Welcome to LoopNet, Inc. Earnings Conference Call for the first quarter of 2009. The date of this call is April 29, 2009. This call is the property of LoopNet, Inc., and any recording, reproduction or transmission of this conference call without the expressed prior written consent of LoopNet Inc. is strictly prohibited. This call is being recorded. You may listen to the web cast replay of this call by going to the Investor Relations section of LoopNet's website. The web cast will be available on the company's website until May 29, 2009. I will now turn the conference call over to Derek Brown, Vice President, Investor Relations and Corporate Planning.

Thank you. Good afternoon. Thank you for joining us to discuss the LoopNet Inc. financial and operating results for the first quarter of 2009. With me today are Rich Boyle, Chief Executive Officer and Chairman; and Brent Stumme, Chief Financial Officer. Today, Rich will begin with an overview of the business and the overall corporate strategy, continued by a summary of the company's first quarter performance and review of the marketplace. Brent will review the first quarter financial results and provide second quarter 2009 guidance. During the second quarter of 2009, the company plans to attend the following investment banking conferences, JMP Securities Research Conference on May 19 in San Francisco, Stephens Inc. Spring Investment Conference on June 3 in New York, and Credit Suisse Convergence Conference on June 9, Dana Point, California. Web cast of LoopNet’s presentations will be available on the investor relations section of LoopNet’s website. I would like to bring the following to your attention. On the call today, you may hear forward-looking statements about events and circumstances that have not yet occurred. Actual outcomes and results may differ materially from the expectations contained in these statements, due to a number of risks and uncertainties. Please refer to the company's recent SEC filing at the SEC's website at www.sec.gov for detailed discussions of the relevant risks and uncertainties. The company undertakes no responsibility to update the information in this conference call under any circumstance. The press release distributed today that announced the company's results is available on the company's website at www.loopnet.com in the Investor Relations section under Financial Press Releases. The current report on Form 8-K, furnished with respect to our press release is available on the company's website in the Investor Relations section under SEC Filings and on the SEC's website. You will also hear discussion of non-GAAP financial measures, reconciliation of these non-GAAP measures to the most comparable GAAP financial measures are contained in the press release distributed today, and available on the company’s website. Now, I will turn the call over to Rich Boyle, Chief Executive Officer and Chairman.

Thank you, Derek. I like to welcome all of you to the LoopNet’s first quarter 2009 earnings call. First off, I would like to welcome and introduce you all to Derek Brown, LoopNet’s new Vice President of Investor Relations and Corporate Planning. We are very excited to have Derek on the team here, and he will be an important source of company information, going forward for the investment community. We have several key topics to address on our call today. Along with discussing our recent performance, today we will also be sharing our perspective on current conditions in the commercial real estate industry, and how they are impacting our business. We will also talk about our recent strategic financing that we previously announced and provide updates on a number of other ongoing initiatives. We continued to execute effectively, and drive our business ahead of the targets we set three months ago in the face of a very challenging macro environment. Revenue for the first quarter was $20.1 million compared to our guidance of $19.7 million to $20 million for the quarter. Adjusted EBITDA for the quarter was $8.4 million, compared to our guidance for the quarter of $7.5 million to $7.8 million. Our adjusted EBITDA margin for the quarter was 41.5% consistent with our stated target range this year of high 30s to low 40s on a percentage basis. We believe that this strong profitability highlights the sound foundation of our underlying business model, and reflects favorably on the ability of our team to execute in a really tough market. We remain well positioned to capture the large opportunity in our core business, and we are moving to take advantage of the conditions created by this industry cycle to our long-term advantage. At the same time, we are actively looking…

Thank you Rich. LoopNet’s revenue for the first quarter of 2009 was $20.1 million compared to $20.6 million in the first quarter of 2008 and our guidance of $19.7 million to $20 million. The decline in revenue was primarily due to lower premium member subscribers and lover advertising revenue, as a result of the challenging marketing environment that Rich just highlighted. Partially offsetting those factors, the company experienced a 12% year-over-year increase in the average monthly price of premium membership, resulting in an average monthly price of $66.18, reflecting the shift to a volume-based pricing structure for listers, which the company began to implement towards the end of 2007, and has now fully implemented. LoopNet’s adjusted EBITDA for the quarter was $8.4 million or 41.5 of revenues compared to $9.6 million in the first quarter of 2008 and our guidance of $7.5 million to $7.8 million. The company has reported adjusted EBITDA, which we define as EBITDA, excluding stock-based compensation and litigation related costs because management uses it to monitor and assess the company's performance, and believes it is helpful to investors in understanding the company's business. GAAP net income for the first quarter of 2009 was $2.8 million or $0.08 per diluted share compared to $4.9 million or $0.12 per diluted share in the first quarter of 2008. Non-GAAP net income, which we define as net income before stock-based compensation and litigation related costs, for the first quarter of 2009 was $4.6 million or $0.13 per diluted share compared to $6 million or $0.15 per diluted share in the first quarter of 2008, and our guidance of $0.11 to $0.12 per diluted share. As of March 31, 2009, the company had $68.7 million of cash, cash equivalents and short-term investments and no debt. In addition, please note that on…

(Operator instructions) And our first question comes from the line of John Blackledge with Credit Suisse. Please proceed.

Thanks for taking the question.

Hi John.

Hi how are you guys? I just want to ask a couple of things, one on the capital injection. Just wondering, I know you talked briefly about the rationale, and given the cash you had at the end of the quarter plus the $40 million, how much of that do you think could be allocated towards acquisitions and if you could just touch on private market values or multiples if they come down as of the last, you know 3 to 6 months? Thank you.

Sure. So the strategic rationale and we discussed this a little bit, we had a brief announcement at the time of the deal. Basically, we think the way the market is moving right now, overall there are some opportunities that are being created to both investing in our core business and look to expand what we do through some potential acquisitions, and without necessarily on the second part of your question, you know I think the exact amounts are not necessarily predictable at this point, but there were definitely scenarios that we think could play out where the capital that we had in our balance sheet was potentially going to be a constraint to some of the things that we wanted to do and therefore the reason for preemptively raising the new capital, so we had the flexibility to pursue those options if we see them develop. We are not at this point, and I think partially timing on these things is very difficult to predict, ready to give a specific break down in terms of where we think it may go or when it may happen we wanted to be prepared to be opportunistic, given what we think of the conditions that are developing in that ties into the last part of your question, John, which is the, yes, I think in the private market world prices are certainly much slower to adjust than they have been in the public world, but we have – we believe seeing some expectations adjusting, and I think it is a combination of the businesses are being affected, a combination of passive liquidity for a private company right now is substantially more challenging, and their view on valuation is, I think, gradually being brought more in line with those of us in the public markets. So you know, we definitely think there are some interesting opportunities coming up. That said, you know we intend to be as we have been all along in our acquisitions very patient and very disciplined how we approach it.

Thank you very much. I appreciate that.

Sure.

And our next question will come from the line of Jim Wilson with JMP Securities. Please proceed.

Thanks. Good afternoon guys.

Hi Jim.

I was wondering, I don’t know if you’ve given this color, but (inaudible) you brought it up a lot on the leasing side of things. Can you give kind of a split of your total listings, profit listings of what are the lease percentage versus the for sale percentage roughly?

Yes. It has been shifting. It will used to be fairly well in balance. You know, if you went back before the credit crunch here in this most recent cycle, but that was very close to a 50-50 split, and so we just sort of left it at that. It has been shifting recently. Obviously, sale has been growing at a pretty slow rate and the lease space has been growing very quickly. So, you know, at the moment I would say it has shifted, you know, at least probably is, I know it is ballpark of 60-40, I would guess.

Okay.

Lease space is probably in the order of about 60%.

Okay, and then I guess if you look at the change, I think I did the math here, but if you look at the change and putting in subscribers and are you still seeing, I guess over a period of more that the buyer side is stepping off as opposed to the lister side or the selling side?

Well, we started to see I think mid-2008 that it was impacting the people doing, in particular the one-off for sale listers what we refer to as kind of some of the transactional listers. So if you look at the big picture segmentation, it absolutely began with buyers of investment properties, and you know the way our business works, there are no long-term contracts. So it shows up in the business very quickly and it started too in Q4 of 2007. Then as you went into 2008, the low-volume listers, just because there is the lack of listings in the for sale markets, we are impacted pretty well also. The higher volume listers, the sort of more well-established professionals in the market that are more likely to have listings on a full-time basis and to be a little bit spread in their business between, you know, little bit of leasing, a little bit of sale are the least impacted right now, and those patterns are still very true.

Okay. All right, Brent that is really helpful, and I guess in there, did you find any changes even (inaudible) with the likely activity in the leasing side compared to wholesale property at least in the near term of any pricing incentives to those in the leasing market or anything you could discuss or (inaudible)?

No the pricing right now, I mean our pricing model doesn't differentiate between the two, and for somebody who is listing on LoopNet, particularly in the segments in the industry, where we really see a lot of traction would be what I would refer to as generalists who do a little bit of everything. So our pricing model for listers is and the volume-based, model-based number of listings doesn't differentiate between a for sale listing and for lease listing for example, and we don't anticipate in the near term really changing the pricing model.

Okay, all right, great. Thanks.

Thanks, Jim.

And our next question comes from the line of Mitch Bartlett with Craig-Hallum. Please proceed.

Hi. It sounded like you were pretty optimistic or you felt like you are beginning to see the first fees of a turn in the transactional volume. You talked about Moody’s pricing being down 20%. You see a catalyst in foreclosed property, and now are seeing a lot of distress listing. So how far away are we with the thought process starting to happen right now or...

Yes. I wish my crystal ball was perfect Mitch, so we could call it by the day, but I guess the way I will describe is, what we said for I think probably over a year now is a big part of the problem. There are still this underlying credit availability issue, which we mentioned on the call as well, but the recovery in deal volume in our business is very much exposed to deal volume or really not exposed at all to asset prices.

Right.

The recovery in deal volume was going to be a two-step process with the first step being this pricing gap needed to close, and we've been watching it very carefully for the last 15 to 18 months, and the rate at which prices are dropping has accelerated pretty dramatically over the course of the last six months. So for people that are exposed directly to asset prices, you know, that's a challenging environment. For us, we think that will lead to the recovery deal volume, and what we've been believing would be the catalyst to drive prices to drop for some time with the motivated sellers faced with the refinancing event that they can’t get done or you know, in the event that it doesn't happen and things really fall out of bed foreclose sales. So we've been watching that pretty closely as well, and we are really seeing a dramatic acceleration of the number of new listings coming on to LoopNet that are distressed or marked as foreclosed properties, and we think those two are related. It has not yet translated to closed deal volume, and I think there's going to be a substantial lag there as people begin to see prices fall, eventually see prices get to where they want them to be, and I don't think we're there yet. So I think that's the first issue. Prices overall, if you look at the Moody’s Index for example, are down a little over 20%. I think if you were to take a pull of a few thousand commercial real estate brokers, the expectation would be there are going to wind up down close to 40% before it is all settled right.

Okay, that's what I was –

So I think there's a little way for it to go. It has fallen very rapidly, which is accelerating, and again we think it is driven by the distressed properties aspect, and then what we think will be the next step is as the prices begin to approach that, you know, the gap closes between the bid ask, if you will. We're going to start to see the buy-side come back and start to be more serious about looking at properties to buy, and that will lead substantially closings because they have to look, find, enter into contract and eventually close, you know, well in advance of the closing transactions being reported. But that's kind of the scenario that people have been expecting for over a year now, and we comment publicly for over a year, and what we are talking about today is really that we are seeing the first steps of that in the form of falling prices and some very aggressively motivated sellers begin to develop.

Right. Okay, and is there anyway to kind of just talk to the number of, you’ve put a lot of muscle into trying to accelerate the number of listings on the side you’ve made two acquisitions, you’ve connected with Xceligent. Can we get a kind of an organic year-over-year, and what you’ve been able to do as far as giving listings loaded up and is there numbers that you could put to the kind of breaking down the 687,000?

It’s almost all organic. The inorganic is quite small in number sense right now. So I think by acquisitions, you're referring to REApplications and LandAndFarm, which we did last year.

Yes.

In REA, we definitely are still working on the listings immigration portion of that. We have some listings, which have been uploaded from REApplications customers, but it is a fairly small number right now. In LandAndFarm, I would characterize as more of – that was more of a demand side driven acquisition. We were really attracted to more than anything that a wonderful set of organic search traffic going to their website. We had a lot more listings in native and land categories, and really the value proposition of that acquisition was to marry our listings critical mass with their demand side critical mass more than anything. So that added a little bit of listings content to our platform, really nothing significant, and then Xceligent as well, we have implemented the first couple of test markets at this point, but it is – in aggregate it would be less than 1% of our listings.

I got it, okay. Last question. Did you fund Xceligent in the first quarter?

We have since the time of the original investment in the spring of 2007, we have provided the incremental funding on an ongoing basis. I don't think we've disclosed either specific amounts or times.

That's correct.

Thanks very much.

Thanks Mitch.

(Operator instructions) And our next question will come from the line of Brett Huff with Stephens. Please proceed.

Good afternoon Mitch and Brent.

Hi, Brett, how are you doing?

Good, how are you?

Doing well, thanks.

Good. A couple of questions, in terms of the adjusted EBITDA for this quarter is better than I expected, and I thought you had talked a little bit about how you thought that the adjusted EBITDA would be tougher to get to that you know, above 40% range, but can you talk a little bit more as you think maybe just beyond the next quarter to. You talked about a long-term goal of 40% plus. Can you give us your current thoughts on the medium-term between now and the ultimate goal in terms of adjusted EBITDA.

Well, so our goal this year I think remains that we expect it to be in the high 30s to low 40s, and it came in towards the upper end of that range certainly in this quarter. I think more than anything, I would probably chart it up to a little bit of timing type issues. We did make in early Q1 some expense adjustments, just trying to manage the business well in a pretty challenging environment, and then there are some of the areas where we are making investments, probably you know, on the margin, we were able to either be a little bit discretionary or maybe a little more conservative in some of the estimates we gave. And in some of the areas, where we are still hiring some people and expanding into some new things, it’s maybe a timing issue, being a little bit more – taking a little bit larger than we expected, or just being a little bit more careful about how we go through certain planning processes. So, you know, I guess I would target up to two or three relatively small things drove that to the high end of the range we expected in Q1, but the overall factors that are creating a more challenging environment this year, meaning high 30s to low 40s margin instead of mid-to-high 40s margin we were operating in last year, are very much still in play. So I think that getting back up to the margin structure we were in, say in, you know, 2007-2008 is going to be a function of when the macro environment gets a little bit better.

In a related question to that, are you – did you anticipate sort of, obviously you're getting leaner and trying to be more conservative, whether it is full-scale or around the edges, did you anticipate a quarter or two of ability to absorb business or top line revenue or other transaction increases without having to increase spending, and do you think you will see a blip in margins for a period of time as you take up any slack?

Meaning, if revenue reaccelerates relatively sharply is their leverage in the business as we lay back [ph] any expenses. Is that –

Yes, as you kind of drag your feet or if you do on that?

Yes, I guess what I want to say, maybe the way I would reply to that is the way our business works, given the subscription nature of the business as you really don't see big swings either way, and so I think as it begins to re-accelerate it probably would be more gradual such that the two will stay in line. But yes, I think maybe said another way, as we start getting the recovery, you know, I think we tend to be fairly conservative about how we manage, and so we'll wait to make sure that things are truly solid before we go back into some of the discretionary spending areas.

Okay, and then can you talk a little bit about last call, and it was really helpful. What are you hearing as you talk to banks or commercial real estate owners or other players, what is actually happening as the, you know, the billions of dollars of commercial real estate that needs to be refi-ed is coming due with banks or other folks who are holding those loans. Are they being worked out or delayed or you know, what is actually occurring, because I presume that the refinancing you know is fairly ratable over the year?

I guess our purposes particularly for those listening to the call, who are within the Wall Street community a reminder of the real sweet spot of where LoopNet operates, which tends to be the investment sale transactions that happen on our platform tend to be a lot of smaller properties in smaller markets, very often financed you know, in a manner by a local or community type bank. It might be with an operating business that has depository relationship with the banks. So there are a lot of factors that is definitely not sort of a straight, you know, CMBS or exotic Wall Street type financing you might see often, but all that said, you know, I think in general you are finding the banks on the lending side are very reluctant right now to originate to originate new commercial real estate loans. There are certainly some exceptions, and you know financing is available, but where it is available, the criteria to get out is dramatically different than it was a couple of years ago, and I think one of the big challenges on the refinancing front is people that were able to borrow money, you know, at 80% to 90% loan to value with maybe an aggressive sort of pro forma financial view of where their income strength in the property was going to be, are seeing the ground shift pretty dramatically. The building is now worth 20% less, maybe more. The loan to value ratio they can get on the refinancing is maybe 50% to 60%, and the pro forma financial they can use are, I think in most cases they are not even being allowed to use them anymore. So the terms to get new money are very challenging, which is what is leading people to realize that you know a property that they bought with a very thin income stream, expecting to make money on asset appreciation. This is simply now not going to happen. So that's what I believe driving the motivated sellers we are seeing. Though I think it is true that the foreclosures in commercial real estate right now are still very low as compared to the rates that they are running in the residential side of the world. There are increasing rapidly, but they are still quite low. But I think that is a big factor that is driving prices down now.

Are you doing anything about sort of short-term extensions or anything like that?

Yes, in – to provide a little bit of background, I think it is true that as you know, the owner of the building who is financed by a community bank, and in general, I think it is a more common phenomena in commercial real estate than in residential. The inability to, for example, to take a commercial real estate loan that was maybe a 10 to 15 loan with a balloon payment at the end, and basically refinancing the form of extending the term, I think is much more common then you would see in the residential world, and that is something that I think we have been hearing kind of anecdotal evidence of you know, people being able to in some fashion renegotiate their terms with their banks.

That is all I needed. Thanks for your answers.

Thanks Brett.

(Operator instructions) Our next question will come from the line of John Blackledge – Credit Suisse, his follow-up question from Credit Suisse. Please proceed.

Thanks. Just a couple of follow-ups, in terms of premium member declines, in the fourth quarter there was over 6000, and then almost 3000 in the first quarter of ’09. Just wondering what are your thoughts are in terms of you know, does it further decelerate throughout the course of the year. Is there a chance that you know, in the back half of the year that we can actually see growth from premium members? That's one question and then just on ARPU, we saw a double-digit growth. Just wondering you know, what your expectations are on the pricing side over the course of the year? Thank you.

Sure, first for the premium membership side, you know, I think our expectation is that as long as the for sale transaction volume market stays as slow as it is, we are going to continue to struggle in that part of the business. That's been true for well over a year now, and we don't see that changing. I think it will begin to be let out by the buy-side getting interested in the market as prices come further down, but when exactly that will happen and whether it will happen this year, I don't think we can predict. And then in terms of the average revenue per user that has been going up as we roll through a pricing model change that we did last year. That pricing model change still had a little bit of tailwind as it rolled through Q1, but it is effectively done at this point and so we won't see those types of pricing increase changes through the remainder of this year right now.

Thank you.

Thanks John.

And at this time, there are no more further questions in queue.

Well then, I would like to conclude the call, and say thank you all for joining us and we look forward to updating you at the end of Q2.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.