Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 CoStar Group Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Ms. Sarah Spray. Please go ahead.

Thank you. Good evening and thank you all for joining us to discuss the third quarter 2020 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Scott Wheeler, our CFO, I would like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements, including expectations for the fourth quarter and full year 2020. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors 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 CoStar Group's press release issued earlier today and in our filings with the SEC including our most recent annual report on Form 10-K and quarterly 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. CoStar assumes no obligation to update these statements whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call including EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at costargroup.com under Press Room. As a reminder, today's conference call is being webcast and the link is also available on our website under Investors. Please refer to today's press release on how to access replay of this call. And with that, I would like to turn over to our Founder and CEO, Andy Florance.

Good evening and thank you for joining us today for CoStar Group's third quarter 2020 earnings call. Total third quarter revenue was $426 million, up 21% year-over-year. For 20 years, CoStar has grown revenue 20% plus on a compound annual basis. Our performance this quarter is no different and shows clear evidence that in the midst of this pandemic, our business is strong, resilient and countercyclical. In the third quarter of 2020, all of our businesses performed well and continue to be solid, resilient and showed the performance that we saw as we exit the second quarter. In the third quarter, we achieved $53 million in quarterly sales bookings, a 53% increase over Q2 sales bookings. This was one of our strongest sales quarters ever despite the continued high levels of economic, social and public health uncertainty. Our marketplace businesses displayed very strong countercyclical growth with Apartments.com revenue up 23% in the third quarter 2020 over the third quarter of 2019. Similarly LoopNet revenue was up 19% year-over-year in the third quarter. Our earnings in the third quarter were very strong with net income of $58 million and adjusted EBITDA of $134 million. Our sales team at Apartments.com turned in one of their best performances ever in the third quarter with net new sales up a massive 59% versus the same quarter a year ago. Customers continue to invest in Apartments.com because of the strong and growing lead flow we deliver driven by growing site traffic and engagement. During the quarter, we set yet another record for site traffic. According to ComScore, for the third quarter, average unique visitors per month to the Apartments.com network of sites in the quarter was over 25 million, up 20% from the same quarter a year ago. The growth in lead flow was even…

Thank you, Andy. I have now removed my mask for all those wondering, while Andy coughs nearby. Actually it's our first earnings call, since what February or, actually together in the same room.

Isn't it great?

Yes.

We could also – while Scott's delivering his section, I'm going to manufacture integrated circuits.

All right, what was I talking about? That's right. The recovery; we experienced a great third quarter. Improved off the second quarter and our momentum is building nicely, 53 million in net new bookings for the third quarter. We think is an outstanding result, the second highest ever and it was in the midst of our global pandemic. With these strong sales, our third quarter revenue of $426 million came in $6 million above the high end of our guidance range, resulting in 21% year-over-year growth in the third quarter, which was over 200 basis points above our forecast. That makes 14 quarters in a row with growth at or above 15%. And we have now crossed $1.7 billion in revenue run rate for the business. We now expect consolidated revenue growth of approximately 18% for the full year of 2020. Looking at our revenue performance by services; CoStar Suite revenue growth was 6% year-over-year in the third quarter, slightly ahead of our forecast. As sales of CoStar Suite improved sequentially in the third quarter, by over 2 times the level of CoStar Suite sales in the second quarter. Accordingly, we expect revenue growth for CoStar of approximately 7% for the year and approximately 4% in the fourth quarter of 2020 compared to prior year. Revenue and information services grew 70% year-over-year in the third quarter of 2020 to $33 million as expected. The revenue growth expectation for the full year remains unchanged at approximately 45% with revenue growth around 14% in the fourth quarter, as we begin to lap the acquisition at STR that occurred in late October of 2019. Without STR, we expect information services revenue in the fourth quarter to be approximately the same as the fourth quarter of 2019. Multifamily revenue growth for the third quarter…

Thank you. [Operator Instructions] Your first question will come from a line of Pete Christiansen of Citi. Please go ahead.

Good evening. Thanks for the question. Nice trends, gentlemen. I wanted to dig into the growth that you're seeing in Multifamily bookings a bit and there's this notion that you have a bifurcation in the market between metro and suburban areas. They can see as growing in metro areas, higher competition in suburban areas. Can you talk about what you're seeing from a sales perspective, where is the platform really winning today?

I don't think we have our sales results broken down by urban and suburban. But my sense of it is that we are seeing – we're going to be seeing strong sales in the CBDs because there are a lot of properties in the central business districts that are in lease-up. There's been a high supply there, and those folks would have well ahead of any disruption would have allocated significant investment for marketing for lease-up. But at the same time we haven't heard anything to indicate that suburban properties aren't also accelerating their investment in Apartments.com. So it's across the board that we're seeing this. I think one of the more exciting things is when you look at that number for accelerated sales into one to four units, which has both suburban and CBD. You can see that, I mean, year-to-date, I think there was 5,700, 5,900 and half of the sales occurred in the last quarter. And that's that mid-market sales team and they're basically geographically independent. They're covering suburban, urban, rural, the whole nine yards; so good pacing on that across the board there.

Next question will come from the line of Mayank Tandon of Needham. Please go ahead.

Thank you. Andy, you mentioned the international opportunity to ex-domestic. Just want to get your thoughts on sort of how you go about building it out? Is it still market-by-market? I think you launched Madrid like several years ago and then you did that deal in UK, Realla I believe. And then you got this deal announce today. Just want to get your thoughts on inorganic versus organic to take advantage of the opportunity internationally? Thank you.

Sure. So Sarah Spray is holding up her hand saying it's 3 times the – the global opportunity is 3 times U.S. opportunity. I in editing the script sandbagged it down to two-x the opportunity. So we could debate the semantics of potential there, but we can all agree it's large. And the nice thing about it is it's also, it continues to differentiate us as a particularly valuable vendor to folks who are flowing capital across border. So when you look at some of the bigger markets London, New York often more than half as much as 70% of the capital going into investment grade properties is crossing borders. So building a good international solution is particularly valuable to a lot of our best clients. I don't think we have the same opportunity to acquire in the traditional commercial real estate space internationally. Like we're just well ahead of any other solutions out there around the world, I mean, there are a couple of little players here and there, but not quite the same opportunity we have here in the United States. We are – the new international CoStar really looks quite impressive when you see it, you'll think, okay, that's really nice. It's very elegant. And our thought is, is that our clients are subscribed to national data in their countries will just be able to see properties around the world. And the addition of Emporis allows us to really crank up what they're going to see when we integrate that in. So as soon as we finished that someone in New York would be able to see thousands of properties in San Paulo or in Buenos Aires or in Tokyo. And now we won't have the same level of detail that we have on CoStar properties in…

Next question will come from the line of Ryan Tomasello with KBW. Please go ahead.

Good evening, everyone. Thanks for taking the questions. The for-sale of housing market is clearly seeing an acceleration in demand, which I think has a lot of people wondering if this represents a secular shift in home ownership preferences. So my question is with that as a backdrop, is there any desire to expand CoStar's footprint in housing, beyond the rental market? What types of areas of that sector could make more sense and be most complimentary for example, anything on the marketplace side, or perhaps on the construction data side, that would be an interesting area for CoStar?

Yes. So I mean, there are a lot of different sub-sectors, just like there are a lot of different sectors in the commercial real estate information and marketplace area. There are a lot of sectors in the residential side. I think that it's good to know that CoStar Group actually began life as a residential information business. So when I first started up, I was doing assessor recorder deeds and downloading MLS data. So actually we started residential. We focused on commercial, obviously. Looking at similarities we're talking about the construction data areas, interesting, historically not terribly interesting for a number of different reasons. There's – there are information services, there are lending services, there are marketplaces. I would note one of the things that really stands out for me is that the United States is a oddly underdeveloped country when it comes to residential marketplaces. If I look at a mature residential market place provider like REA Group in Australia, and I take the relative size of U.S. and Australia on a GDP basis, it would imply that you create a market cap of about $200 billion in the U.S. on a residential marketplace. You create $1billion plus of EBITDA in that area and yet, no one's really doing a good job of there. Same thing with the right move in the United Kingdom, if you just take their 50%-plus margins, I think they're 60%, 70% of margins, but they're huge. And you just scale them to the U.S. there's clearly a lot of opportunities in the U.S. that are underdeveloped, while people are moving in away from really pure digital models and getting into actually becoming players in brokerage and flipping and mortgages and, so I think there's some big opportunities out there nothing to talk about today, but very focused on it. And it's an area we feel very comfortable with because we've been working with that space for a while. You can see we're selling a lot of product that what an essence or houses for Apartments.com recently. So it's interesting we're keeping an eye on it and we're – there's nothing remarkably different about the picture of a house, a dot on a map for a house, a dot on a map for a building, assessor parcel record for an industrial building or a house or a walk-up, so all very similar. But again, the whole space of digital real estate is just massive and unlimited amount of opportunity.

Next question will come from the line of Mario Cortellacci from Jefferies. Please go ahead.

Hi. Thanks for the time. I'm just curious about Q3 new bookings. And I know that Q2, a majority of it was in June, and I'm assuming that that pent-up demand carried over into Q3. So I just wanted to get a sense for what the cadence of the net new bookings were throughout the quarter. And then maybe you can even go a level deeper and maybe give us a sense for what the cadence was for CoStar Suite and LoopNet and Apartments.com. Just to get a sense for which was when it may have accelerated versus which may have just had that, that pent-up demand and had maybe the first month be the largest?

Sure. Let me – let me take a shot at helping you with that one, Mario. The phenomenon we saw in the second quarter was clearly one of significant disruption early in the quarter, and then with strong rebound particularly led by Apartments.com and the marketplaces. I think when I look at the pattern that we saw in the third quarter it was really pretty well distributed. There wasn't a slowing in the first month and then a big acceleration to the end. It was pretty evenly balanced. I, I think that pent-up demand that came out of April and possibly may, a lot of that came into June and then it's sustained itself pretty strongly in the third quarter across all of the months. That typically the third quarter or the third month of any quarter is our strongest from a sales perspective. And that's as much just with sales, pacing and making the quarter closings of the sales force s focus on. But I think if you look at each of the businesses, the marketplaces were very steady sequentially on the quarters, multifamily tends to come off in the third quarter versus the second quarter numbers that seasonally same thing this year, but it was still very strong versus last year that Andy mentioned. And then, LoopNet performs strongly across all the months. Information services the same with probably some slight growth as STR continues to just month-to-month do well with its customers and CoStar, I think had a very solid pattern across the quarter as well with no major real cycles to point out. So I think it was pretty evenly balanced and more so than actually some other quarters. So it's encouraging that we've seen that and that hopefully we'll see those same strength carry into the fourth quarter.

I think the standout was probably LoopNet really, the CoStar sales force I felt it came pretty positive about the LoopNet product and the potential for that as the quarter went on.

Next question will come from the line of Sterling Auty of J.P. Morgan. Please go ahead.

Yes. Thanks. Hi guys.

Hey, Sterling.

I missed a few set of questions. Can you guys give us some more detail on the acquisition that you made? You gave some of the properties, but what is the price paid for an asset like that? And how much does that jumpstart your ability to really get kicked off in that region?

Yes. So I'll let Scott comment on the price. I think he'll say diminimous. I think it's in line with a coffee budget. And lately we haven't been using much coffee here, though I did buy my own milk for the headquarters today. So the – yes, so it's a relatively small purchase price – a small revenue stream. It's a company I've known. I've known the founders and the principals for a number of years. It's recently been acquired a couple of years ago. I think I've known this company for 10 or I think I went over to visit them 15 years ago, or 12, 15 years ago. They have a network of photographers and researchers who are volunteers, sort of like Wiki around the world who go around to take pictures of buildings and collect data about who the architects are, the construction company. They're focus intent. They initially focused intensely on skyscrapers. They gave an annual award for the best skyscraper in the world. But as time went on, they started focusing on smaller and smaller buildings and some cities where they've got good volunteers out there they'll have a great coverage, whether it be Sao Paulo or Buenos Aires or whether they'll Tokyo. They don't have the current availability and comparable sale data we might have. They don't have the news, but it's a great – it's a great sort of grid for us to use to start to bring content to these markets. And it has tremendous branding benefits. So the first time next year, when a customer – a longtime customer in New York who actually has a cross border investments, turns on their CoStar terminal and can browse different city, beautiful buildings in different cities around the world. I think people are going to waste a bunch of time looking at buildings all over the world from their CoStar terminal. And I think it's a great branding event. I don't – when I look at a London broker, they often sort of look at CoStar as a London company or a Chicago broker often looks at CoStar is a Chicago company. I think this sort of expands their – our brand and has them view us a little bit more like a Bloomberg, a global player really moving away from what started life as an outsourcing function for these brokerage firms or owners to becoming more of a unique, completely different animal, hat's a vast global network of valuable commercial real estate data. So it's a teeny company but it's a fun one. It's exciting. It's got some great field researchers. We can't wait until we can travel and we can host these photographers for a global conference and we'll end up taking a number of these volunteers and hiring them and making them full-time photographer researchers and South Africa, or in Kyoto or in Sydney or in Moscow or in Bogota, wherever they might be.

Your next question will come from Andrew Jeffrey of Truist Securities. Please go ahead.

Hey, good evening. Appreciate you taking the question. Andy, I liked the description of some of the customer characteristics – property characteristics in apartments. I wonder if you could talk a little bit about sort of how you'd frame up the, I don't know if there's an average or a template kind of customer, but when you talk about the average spend, especially in vigor customers, but also down market. Can you kind of frame-up how much more you think you can take, and then what the average revenue per property might look like by segment at maturity. It's a wallet share question.

Sure. If I just take the – and I think that there's some noise in that one to four category, but it's a 100 unit plus category we're at $1,000-some per month per property. I think that as the value propositions of digital marketing continue to grow for these owners, I think that number can – there's room to grow there overall pretty significantly. I think that the – when you look at the five to 100, that the $500-some, that's an impressive amount initially. Those are often being sold by a relatively junior new people to the sales world for us in our mid-market group. So as they gain experience and as people become familiar with the value proposition of Apartments.com, I think that people bid for more exposure and drive some of those price points up in particular in the middle. It might move up closer to the thousand mark. And then at the lower end that number really quite impressive to me. This is our first year really focusing on that area and to add a sales team of about 30 folks focusing on the mid-market and the smaller properties and come up with 5,700 properties at $150 per month. And that number may be a little rough because they can extend, the time periods is a little flexible, but many of them usually lease their property up within the month, but then go a little bit further than that, but roughly $150 per month. If you think about it, the per unit cost is higher and higher as you get smaller. So the folks over a hundred units are getting a real bargain at a thousand and the folks the thousands of people beginning to buy from us from single-family homes and condos and townhouses, they're willing to pay a real premium at that $150 price point. That's probably 10 times the price point or more that a Greystar is paying for a hundred unit plus community. So, I think, we'll get – we've had five years of continued appreciation, our average price point in all these areas. I think that trend will continue as we continue to build out a stronger and stronger product offering. And then the thing that I'm very focused on, I hope you're listening to me Paige Forrest is we need to build a bigger boat because everyone wants to ride, so we need more salespeople, but we can do that. We can build that team out. It's a great ROI. It's real straightforward. And we have a great team to grow with.

Your next question will come from the…

Paige Forrest is our Head of Sales for Apartments.com by the way.

Your next question will come from the line of George Tong of Goldman Sachs. Please go ahead.

All right, thanks. Good afternoon. You're building out a dedicated sales force for LoopNet with 100 to 200 sales professionals. Can you discuss the timing of when the sales team will be built out by? How you plan to transition the sales process away from CoStar Suite sales? And what the implications are for margins?

Sure. So - yes, so LoopNet's separate sales force. I believe we already have hired the first 15 to 20 people. We have also reassigned maybe five or six people already, 15 to 20 folks in that group. For the foreseeable future, the apartments – the CoStar sales team is doing a great job selling LoopNet. We'll continue to do so. They get the hang of it. They're doing a great job, but we just have so much opportunity in the LoopNet side and so much opportunity on the CoStar side. We really want to give folks the ability to focus on their core areas and make sure that all the good prospects are getting covered in any given year and that we are pursuing best practices on retaining and renewing those folks that do begin buying. So what we'll do is as we have both the CoStar team selling LoopNet and the new LoopNet team selling LoopNet, we will do cross commissioning, which means that if I'm the primary lead on an account and I'm a CoStar rep, when a LoopNet rep comes in and sells that account, I will get some referral commission and I get higher rates on my CoStar. So that everyone is on the same team. The more they're selling LoopNet in the market both the CoStar and the LoopNet people will get escalation in their commission rates. We do it, so that it's still a very high margin. I think that the ramp up period for CoStar has historically been six months. As we bring people in and if they focus on the more entry-level LoopNet buyers that ramp up period is typically two months. And then as they go to higher end properties that might be six months. So I don't think there's…

Your next question will come from the line of Stephen Sheldon of William Blair. Please go ahead.

Hi, thanks. On the multi-family side with solid levels of supply hitting the market recently, and over the next year, and with some forecasting vacancy rates to trend higher including I believe the forecast from your research group. What could that mean in terms of the ad sales environment for Apartments.com and any other multifamily marketplaces next year? Could it become an even more favorable environment than what you've seen this year as owners try to compete for tenants and to fill vacant units?

Yes. So, historically, the conventional wisdom has been, and then the empirical experience this year is that the higher the vacancy rate goes the greater the demand for lead generation with an online marketplace like Appartments.com. So we'd heard when operating Apartments.com for the last five years prior to the pandemic, we'd heard that when the market goes south and the vacancy rates rise, demand goes up for these ads and then the pandemic hit. And in fact that's what we observed. If we do get a continued secular shift to housing and obvious, you know, new home construction now is through the roof, lumber prices are through the roof, numbers are huge. There could be more competition for renters and that would bode very well for Apartments.com. I was on the phone with a friend last night, who is looking at running out their New York City flat, and they're having a tough time. And I sold my lifelong friend $159 ad. That's how good a friend I am.

Always there to help.

Yes, always there to help. And I know you can't use my pickup truck to move. I'm sorry.

Your next question will come from the line of David Chu of Bank of America. Please go ahead.

Thanks. So can you just discuss the LoopNet marketing plan? So it sounded like maybe about $15 million to $20 million in '20 or the fourth quarter? Just how much should we think about incremental in 2021? I am just wondering if this is going to be something large similar to apartments.

Do you want to talk about it?

Yes. Yes, so what we saw – obviously as we got into the third quarter and the strong response with LoopNet that both from a paid traffic and a retargeting, we found that that was generating great leads and really helping our sales teams who want to grow and grow the revenue. So to keep it in perspective obviously, the apartments business is a direct to consumer business, which you have to cover an awful broad territory in your marketing scope to generate the consumer traffic that we need. When we talk about advertising for LoopNet, it's going to be towards – the owners and the brokers involved in property transactions. So it's a much more direct approach and it's not as broad as the consumer side. So fundamentally, it's not going to be as large as apartments. Now, when you look at our overall spending marketing, apartments is 80% of what we spend every year, LoopNet is only about 10%. And so, when we ratchet LoopNet up by three or four more percentage points of that in the second half of the year, it's not a whole big number. So, if you analyze what we're spending in the second half of this year, you might get another $10 million to $15 million of marketing spend next year for LoopNet. So, now that our marketing budgets are as significant as they are, that's not a whole lot, but we haven't set our plans for 2021 yet. We'll still be working on those for the rest of the fourth quarter. And as the marketplace for LoopNet continues to perform, we build that sales force then we'll definitely want to give them the marketing support they need, but the growth will pay for all of this very easily in LoopNet just like it has for Apartments.com.

Great.

So it is increased investment in SEM. We're having great success with our retargeting initiatives for both LoopNet and for Ten-X that is giving – providing real value to our diamond, platinum advertisers great results. The fact that we know who's in market – uniquely know who's in market searching for office space or investments or industrial or retail once we discover who's in market, we can dramatically drive the frequency with retargeting and that's working well. So we want to continue that. And then also since we have a good sense of who's in market to invest in properties with Ten-X we're investing in increasing the retargeting there that the metrics are great on the results we're getting there. And then we want to do general branding to elevate the image of LoopNet from what had in the distant past than more of a Craigslist for commercial real estate to more of a higher end marketing platform like Apartments.com. So we will invest, but we're investing at a lower level on Apartments.com, significantly lower levels of Apartments.com, but with a view to the fact that we can achieve the same sort of revenue numbers in LoopNet as we can in Apartments.com.

Your next question will come from the line of Jeff Meuler from Baird. Please go ahead.

Yes, thank you. Good evening. With the build-out of the dedicated LoopNet sales team wanted to ask about the plans for, I guess, the suite sales team capacity and prioritization. So just first, are you planning to maintain or grow that capacity instead of reallocated? And then just from a timing perspective, given I guess some CRE end market challenges, is this just that the size of the opportunity with banks, lenders, investors, owners, et cetera is so big and kind of those cool new CRE analytics you have in the development pipeline, but just if you could address just first the reallocation or growth in capacity, and second the timing of when you're doing it. Thanks.

Yes. So we're – the opportunity for the CoStar team. So we've seen them going more and more into selling LoopNet in the last quarter or two, which is great news. I mean, that's giving us great results on LoopNet, gave us our best sales quarter ever LoopNet, but that means there's just not enough people left to sell to banks, owners, all the different folks, corporations who are buying CoStar. And as I look forward to 2021, and we've got a very robust rich product pipeline that is transformative, we got to make sure we have a sales team ready to carry that out to all the opportunities we've got. So, we'll be pacing in 10, 15 new hires, something in that neighborhood each month going into the LoopNet side, we might be doing a little bit of growth in the CoStar side. And so just incrementally as we an inward setting up the commission structure, so that the CoStar sales person benefits by making the introduction for a LoopNet person to do the work and selling into one of their accounts, freeing them up to go sell something else, but still being able to make money by selling LoopNet into their – facilitating to sell LoopNet into their accounts. So it will be an intense or ramp up of both sales forces as we free up capacity in CoStar over the next 12 months, but it will probably be a growth rate of about two years, most of the growth is in the LoopNet side, but that's freeing up resources in the CoStar side and there will be some growth in the CoStar side because just we can see we're unable to reach and prospect all the good targets we've got on either CoStar or LoopNet. I hope that answers the question, but the overall message is we've got a good prospect, we're investing into high margin and we have a huge market opportunity and we're kind of bullish and we want to grow.

Thank you.

Your next question will come from the line of Joe Goodwin of JMP Securities. Please go ahead.

Thank you for taking the question. Just a quick one on Ten-X. How does it perform in the quarter from a revenue standpoint? Did it beat expectations? And then as far as what that asset will contribute for the remainder of 2020, is that still in line with what you previously provided? Thank you.

Yes, we're pretty much in line with what we talked about last quarter. I think we said $25 million to $30 million contribution for the year. We're still right in that range. And it seems to be doing just as expected. Our focus on Ten-X right now is integrating the platforms, is connecting to the LoopNet Diamond ads that Andy talked about. And really until we get the platforms connected some time into 2021, we don't expect Ten-X to perform really any differently than where it is today. Even though they will have more interests, but until we can start elevating both the supply and demand side with that backend put together. We expect it to be about where it is until two things. We see the integration and then we see the advent of the distressed properties start to come through, which we expect really later next year.

And I would add another element to that. So, we're clearly in the under construction phase with Ten-X. And as Scott says, optimizing the eyeballs to bring more bidders, we want to bring more demand to that market, so when someone puts an asset up there, there is a robust set of bidders. So in each auction, I'm watching carefully to see how many registered bidders, how many people actually bid on each property, and I'm – and this is not a monetary event. This is more of a tuning it to make sure we're bringing the demand to the marketplace. And we're getting fantastic results there. So the number of bidders is going up. The sell-through rate is going up. And as you do that – and then also, we're – yes, so as we do that, we're making good progress there. We're fine-tuning some of their go-to business strategy, go-to-market strategies like their pricing scheme, the way they're – like there was some – they were using traditional auction pricing, which I don't think is appropriate in a digital marketplace. We've been playing with their gross margins at different price levels and trying to optimize that a little bit. But the one thing that really stands out is that these numbers are great. I mean if we've got a process here that takes your success rate on selling a commercial property from 36% to 70 some percent, that's really – this can – that's discontinuous change. That's transformative. If you take a process from taking 500 days down to 90 days, that's discontinuous change. We have appraised values for all these CMBS properties, and we'll take that data set to write a white paper to show that the properties actually sells the same or more in a digital…

And your next question will come from the line of Brett Huff of Stephens. Please go ahead.

Good afternoon or evening Andy, Scott and Sarah. Hope you're all well.

We are. Thank you. Likewise to you.

Thanks. So a little bit bigger question because I'm having trouble trying to wrap my head around it and I've gotten some questions from clients. All the moratoria that are still in place and that may stay in place or however long they go for no apartment evictions, how do you all think about that both impacting the business today? Is it a negative demand driver today or positive? And then as those moratoria roll off presumably at some point, what is the impact on Apartments then? I don't understand how that good, bad and different or otherwise. So, thanks.

Yes. So it puzzles me a little bit because I would have expected a higher default rate at this point for people paying their apartment right now. You saw the article. I think they're in the Wall Street Journal. It's definitely growing, and the consortium of folks who are collecting rents have shown that the number of people who are in default on the rent is growing. While there's a moratorium in effect that in theory is bad for Apartments.com because I can't move in a new tenant if there's a moratorium in eviction, in practice, what's happening is the landlords want to build that supply, so that the second they can evict someone who isn't paying their rent, they can bring a new renter in. And so in practice, short term, in moratorium where it's not impacting us negatively and then when it actually – when the system clears, that will probably create a lot of demand because you're going to have a lot of flow. Obviously, there is a terrible human cost here, but the question is more technical in the business. I did double check in preparation for the call today. I just checked with – we're handling hundreds of thousands of rent payments for individual, generally single family homes, and surprisingly that the rent payments there holding up remarkably well. So, so far no negative signals to our business in what I would have thought would have created a big negative signal, but when it clears, it's a positive signal.

We have no further questions at this time. I'll now turn the call back over to presenters for closing remarks.

Thank you all for joining us for this third quarter earnings call, and we look forward to wrapping up the year and I guess a number of months from now, but we'll update you on our progress towards some of the goals we've talked about today. And I hope you all have a good evening, and stay safe. And great for us to be back together in the same conference room for earnings call. Thank you.

This concludes today’s conference call. You may now disconnect. Thank you.