marketing to drive greater digital traffic to the Finder site. During the process of converting those ApartmentFinder clients that are buying a combination of print and digital marketing, as we move them into pure digital, we will be carrying the expense of both print and the replacement digital investment. This is to be able to show the clients that we have more than replaced the leads lost from print with the enhanced digital marketing. In the first full month that our sales team has been converting these combination accounts into pure digital, we have converted 15% of the business or over a thousand and some contracts. This will be one of our sales team's highest priorities this year, and I believe it's a manageable task. We are keenly focused on expanded online marketing efforts for ApartmentFinder, and it is working. In just our first month of owning ApartmentFinder, a combined team of existing Finder staff and CoStar staff have successfully driven significant increases in traffic to ApartmentFinder, accelerating visits to the site an astounding 135% year-over-year. And that's just for June of 2015. This was exceptional progress considering that ApartmentFinder visits grew in the single digits year-over-year, in April and May. Additionally, ApartmentFinder unique visitors increased 64% year-over-year in June of 2015. In order to offer a simple, but powerfully compelling value proposition, we're marketing our digital apartment marketplace offerings as one apartment network. And a private manager who had been advertising on ApartmentFinder earlier this year would've received the benefits of a site that generated about 2 million unique visitors a month, and a print distribution of a 1000 books -- a couple of thousands books in a market. Once they're converted into a pure digital contract, their apartment ad will run on ApartmentFinder, Apartments.com, ApartmentHomeLiving. Then the advertiser will receive the benefit of three sites with combined unique monthly visitors of approximately 14 million. That is approximately a 700% traffic increase for those converted advertisers. We believe that with this sort of unparalleled exposure we will convert the majority of ApartmentFinder's combination print and digital business to pure digital by year's end. As we achieve this goal, we also expect to achieve significant cost savings. Okay, at this point I'll put my glasses on, which should help. And of course, we're sitting here in a conference that is lead [ph] platinum certified, which means it has no light. Okay, back to the call. ApartmentFinder offered a social media marketing service called Finder Social. The service was not profitable, and in fact was indirectly competitive with our profitable products. After careful consideration and review we have decided to eliminate Finder Social, and its associated significant costs. We believe the ultimate best value we can provide our clients is delivering the best network of digital apartment marketing Web sites, and the highest quality leads that turn into leases. We believe that once we have eliminated non-core ApartmentFinder products, and have achieved integrated operating efficiencies, ApartmentFinder will be very profitable. We use the National Apartment Association exposition, held in Las Vegas in June, to announce our acquisition of ApartmentFinder, and showcase the tremendous value proposition our network of apartment sites and CoStar marketing analytics can offer. The NAA event was attended by 9,000 multifamily professionals, a record for the event in our prime target audience. We created an enormous amount of buzz in brand recognition. We hosted a never-to-forget client party at the event, with 4,500 clients and prospects attending. Well more than 3,200 attendees visited our booth on the exhibit floor. We gave hundreds of product demonstrations of our integrated multifamily offering, and spoke to thousands of clients and prospects. It was really exciting to see our sales people processing signed contracts well past the end of each day's session after the rest of the conference vendors had left the exposition hall. In just two days we signed 350 new communities. Even better was that our sales people came out of NAA event with multiple follow-up meetings for June and July, which have also resulted in sales. In combination, our Web sites are now generating more than 24 million unique visitors each month. That's the equivalent of every person down under in Australia visiting our Web sites last month. It's quite some traffic. For the fourth month in a row, Apartments.com is the undisputed number one most visited apartment listing site according to each of the four leading traffic authorities; comScore, Experian Hitwise, Amazon Alexa, and Compete. We're just four months into to re-launching and marketing campaign of Apartments.com, and we have established Apartments.com as an absolute leader. Apartments.com has experienced a 70% year-over-year increase in unique visitors and a 65% year-over-year increase in total visits in the second quarter of 2015, according to comScore. In June 2015, we significantly increased the year-over-year traffic to Apartments.com, with over 14 million visits, and 6 million unique visitors. Our own internal Google Analytics numbers show much higher traffic numbers. Even more impressive than the traffic numbers is the behavior of consumers once they come to our sites. Apartments.com is engaging consumers as shown by time spend on site and page views. According to Compete, we had more than three times the number of page views on our site, in June, than Apartment Guide, which was the closest competitor. According to comScore we also had 50% more time spent on our site than Apartment Guide, in June. Clearly customers like what they're seeing on Apartments.com. We are very pleased with our success, and continue to grow traffic for our advertisers. We believe that with more traffic than any of our legacy apartment competitors, many of whom are charging more for less traffic, we can take significant share from our top competitors, who combined have nearly $500 million in revenue. We're already seeing good success in moving advertisers from Apartment Guide, Rent.com, and ForRent into our platform. We're not taking our early successes for granted, and we're working hard to move Apartments.com even further ahead. One of CoStar's strengths is collecting and building content. No competitor is matching us in providing the depth of data that our team of researchers, writers, field researchers, sales force, economists, and analysts are able to generate. We know that on the Internet content is king, and we're taking a number of innovative steps to increase quality and breadth of content on our site, and therefore consumer engagement traffic and, we believe, eventually sales. Our market research indicates that renters place an extremely high value on apartment reviews when they're searching for a new apartment. We know from other successful consumer sites, sites like Yelp, and TripAdvisor, that users really like to provide feedback about their experience, and other users want to be able to read what consumers, like them, are saying. Consumer ratings matter. And just recently Harvard Business Report published a study that found a one star rating increase for restaurants on Yelp correlated to revenue gains of up to 9%. So reviews are really important for folks when they're looking at these apartments. In July, we launched an innovative, in fact, the 21st; we launched an innovative campaign to encourage renters to provide quality reviews of their apartments. Apartments.com will give away free rent for a year to 12 weekly winners. Renters who write reviews that are rated as "Helpful" will also be eligible for free rent-for-life grand prize drawing, which will take place October of this year. We expect that this will -- for this promotion will draw many renters to our websites and drive more value for our advertisers. We are combining these objective consumer ratings with our objective fact-based scoring system driven by the data collected by our researchers. By combining facts and opinions, objective data, and subjective experiences we can create a rating system that we believe renters want. One they can count on to inform them for one of the most important decisions they have to make. As part of our previously announced marketing budget, we have also initiated a national marketing campaign to promote the newly released review functionality at Apartments.com. We're promoting this campaign on national and local television, cable T.V., digital, local radio, and social media. Our advertising customers have been given tools and resources to promote the campaign within their own communities. Prior to the campaign, it took Apartments.com three years to collect 12,000 reviews. We surpassed that number in the first 36 hours of this new campaign. At this very early stage in the campaign we have 35,000 reviews submitted. I've read through them, and many of them are really quite good. And that the cost per review, I estimate, is running about $20-$30, which is a really good value. In another technology innovation in the apartment space, we have been adding immersive 3D virtual tours for apartments to Apartments.com site with a technology known as Matterport. It's great technology. Renters can virtually walk through the apartment, and get a true feeling for the space in a unique way that pictures and floor plans do not capture. Property managers and renters love them. We now have over 20,000 Matterport 3D images on the Apartments.com Web site, and we're adding approximately 1,500 per week. We have almost reached 2 million renter views of these 3D immersive apartment walkthroughs, so they're really working. Accurately advising our clients on new construction will bring new supply and competition to the market is an important value proposition for CoStar Market Analytics. And additionally, we generally drive 6000 or more per year for each property in the critical marketing phase post construction around initial lease-up. While tracking new construction has always been a strength of ours, we are working to build an ever more accurate picture by flying over U.S. cities to monitor new construction in a way not possible with Google Maps, commercial satellites or ground based researchers. We have expanded our field research fleet to include a Cessna aircraft equipped with a seriously state-of-the-art augmented reality computer software and camera systems. It will help us survey commercial real estate in a way that's never been done before. In the first 10 days we've completed four test markets. And during these 10 days we discovered and added over 100 new construction properties, 8.6 million square feet of new construction, and 2,375 new multifamily units to the CoStar database. Clearly this will add to the depth and richness of our database, and provide valuable information about upcoming supply in the marketplace. Several of our clients and prospects were given demo flights at NAA, and even one was moved to sign a contract worth several hundred thousands of dollars in the plane, up in the air. Great thing is it was a researcher that asked for the business, not the sales person. Our advertising agency, RPA and a third-party independent research firm has been providing us with detailed analysis from the first four months of Apartments.com national campaign. Till the end of June, the campaign has created over 3 billion impressions, including 1.9 billion digital impressions, and 7.2 million social media ad engagements. As of June 2015, compared to February 2015, our awareness is up more than 50%, with a quarter of the respondents listing Apartments.com in the top four mentions. In June, Apartments.com was ahead of all other apartment listing sites in awareness, with only Craigslist edging us out. In several key markets, like Philadelphia, Houston, Los Angeles, and Phoenix we experienced 100% growth in awareness. Three of four competitor apartment listing sites declined significantly in awareness over the last four months. Equally as impressive is the growth of intentions for Apartments.com, which nearly doubled from 11% in February, to 21% in June. The perception of Apartments.com as a leader surpassed key competitors, and ranks in the top three based on the same study, with the strengths being characterized as smart, an ally, honest, and trustworthy. Ultimately, the best judge of success of the campaign though is sales. And clearly the second quarter of 2015 and June, were all-time highs in sales, casting a vote of confidence for the effort. In addition to the work done by our agency, each of the past three years, Apartments.com has commissioned an independent national study that surveys multifamily professionals across the country about their use and attitudes about leading apartment listing services. This year's survey period covers the first 60 to 90 days after our national advertising campaign began. So it captured the trade's initial reactions to the new Apartments.com Web site. Nonetheless, we learned a lot of interesting things, and I want to share some of those highlights with you. We asked apartment listing sites trade professional -- when we asked folks which sites they were familiar with, the survey showed that Apartments.com is now tied for a first place with Craigslist. Aid awareness for Apartments.com was 94%, up 200 basis points from the prior year, while Craigslist was down 200 basis points. All three of our largest competitors, by revenue, saw declining awareness. 30% of survey respondents selected Apartments.com as the most effective source of quality prospects, while 24% selected Apartment Guide, 22% selected Craigslist, and 4% selected Rent.com. Apartments.com achieved a positive net most effective score of 22% when the survey respondents were asked to select the most effective advertising platform for delivering quality prospects. Craigslist net effective score was the worst, at negative 14% because of low quality of leads. Zillow, Trulia, and Rent.com, all were negative as well. Our net value score climbed into the number one position, at 19%, while Craigslist and Apartment Guide came in at 7%. While other primary competitors, including Rent.com, were in negative territory. If you look at trends on net value, it really points to how well we're doing. Craigslist net value dropped from 31% in '13, to 7% in '15. Apartments increased from 5% in '13, to 19% in '15. Our marketing campaign has been very effective in reaching potential clients, with 93% of survey respondents indicating they had very high awareness of the campaign; can't drown it out. Since the launch of our new multifamily services, cross sales of our Apartments.com, and our multifamily debt and equity information analytics product, CoStar Market Analytics, shows similar potential to the success we had in cross selling between CoStar and LoopNet. CoStar Market Analytics has been significantly contributing to driving sales of Apartments.com. The insights provided by CoStar Market Analytics are extremely popular with apartment managers and owners, and we're able to help them identify rental trends more quickly and with better accuracy. Year-to-date, and since the launch of the new services four months ago, we have sold $8 million of annual subscription combined packages of Apartments.com and CoStar Market Analytics; $8 million of cross selling activity. With a full four months behind us, we are more confident than ever about our strategy and execution in apartments' rentals marketplace. Sales are growing as a result of providing an excellent destination and positive consumer experience for renters, which in turn is causing property managers and owners to advertise their properties with us. A quick update on LoopNet; LoopNet marketplace remains vibrant as we rapidly approached 10 million registered LoopNet members, average monthly searches are up 30% year-over-year. During the quarter, sales increased just over 6 million annualized value of new businesses on LoopNet. There was a component of that that is connected with an accounting change, but the revenue continues to grow. After we complete the software integration of ApartmentFinder, late this fall, we plan to move to integrating the LoopNet land and CoStar backend databases together. We believe this will allow us to significantly reduce research costs, improve data quality, and position us to most effectively migrate remaining LoopNet Premium searchers to the CoStar platform. In preparation for that migration, we continue to seek and are achieving higher prices per user in an effort to reduce internal competition and cannibalization. Year-over-year, our average new selling price per Premium user has increased 45%, from $98 to $142. On July 1, CoStar completed the acquisition of a Madrid, Spain based commercial real estate information provider, called Belbex. Though very small and young, Belbex is the leading commercial real estate data service in Madrid. And we believe that with time we can grow it to become a significant business for our European operations. Madrid is both the third largest city and metropolitan area in Europe, so it's a valuable chess piece in a longer run strategy. We plan to invest in the business, but that is not expected to have a material impact on our overall financials. The new company will be managed out of our London office, and will be led, in Spain, by Belbex's Manager, Juan Menduina. Because of the scale of the market, as well as our leadership team in both London and Spain, I'm very optimistic about the business potential of our growing European operations. Finally, I want to share a few recognitions our team has recently earned. For the second year in a row, CoStar Group has been recognized by Forbs Magazine as one of the most innovative growth companies in the world. Citing our rate of innovation, and sustained appeal to investors, Forbs ranked CoStar number 15 in the annual ranking of the top 100 most innovative companies. Up from, I believe, the 27th position, and ranked us among the top 10 most innovative companies in the software and services category. Jon Coleman and our legal team have been including in the National Law Journal's annual roundup of Washington legal departments of the year, recognizing the company's superior in-house legal team. Our legal team was winner in the big deals category, and recognized to successfully supporting the company through several major recent acquisitions. Finally and most importantly, CoStar Group was named by The Washington Post as one of the best places to work in the Greater Washington Area. We were recognized in the large company category of the Post's prestigious top workplaces 2015 list. The top workplaces are based solely on employee feedback, with a survey conducted by WorkplaceDynamics, an independent research company. Factors concerned include employee satisfaction, with benefits, their job and corporate leadership. The economic strength of the U.S. and its real estate, especially compared with international options drove an exceptionally large flow of capital U.S. commercial real estate sector in the first half of 2015. Specifically, 208 billion in sales in that time was 27% higher than a year earlier. It's the highest since 2007. Fundamentals in the market continue to be strong, and occupancy rates for all the major property types are at the highest level, since '08. Corresponding to strong occupancy rates, rental rates grew well over inflation, ranging from 2.6% for retail, to 5.1% for logistics. Year-over-year gains for office and logistic rents hit their highest point in this recovery. In response to stronger rents and occupancies, new construction has increased especially apartment, office, and warehouse. So far demand is still growing faster than supply. However, with the exception of the apartment market, we believe most markets should see declining occupancy rates over the next year. The apartment sector performed solidly. Net absorption was up 11% in the first half of '15, from a year earlier. A high number of household formations drove the demand for apartments, and allowed vacancy rates to decline to the real estate cycle low of 3.7. And year-over-year rent growth of 3.8% is up from 2.8% one year earlier. In the office sector, net absorption of 38 million in square feet in the first half of 2015 was up 4% from a year earlier, the highest net absorption rate of this real estate cycle. The 60 basis point decline in vacancy, to 11.2% over the past year, allowed office rent growth to hit 4%. A 35% increase in office sales has been especially good for commission-based brokerage clients. The story of strong demand, high occupancy, and high investment sales volumes is similar for other real estate sectors, including retail, logistics, light industrial, hospitality, and specialty. The broad-based strength in both fundamentals in sales has helped support increased demand for CoStar products and services. I'm very pleased of what we've achieved in the first half of '15. The second quarter of 2015 was exceptionally strong, as our powerful sales team is driving all-time high sales; congratulations to Max and his team. We are well on our way to 1 billion in revenue and 40% margin in 2018, and we'll continue to actively grow our powerful commercial real estate platform. We believe we are exceptionally positioned for strong growth and financial success for many years to come. Gosh, on that note I'll turn it over to Brian Radecki, our Chief Financial Officer. Okey-dokey, go with that Brian.

And these calls, they just never are dull. Thank you, Andy. As Andy mentioned, we are very pleased with the performance in the second quarter of 2015. The investments we're making in marketing are showing great results with all-time high sales numbers, increases in traffic, leads, all allow the CoStar Group's core business continues to grow at solid top line. We just closed the ApartmentFinder acquisition last month, and are aggressively integrating the business, while providing our sales force with another service to sell to our multifamily customers. In the second quarter of 2015 -- he just does that to see if he can just mess with me before I start, the company reported 170.7 million in revenue, an increase of 16%, compared to the second quarter of 2014. Gross margins, with 126 million for the second quarter of 2015 or 73.8% of revenue, the highest gross margin we reported in the company's history. So the continued margin expansion shows the leverage in strength of our business model, even with the research investments we've made in Canada, and in multifamily. So highest ever gross margins, which I -- we believe will continue to climb. Adjusted EBITDA of 11.3 million for the second quarter 2015, and non-GAAP net income in the second quarter was 2.4 million or $0.08 per diluted share. Both of which are impacted by the investments in marketing for Apartments.com, as well as expenses for the ApartmentFinder acquisition. Net income in the second quarter of 2015 was a loss of 15 million. Reconciliation of non-GAAP net income, EBITDA, adjusted EBITDA, and all non-GAAP financial measures discussed in this call. So the GAAP basis result are shown in detail, along with definitions for those terms in our press release issued yesterday, and are available on our Web site at www.costar.com. Cash in investments were 367.8 million, along with short term and long term debt outstanding of 375 million, as of June 30, 2015. Now, I would like to give some additional color on a few metrics to highlight the strong performance in the second quarter. As Andy mentioned, we achieved 25.5 million in annualized net sales of subscription services on annual contracts in the second quarter of 2015, an all-time high, an increase of 58.9% over the second quarter of 2014. This is an outstanding performance from our entire sales force, and reflects the impact of our marketing investments. We've been providing this metric consistently each quarter, this key metric, and it shows the strong results of our continual efforts to move customers to long term contracts. As of June 30, 2015, we had approximately 624 sales people across the company, which includes the addition of approximately 110 reps that came to us from the ApartmentFinder deal. We are actively working to integrate our sales force resources, and ensure that the field sales teams are appropriately sized and managed in each of the markets. Revenue from subscription services and annual contracts is 110.9 million in the second quarter of 2015 or 65% of total revenue. For the trailing 12 months, subscription revenue from annual contracts totaled 420.1 million, up 17.4% from the 12-month period ended 2014, reflecting our continued success in growing the annual subscriptions faster than the non-subscription services. We expect to continue to grow our revenue from subscription services on annual contracts back up into the 70's range in the near team, and eventually back up into the 80% and 90% range of our total revenue. Renewal rates for annual subscription revenue remained high during the quarter. The 12-month trailing renewal rate for CoStar's subscription-based services was 90.6%, in the second quarter of 2015, while the 12-month trailing renewal rate for customers who have been with us for five years or longer was 97%. As we discussed in our last call, this metric ticked down slightly in the quarter as GE, a long-time subscriber, sold its real estate portfolio. Now, I'll discuss the outlook for the third quarter, and the full year 2015. Full year 2015, we expect revenues of approximately 707 million to 712 million. Based on our strong second quarter 2015 sales results, we're happy to be able to raise the full year 2015 revenue guidance again, despite the fact I just announced an increase, on June 8th. At this point, the top end of our annual guidance range is now 52 million higher than our initial 2015 guidance range. ApartmentFinder contributes 40 million to 43 million of that increase, while the remaining upside is organic revenue growth resulting from the outstanding sales results in the first half of 2015. For the third quarter 2015, we expect revenue of approximately 187 million to 189 million. We expect non-GAAP net income per diluted share in the range of 162 to 170 for the full year of 2015, which is up $0.03 at the midpoint from the range we provided you in June. For the third quarter we expect non-GAAP net income per diluted share of approximately $0.42 to $0.45, which includes the impact of shifting some spending from the second quarter into the third quarter to support the recently announced Rent For Life campaign. For the fourth quarter 2015, we expect the range to increase to approximately $0.79 to $0.84 per diluted share. The investments associated with the marketing campaign are expected to trend down as we get past the peak rental season for 2015, and we expect that trend to be reflected in our quarterly earnings later this year. The sales results have been impressive in a short time since we launched the new Apartments.com Web site, in February 2015, and the start of the national consumer marketing campaign, in March of 2015. However, please remember that it's only been four months. Our models, moving forward, do not reflect continued sale growths at 50 plus percent rates on Apartments' revenue forever. I'd like a few more data points before people start modeling and extrapolating out four months of sales results into their model for every quarter going forward. But obviously we're extremely happy with where we are. At this point, I'd like to talk about the growth trajectory for the business. As we still see the core business growing annually in the 11%-12%-13% range moving forward. And as we previously discussed, we have a target for Apartments.com growth rate of 25% to 30% going into 2016. Based on the strong early results I'm seeing, I think we'll be at the high end or slightly above that range. As we integrate ApartmentFinder, our expectations should add about 70 millionish of revenue in 2016, as we discontinue the non-core products, and transition ApartmentFinder away from print and into all-digital. We continue to believe that we can reduce the cost base of our combined Apartments' business as we integrate ApartmentFinder. And we still expect the ApartmentFinder acquisition to be accretive to the bottom line in 2016, and beyond. As we've consistently stated, we'll be evaluating the effectiveness of our 2015 Apartments' marketing campaign as we get close to the end of the peak rental season, and begin planning for next year. I think it's clear the campaign is achieving our goals of expanding consumer awareness, driving traffic and leads to our clients, and supporting a very strong sales momentum. I look forward to updating investors on our plans for 2016 as we finalize those next quarter. In summary, I'm very pleased with CoStar's financial result for the second quarter 2015, and we're off to a great start with the Apartments.com traffic and sales in the first half of the year. We believe our historic sales results keep us well-positioned to achieve our stated financial goals of a billion in revenue, and a 40% adjusted margins exiting 2016, and our new goal of 1.5 billion revenue run rate, with 45% to 50% adjusted margins exiting 2020. As always, we look forward to sharing our progress with you on these goals in the upcoming quarters. Now, before I open up the call for questions, I have some additional news on a decision I have made. After 18 spectacular years at CoStar, I've decided to take a sabbatical for the next year to spend more time with my family. Now, I know this sounds very cliche, but the simple fact is I'd really like to spend more time with my family. As much as I love my job, I love my family much more. For anyone who knows me, it's been almost always on, day or night, for CoStar, and it's been nearly non-stop work since the beginning. And, unfortunately, with my all-or-nothing personality, striking the right balance between work and personal life has been a struggle for me. Truthfully, I enjoy working. I enjoy working really hard. And all of CoStar's success has made it very easy for me to keep doing what I like doing. Quite frankly, I have the best CFO job in the world, even if it means working long hours. To be the best there has been a lot of late nights and weekends. Spending more time with my family has been something I've thought about for years, but like most of us, it's been elusive for me because work has always been crazy. We've been in the middle of something exciting or about to close the next big deal. But over the past few years time seems to have accelerated, and the thought of one of my two high school kids leaving for college, next August, has had my head spinning -- excuse me. How much time have I spent with them? Has it been enough? Have I been the best father or husband I can be? I can pretty much go on and on. While contemplating these thoughts and talking to a good friend of mine, he simply advised me to list out what was important to me, what I should be doing and not doing, stack-rank it and go for it. So needless to say, when I do this it's pretty crystal clear; health and family comes first, and everything else, including the work I love, comes after that. So let's be clear. I'm not going anywhere for a few months. I'll be at CoStar working with Andy and the team as long as it takes to have a smooth transition. Therefore, I'll see many of you at various conferences, including next week that we'll be attending during the quarter. I'll also be working closely with Scott Yinger, our VP of Finance for the past five years, who most of you know. Scott will be the interim CFO while the company interviews both internal and external candidates for the position. He's been in the trenches every step of the way, so the company will be well served during this period. Really, it's been impossible for me to sum up the words CoStar has meant to me, but I want to thank all the truly incredible people I've worked with, for all that you have done for both, me personally and professionally. CoStar, and everyone I've worked with side by side for all these years, has really been a second family to me. So again thank you all. But mostly, I can't thank Andy enough. He is truly one of a kind; special in many ways. A real visionary and a good friend of mine, he's been amazing. And as usual, we are both on the same page. I couldn't be more excited about what we've accomplished to date, building a great company which grew from a 14 million evaluation, when I stared, to nearly 7 billion today. Resulting in 1800% shareholder return, over 10 times the NASDAQ average since our IPO, wow, that's some serious shareholder returns. But even with all we've done, I am still even more excited about the massive opportunity that lies ahead for the company, and I have no doubt we will dominate everything we turn our attention to. I realize this decision may be surprising to some, but I know in my heart it's the right thing for me today. And I look forward to spending more time with my family and reconnecting. At the end of the prepared remarks we'll only be taking work-related questions in the Q&A, so I'd appreciate keeping my private life exactly that private. If you still have questions related to my sabbatical feel free to contact me directly. So let's take some questions on the fantastic quarter we had, and the outstanding future of the company. Au revoir, Gopher. Andy?

Okay. On behalf of CoStar's Board of Directors, our investors, and all of Brian's colleagues, and most especially myself, I want to express our deepest appreciation and respect for all Brian's achievements and contributions over his 18 years with CoStar. I must say, 18 chronological years is a deception. Though Brian started 18 years ago, he's worked not a minute less than equivalent of 45 years. I clearly remember when Franc Carchedi, our EVP for Operations hired Brian, back when Franc was our CFO. The week Brian started, Franc and I headed off to New York City to meet with a venture capital, and we left Brian in Washington to run the shop. We left him with a bank statement on his first day of work, with $0.50 in it. We let him know payroll was $150,000 on Friday, and we encouraged him to get collecting. I know he called his wife that day, and told her that he thought he might have made a mistake leaving his stable job. We made payroll that week, and with Brain at center stage we built an exceptional business that positively impacts tens of millions of people, employs thousands, and has generated great returns. And we'll thrive for a very, very long time. This quarter, when an opportunity arose to make an opportunistic investment, like acquiring ApartmentFinder for 170 million or a non-material multi-million Euro company in Madrid, we can do that from cash on hand. That is thanks to how far Brian has brought us from that $0.50 bank balance. Rest assured Brian's greatest accomplishment is the strength and depth of the finance team he built. We will not miss a beat in transition with a team like Charlie Colligan, Don Wilson, Mark Zebra, Matthew Green, Tim Clutter, Rich Simonelli, especially Scott Yinger, and so many more. Scott Yinger, our VP of Finance, already leads the team. And with the highest qualifications, he will step into the Interim CFO role as we transition to a new permanent CFO. As Brain stated, he will remain onboard on a reduced schedule to assist in a smooth transition. We have retained Russell Reynolds, and the search for a new CFO is underway. I owe Brian more than I can every repay him for. He's been a close colleague, a genius, a fighter, and most importantly, a friend. The truth is he's spent more time with me over the last eight years than he did with his family. That's a mistake, because he has a wonderful family, and time is too short. The best I can do to repay him is to wish him well as he heads off in a well-deserved sabbatical, and hope he gets busy making new memorable, wonderful experiences with his family. He will always have a big office waiting for him here at CoStar. At this point, I'll turn the call over to questions. I would reiterate Brian's request that we focus the questions on the business, and respect Brian's privacy. Questions?

Thank you. [Operator Instructions] And we'll go to Andre Benjamin with Goldman Sachs. Please go ahead.

My question is actually not on Apartments, but the core CoStar suite. I was wondering if you could confirm what the organic growth rate was just for core CoStar and the LoopNet platforms for this quarter ex Apartments, and then more deeply, how you're trending with just that core broker customer.

Sure. I'll start and then hand it over to Andy. Thanks, Andre, 300 [ph]. So the core platform, the major brands that people think about, CoStar, LoopNet, and all that, they're all growing in the 11%-12%-13% rate the last few quarters. I think they're still growing fairly strong. Obviously there's a lot of focus around this recent release the last four months. But as we talked about in prior calls, we've devised a commission structure to people to be filling up the three major buckets on commissions. We think over time that will be -- still continue to be a strong area of growth.

And with that the reality is, is that we are seeing good growth in the core business, but there is a unusually strong opportunity for our entire sales force in the Apartment opportunity, and that for good reasons diverts sales people attention to those big commission dollars on the Apartment side. So with so much growth over there, I'm very impressed that we're maintaining those double-digit growth rates in the core business.

We'll go to the line of Sara Gubins with Bank of America Merrill Lynch. Please go ahead.

Hi, thank you. Brian, thanks for your comments, and I feel a little bit petty about asking a couple of numbers questions, but I'll do it anyway.

That'll make it easier on me. Please do. I want the numbers.

I'll throw them all in here. Could you help us break down revenue from ApartmentFinder and Apartments.com in the quarter? Was there any revenue to speak of for ApartmentFinder Social that you'll be shutting down? And just a broader question on Apartments.com, if you're seeing any competitive reaction.

Yes, I'll talk the numbers. And Andy loves talking about competition, so I'll leave that piece to him. Yes, so in the quarter, for the year I think we said -- I'll go back and look at the transcript, but I think it's 40 million to 43 million. It's plus or minus 6 million in the quarter. So that's all in the core. I think we've disclosed all that for ApartmentFinder. Their core business is in that 68 million to 70 million. So there's probably about $10 million of revenue that we are currently shutting down. As you approach the end of the year for the conversion it's about $10 million are going to go into next year that you'll lose. I think I just mentioned, we'll expect about 70 millionish I mean, I'm not giving guidance for next year, but just so people can start gauging their numbers for ApartmentFinder for next year. Obviously, once we get through all those conversions, we get rid of the print, we get rid of the Social and all the stuff that we have going on, we convert to the new Web site, and we start selling it, then obviously we think we can grow that longer term at corporate rates, mid teens or so. But that'll be -- it's going to take the next 12 months to get through all that transition, and then start getting the engine going on the sales there. And competition?

And really -- the Social will -- elimination of Social will increase profitability without a doubt.

Correct.

The competitive situation; frankly, Brain is right. I like competition. This may come as a surprise to people. The competitive front has been a lot of fun. There were a lot of players in the apartment space as we entered it. We have moved into number one. There have been reactions here and there. Our single largest competitor, RentPath, has for the first time begun to do some advertising to try to brand in reaction to our marketing campaign, national marketing campaigns. They've made some interesting choices. The mass majority of their revenue is on Apartment Guide. They decided to spend their marketing on Rent.com, which is the minority of their revenue. Our surveys show that Rent.com is less popular with apartment owners and managers. Apartment Guide is more popular. Watching Alexa, it would appear that there was spending really ahead of the NAA conference and no material traffic movement in Rent.com, which would look like to me, initially, who knows where it goes. It looks like a somewhat ineffective response. The CEO of that organization was replaced last month or this month. So I think that also might be an indication. Then I feel like we're in a very strong position with some of the other players that we're up against there. On the information side, I think we're having -- we're taking a lot of share from some of those smaller players providing multifamily information. I took a quick glance on the iPhone at a red light on the way down to the office this morning, at the only other publicly-traded company providing multifamily market information. And it would appear that their subscription revenue was absolutely flat for the first time in years, and that their revenue growth was all from consulting. And as you track -- have heard the term, zombie company, it's when you move to consulting instead of leveraged revenue. I think that shows that we're taking a lot of share there. And then folks who are in the space but not directly competitive, folks providing general real estate Web sites that begin with a C [ph] and end with a W, they're pretty busy right now on a lot of other issues. We are not seeing any share movement one way or another with them. So they have very little revenues in this space, and don't appear a big factor. I have to say it's been really rewarding to come in, and with our team build a really strong product offering, join up with the Finder folks, and the Apartments.com folks, ApartmentHomeLiving folks, and take a tremendous amount of share right now from everybody. If you want to ask to get back in line and ask the same question again, I'd love it.

And we'll go to the line of Sterling Auty with JP Morgan. Please go ahead.

Yes, thanks. Brian, congratulations on an excellent tenure, and enjoy the sabbatical. On to the business stuff, can you give us an update in terms of you talked about coming into the year, the elimination of, I think, the Premium Searcher with LoopNet? Where are you in the process, and is there a chance that you end up doing the same thing with FinderSocial, where maybe it's a wind-down and not a complete elimination?

Okay, yes. I'll start, and Andy can jump in. LoopNet, again, we keep pulling the levers. It's the same as we've talked about in prior calls. We've jacked up the price significantly. We are losing some people on the searching side. Again, overall LoopNet is growing a little bit less this year. We got a little bit less revenue this year than growth in the last year, still in that 10%-11%-12%-13% range. But we're essentially getting the effect of what we wanted. I'll let Andy talk about it. I mean, eventually we will move all those people off of there, and make it a pure marketing site. On the social thing there will be zero chance, and Andy can obviously overrule me. Zero chance that we will not eliminate that revenue. And zero chance we will not shut down the print. That is an absolute. We're already staring the process. And obviously we want to get to pure digital play in those areas. And we're feeling great about where we are in little over a month on this.

Yes, so the folks who were prior doing the social and print are actually have been given their warn notice, and we are actually moving people into other job opportunities, and that is a fait accompli. The only thing delaying the Premium Searcher is Apartments.com, and then ApartmentFinder, and the fact we're working really focusing on that. Again, the price, when we acquired LoopNet for Premium Searcher was roughly $37. Today it's roughly $300. Yes, it continues to grow. By taking it up there, and moving it towards parity with CoStar Property, it will make the transition easier as we do that. Again, it continues to grow. We really want to have the back ends integrated between LoopNet and CoStar Group so that there is a 100% clear upgrade path for all customers. And that if a customer wants to use the CoStar content inside the LoopNet interface they'll be able to do that as well. So we'll make progress on that this year, but again it's just delayed by Finder and Apartments.com's successes.

And just add one thing on that. We've got about 120 or so that we've given notices to. Most of them will be here through the end of the year, some a little bit going into the first quarter next year. So we're well underway. As most people know, CoStar moves a light speed. And we've done lots of very, very successful integrations and acquisitions. So I think we're well underway, maybe better than ever.

And we'll go to the line of Andrew Jeffrey with SunTrust. Please go ahead.

Hi, thanks for taking the question. Brian, I hope your sabbatical doesn't mean we have boring conference calls for the next four quarters.

I'll see you in Boston next week with Andy, don't worry.

I need more entertainment in my life, apparently. Could you talk a little bit about the growth strategy in Apartments, both Apartments.com and Finder vis-à-vis price? I wonder how much of the blow-out sales growth is a function of underpricing the competition, and at what point do you start to price for value, integrate data, and start to drive some greater yield, or if today and for the foreseeable future, share is your primary consideration?

Well, we -- in acquiring Apartments.com, one of the considerations was we looked at all of the other players, and looked at their price points they were charging people. We have experienced, though decades and decades ago, of converting from a print advertising medium to a digital information platform or digital marketing platform. And it's common that when someone converts from a print ad solution to a digital ad solution they maintain the cost structure of the -- just religiously maintain the cost structure of the print platform, which has ink, Heidelberg presses, and trucks involved. And that isn't always the right solution. You can actually -- when you have no direct cost for acquiring additional ad, other than the sales commission, it's possible to very profitably go for volume, and leave a player who is charging print prices vulnerable. So you can go for higher profitability at higher volume. And, clearly, the renters have told us they care about higher volume. That's the strategy we're going after. And the fun thing is that it's hard for the competitor who has set a strategy on high price at a low volume to respond to that quickly. So I'm very comfortable of the prices we're charging. Again, we have these differentiated scales, so we have silver, gold, platinum, and diamond. We're intentionally bringing people in on level three, and leaving open the ability to move them to level two and one over time. Buildings moving into lease-up or the vacancy problems move into -- will pay dramatically more, they'll pay more than twice or three times as much to go into the top [indiscernible] position with the most prominent ad. I believe that if you get some softness with over construction, some marketers will get a lot a more share and that people move into that two in one position to create a marketing exposure. And then the other thing is we just have a cost advantage here. I mean we're already collecting all those content about the buildings. We don't have to hire the people to collect that content in connection with the sale of an ad. So our costs are being distributed across the advertising platform and the information platform. So I feel very comfortable where we are right now, and I just think we're lucky as heck to have a cost advantage. And do not be afraid to be a little bit bold and change in the business model up a little bit. So did I answer your question? Okay, I'll assume it did.

And we'll go to line of Brett Huff with Stephens Inc. Please go ahead.

Yes, this is Jim Rutherford in for Brett. I just wanted a quick update on hearing what multifamily owners are saying about lead quality and if there's been any change there, and then on the volume that they -- volumes of leads they're getting after switching to Apartments.com from other vendors.

Sure, happy to. I met with a lot of owners recently with NAA in Vegas, and was extremely pleased with the feedback I received. So across the board, the most senior principals of firms, and then the marketing leadership across the board, everybody I spoke to acknowledged that they were happy with ever seeing a material improvement in lead quality and quantity from Apartments.com over prior year. And in particular, one of our strategy differences from other competitors has been we are not focused on maximum lead volume or focused on lead quality. So a lead is a cost item. A lease is a revenue item. And the industry had gotten into a game where it was drive leads to the telephone leasing office, regardless whether or not that lead was even remotely qualified. So specifically you don't tell the person if the apartment, the one bedroom is available or not. You haven't called the leasing office to find out. That's a waste of the leasing office's time. So we've done, as we're telling people there's no one bedroom available here, don't bother calling unless you're really, really desperate. And that brings lead volume down a little bit. The marketing and the traffic brings lead volume up, but it's more qualified leads. So we're getting -- we are really pleased with what've heard. And I think now, especially for the 13,000 communities that have been advertising with the ApartmentFinder, I believe we're going to blow their minds. I think we're going to give them an increase of leads, like, they can't believe when you go from 2 million unique visitors to 14 million unique visitors. And you go from, again, this sort of murky lead shotgun game to really qualified high quality leads. I think it will work really well.

And we'll go to the line of Bill Warmington with Wells Fargo Securities. Please go ahead.

So, good afternoon everyone.

Hey, Bill.

Hey, Bill.

And so I heard a rumor that, Brian, you were trying out for the Washington Capitals and you were going to go on the ice, that it could be pro this time.

Trying out, I already got a spot.

I'm behind. Anyway, so congratulations on that, and we're going to miss you.

Thanks, Bill.

So I have a question for you on the sales force structure. I know you gave out the number of 624 and that included 110 coming in from Finder. But maybe it would be helpful if you could sketch that out for us now, how the sales force is actually organized across all the different products and how we should think about that in terms of how it's organized.

Okay. So, oversimplify…

It can't be too simple for us for a sell-side analyst.

So if I extract out inside sales selling a LoopNet in tertiary markets, and I extract out verticals and real estate manager and things like that, these are little sales teams of -- just smallest sales team, which were not insignificant. There's probably a hundred some people there. And I focused on the core businesses. It really breaks into a CoStar information-oriented and commercial real estate oriented sales force. And then in Apartment, a marketing-oriented sales force. One of my big concerns, this time last year was that I did not have as big an apartment marketing sales force as my competitors did. And that was one of our disadvantages, so I was pushed to move the CoStar information sales people into supplement what we had in the apartment side. So the ApartmentFinder acquisition really solves a whole and has been exceeding expectations for the result. And especially it's different about this apartment business than from the office industrial retail business is that, the smallest cities in America play an outsized role. So Greensboro, and Biloxi, and Baton Rouge, Albany, Buffalo, they actually generate material revenue in these apartment sectors. So we did not have strong offices or personnel in those really, really small cities. And ApartmentFinder brought that to us. So it's complementary geographic distribution between where the ApartmentFinder folks are strong and where the Apartments.com people are strong. The tenure of the ApartmentFinder people we're bringing on is excellent. I mean it's not a typical that's eight years, 12 years, 14 years at NAA as I moved from little group, at the party, from little group of clients with a sales person, a little group of clients with sales person, I heard several times that this sales person was in this client's wedding party. So that's fantastic. And what that's done has given us real strength in the tertiary markets and good relationships, and then also, some strength in the primary markets. So for instance, Apartments.com had six sales people in Los Angeles, and ApartmentFinder has six people in Newport Beach, so it tells me that no one really manages sales people down there before, because you can't go from Newport to Santa Barbara effectively sell, and by bringing those two groups together, you actually begin to able to assign out L.A. in a realistic territory pattern. The thing that's key is the teaming between the information sales person and the marketing sales person. That's working like a homerun. People are teaming up. And they end up getting a lot more revenue and taking lot more share when they go into combined offering. And the other nice thing about that is historically the marketing people were gate-kept at the leasing office of the community. So they were often selling one community at a time to the leasing manager of the community. When you bring in the CoStar reps' information, they're used to selling to the C-suite of the organization, and that group has an interest in it. So they're bringing the marketing person up to the C-suite, and it's atypical we are getting a lot of deals with the 20 communities at once, which was prior unheard of, which is allowing us to move so much shares so quickly. Anecdotally, I would hypothecate that -- maybe six or seven competitors we're dealing with right now, I would guess that many of them are down 10% of their revenues this year. Again, I look carefully at our public. I look carefully at the subscription base for public information competitor. I think that this teaming in the sales force is working incredibly effectively, moving thousands of communities to us. So there will be - there is some overlap in some areas, but we want to grow that sales force for the -- there's an unlimited need to grow that marketing sales force on the LoopNet side in the field and the lands of America, which is still are very promising vibrant business with a great future. So I would -- I know you're not supposed to look at an acquisition and say that the sales force was like a real linchpin. You wouldn't spend that much money for just a sales force, but we did get fantastic sales forces here. And I am personally thrilled to finally look at like our Charlotte office and see real strength, see like 15, 16 solid sales people and the real CoStar presence in that community. So we're really a meaningful member of that business community. So that's happening all over the country, and I'm very thrilled with it. It will be a competitive strength.

And we'll go to line of Michael Huang with Needham & Co.

Thanks very much. Brian, so have fun with family and good luck with everything. It's been great working with you. This is just a quick one here. So I appreciate the comments around not extrapolating from the strong bookings performance that you've been seeing here. I was wondering, was there anything one-time in nature that benefited the quarterly bookings? And I guess, as you think about the year, I know that you're not going to be extrapolating aggressively here. What should we be assuming around bookings source for the year? Should that tail off a little bit, or is there a way you could walk us through that? Thanks.

Yes, I'll talk about. So I'm going to focus on the annualized contracts bookings number, the 25 million number. The other numbers are good number too. There's a lot of monthly stuff that comes in and out of there. Obviously all Finder stuff is monthly now. We are moving most of the apartments to annual, but there is still a lot of monthly stuff there and a lot of monthly -- three-month stuff at LoopNet. So, on the annualized number, which is really to me the key metric that we're tracking, that's obviously up fairly significantly, and that's the number -- I don't try to guide to it, Because I'll tell you quite frankly we're in uncharted territories here. Right? And that's why I'd say, it's four months into this, and I don't want to extrapolate things. I've always said this in the last two calls like let's get through one full year of the marketing campaign, and the sales stuff, and then really know what the trajectory is. Do I think we can grow that number, continue to grow at 50 plus percent for the next 50 years? No. But can we continue to grow at that rate? Possibly. We've never done it before. I mean so we're in the fourth month in, and I just think it's a spectacular number now. Obviously as we keep getting more experience each quarter, then we will continually sort of update that number. So in the annualized bookings number, there's nothing as far as I'm aware that's one-time in nature. So I think we'll just have to see how that plays out. I mean obviously there's NAA. There's a lot of big bang things upfront. So I think you have to get through a full 12-month cycle to see where we're going on that.

And we'll go to Peter Lowry with JMP Securities. Please go ahead.

Hi, great, thanks. It sounds like the synergies in between the recent acquisitions and the information on the analytics side of the business may be going better than expected. You mentioned the revenue synergies in terms of how the territories lay out, but is there anything else that's been surprising on that front?

And when you say it's surprising, do you mean in terms of specifically the synergies?

Like, worked out better than expected.

Yes. We initially thought that the focus would be on selling the information product to the asset manager, at the owner, or at the property management firm, where property management is also involved in acquiring and disposing for their clients. So we thought we're showing more of an asset management tool with our product. And what's surprised us was that often the very same person who would make the most senior decision on the marketing was also the person that had the greatest need for tactical rental information. So you go meet with somebody, ensure the asset mangers are in there and they're interested, but the direct VP of Leasing has to manage and understand every day what all their competitors are charging for rent, and they either watch for the people who are raising or lowering their rents, and that same person is responsible for lead generation. So what thrilled us was that person when you could solve the problem that no one else could solve, because no one else is solving this problem we're solving here. There are other people, who provide information on apartment buildings, but they're updating a very small set of properties realistically with a very, very small staff. And they're doing it on a bimonthly basis typically, or a quarterly basis. And we are updating more properties and their rental information each day than I believe any of our competitors update all year long, like, update quarterly. So we're providing these people with really good pricing, competitive intelligence. And that is really compelling to them. And the great thing is they control a massive budget for marketing the properties. And then the other little secret there is that they -- it's appropriate, there's nothing wrong with it, but they have a big budget for marketing these 30 buildings they manage, but the marketing budget goes directly into the partnerships on the buildings. And if they can get packages that allow them to get discounts on information based on the spent at the building, they can get very low cost information of the general partnership, and they're really like that. You could make an argument that you could allocate information cost against the limited partnerships of the building set in, but we do that for them. So in many cases, if somebody moves, there's substantial advertising budget for 20 or 30 properties from a competitor to Apartments.com. They can get free information to manage their rentals and their asset managements. They're underwriting the whole nine yards. And I really enjoyed the other day listening to a sales pitch from a direct competitor, where it was quite clear at the end of the presentation that the CoStar marketing analytics was a better product, and was free, because of their marketing. And the competitive sales person just shrugged and disappeared. So that's the surprise. Thank you. So I believe at this point, we have no more questions. So thank you all for joining us in this call. And we look forward to those who are going to be up in New York for the Needham conference, and for those we are going to see up in Boston in the next -- the day following that. We look forward to seeing you. Again, thank you very much, and look forward to hearing from you all next quarter, and look forward to Scott leading the call next quarter, and Brian making comments from the peanut gallery. Thank you very much.

Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you for your participation and for using the AT&T Executive Teleconference. You may now disconnect.