Thank you, Gabriel. Good evening and thank you all for joining us to discuss the Q1 2021 results of CoStar Group. Before I turn the call over to Andy Florence, 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 the company's outlook and expectations for the 2nd quarter and full year 2021. 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's press release issued earlier today and in our filings with the SEC, including our most recent Annual Report on Form 10 ks 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 measures of 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 webcast and the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call. And with that, I would like to turn the call over to our Founder and CEO, Andy Florence.
Thank you, Bill. Good evening, everyone, and thank you for joining us for CoStar Group's Q1 2021 earnings call. We had a strong start to 2021 with Both revenue and profit ahead of forecast. CoStar Suite had its best sales quarter since 2019 and is positioned for accelerating revenue growth into 20 '22. Parvans.com delivered its 7th sequential quarter of revenue growth above 20% year over year.
Our Q1 marketing campaigns for LoopNet and 10x are hitting the ground running with both businesses showing good traction. In Residential Homesnap's 1st quarter pro form a revenue grew over 40% year over year as paid subscribers More than doubled, and subscription revenue grew 68%. 2 weeks ago, we announced our agreement to acquire Homes.com, the next incremental depth in building out our differentiated residential strategy. Overall, we remain highly confident in our ability to continue to deliver Double digit organic growth revenue for many, many years to come. Total revenue for the Q1 of 2021 was 4.50 $1,000,000 which is a 17% year over year growth rate and $3,000,000 ahead of the high end of our guidance range given in February.
Quarterly sales bookings were a solid $52,000,000 Our profit performance was equally strong with EBITDA of $160,000,000 an increase of 29% year over year and $15,000,000 above the high end of our February guidance. As a result, we are modestly raising our full year 2021 revenue, adjusted EBITDA and adjusted EPS guidance, But you'll hear more about that interesting news from our CFO, Scott Wither. CoStar Suite had its best net new sales quarter since 2019, We appear to be moving past the pandemic disruption. We believe the combination of renewals returning to the high pre pandemic levels, New product introductions with CMBS, STR, International and Lender and the global CoStar upselling effort position CoStar Suite for accelerating revenue growth into 2022. 3 CoStar Suite product enhancements both improve the utility of the product for all users and expand the universe of potential users.
New users often sign up because of a specific feature or use case, but they often renew because of the power of the overall platform. By the end of this week, we will have loaded into CoStar information on over $1,000,000,000,000 of outstanding commercial loans made to over 100,000 properties. Since we began including CMBS data in CoStar Suite, the supporting marketing campaign has reached the target audience with 45,000,000 impressions and 1,300,000 views of the CoStar CMBS product video. CMBS data has helped open the doors to prospects and land multiple new accounts. The inclusion of STR's hotel data in CoStar Suite is Following a similar pattern.
Before SDR, CoStar Suite had minimal data on hotels. Beginning on April 1, CoStar Suite Scribers received access to highly detailed data on 90,000 new and enhanced hotel properties. Since then, the STR data has been generating about 8,000 views per day. The sales force began marketing the STR data to existing clients on April 12 and successfully adding new CoStar Suites. The next wave of sales activity will focus on targeting nonclients beginning later in Q2.
Major capital flows are regularly cross border, and one of our goals at CoStar is to align information flow capital flow. Our strategy with international is to start a mile wide in terms of geographic coverage and several inches deep in terms of data and then continuously and consistently add depth over time. On April 22, all subscribers to our highest CoStar Suite Over 200 countries. Our plan is to steadily grow our international coverage at a measured pace over the years to come. We plan to launch CoStar Suite in Montreal, en Francais this summer and CoStar Suite in Madrid and Espanol later in this year.
In 2022, we are planning to establish deeper research coverage in additional European markets, including such as Berlin, Frankfurt, Munich, Paris, Rome and Milan. If travel access to overseas markets Open sooner, we may accelerate the expansion pace incrementally. In the second half of this year, we also plan to launch Full global coverage of hospitality in CoStar Suite. Our goal is to track every significant commercial real estate property listing, transaction For cross border global access based on their needs. Over the past 30 years, we've sold CoStar subscriptions on a modular basis with A wide range of geographical coverage options.
Customers have subscribed to our property information module, a light version of our property module or sales module, our tenant module or a suite of all the modules. 10,000 firms subscribed to just the city they operate in, with 1,000 subscribing to just the state and only a few 1,000 subscribing to full national coverage. We believe that as we continue to expand our geographic coverage and functionality, we can better serve our customers and create more value by One comprehensive global solution with all the modules included to all of our customers. Over the course of the next 18 months, we're commencing a focused effort to up And migrate our clients to this global suite product. The standardization of options should reduce support costs, simplify the selling process, facilitate Pricing discipline eliminate technical debt, we also believe that providing more comprehensive value, we can also increase our renewal rates.
Today, only 17% of our clients subscribe to our most comprehensive offering. So the upselling effort can create an Goodstone. For tens of 1,000,000 of dollars in incremental subscription revenue. Decades ago, we went through a similar successful streamlining process As we move from being a small regional company to being a national company and as we move into a more global footprint, we're again streamlining to facilitate growth. This strategy is similar to Bloomberg's successful comprehensive non module offering strategy.
We believe that as we offer readily accessible and accurate information on more and more segments of real estate covering more and more geographies, Our clients have consistently expanded their business into the incremental revenue opportunities we presented by giving them these broader information solutions. Through the years, I have observed many brokers who once transacted 1 property type in 1 or 2 neighborhoods, Grow their business into covering multiple segments across multiple cities. Previously, brokers would have simply referred deals to other brokers if it was not in their geography. But by upgrading their CoStar Suite subscription from a single market to national and international, they can now pursue these deals themselves. Once their business grows into these new broader opportunities, we become an even more important partner in their success.
In early 2022, we plan to launch a powerful new CoStar product for the banking sector. CoStar Lender, An all in one suite for loan underwriting, surveillance, risk management and regulatory reporting tool. There are over 10,000 banks and credit unions in the U. S. With CRE exposure, and we currently do business with less than 10% of them.
We believe lender has the potential to Generate over $300,000,000 in incremental annual revenue. Lender will enable banks to link the collateral behind their loans to CoStar property and our independent market information. The product is being designed with input from U. S. Regulators and includes a built Conversion of the CoStar Compass credit default model that enables banks to forecast expected loss and probability of default for easy current expected credit loss or CECL reporting.
The combination of increasing renewal rates, a robust new product pipeline and And the simplification and standardization of the product options all position CoStar Suite for really strong accelerating revenue growth into 2022. When we acquired Apartments dotcom in 2014, it had less than $80,000,000 in annual And was growing at approximately 10% per year. In this Q1 of 2021, apartments.com grew revenue 21 Year over year, its 7th quarter in a row of growth at or above 20%. With a current run rate of over $660,000,000 I'm proud to say that dotcom is on track to overtake CoStar Suite as the largest component of our business in 2021. This strength is particularly impressive given 2 challenges created by the pandemic.
The first is that the apartment owners and managers continue We operate under the budget, occupancy and cash flow restrictions of an eviction moratorium currently scheduled to expire at the end June. And the second is that we had to suspend the build out of our promising middle market sales team that was successfully Selling into and penetrating the massive lower end of the rental market. We have launched Apartments dot Coop Stone. Most comprehensive marketing plan ever with Jeff Goldblum returning as Brad Bellflower, our iconic spokesman and the inventor of the Apartamentternet. Hopefully, many of you enjoyed our commercial Sunday night during the Oscars.
Mr. Goldblum's character demonstrates the limitless lengths to which Apartments .com will go to ensure we have the most listings so that every renter can find their perfect new home. Sunday night's focus on Friendly Apartments is an awesome spot and a really quality piece of creative work. This year's campaign will feature 7 new TV spots in over 20,000 commercials on top primetime shows, premieres and finales as well as major sporting events, including premier placement on the Olympics this summer. Let's hope that all goes off, let a hitch.
We estimate the campaign will deliver over 10,000,000,000 media impressions, including twice the video on demand, 1,000,000 of goods done. Of ads on streaming audio and podcast stations, including Pandora, Iheartmedia and Amazon and 100 of millions of social media and digital ads on Facebook, TikTok, Vox and Cargo as well as entering new outlets like esports and livestream on Twitch. I really believe that this is Jeff and our agency's best creative work yet, and the distribution is the most powerful we've ever deployed. I believe our Apartments.com marketing effort is operating at 214.2 percent. The Apartments dotcom network continues To make tremendous traffic gains as consumers view our advertising and experience our site.
During the Q1 of 2021, Apartments dotcom network, according to Comscore, had 25,000,000 average monthly unique visitors to our websites, up 4,000,000 uniques or 21% from the same period last year. During the same period, RentPath had 9,800,000 average monthly uniques to its for its network of sites, up only 400,000 uniques from the Q1 of last year. In other words, we have over 2.5x RentPath traffic and then grew our uniques by 10x We lost over 2,000,000 average monthly uniques visitors quarter over quarter. We are now ahead of Zillow by over 5,000,000 average monthly uniques for the quarter. In the month of March, in the back of our new marketing campaign, the Apartments dotcom network had 26,000,000 visitors, up 40% year over year And set an all time record for visits at a month in a month at 78,000,000 visits, up 45% year over year.
As we head into the peak apartment leasing season, there are more people looking online to rent an apartment than ever before, and our share of that traffic is increase, both through our small mid market sales team based in Richmond, Virginia and our self-service e commerce offerings to our independent owners. We define independent owners as folks who own 1 or more 1 to 5 unit properties. The revenue growth rate for buildings with 5 to 1 100 units has been accelerating from the low 20% range in the Q1 of 2020 to the mid- to upper 30% range in the Q1 of this year. We're excited that a portion of our 2021 marketing campaign will specifically target the massive but underpenetrated independent owners marketplace for the first time. Our current offering of rental tools, including applications, screening, leases and payments, is proving to be extremely valuable to these people.
In the Q1, over 80,000 applications were submitted on Apartments.com with credit checks resulting in over 27,000 new leases, A 14,000 percent increase for the same period last year. Apartments.com processed $891,000,000 Payments in the Q1, up 27% from the Q1 last year. As our marketing for these features accelerates, We look forward to expanded sales opportunities. With the now widespread availability of safe and effective vaccines, we're better positioned to restart the an effective face to face training of new mid market sales team members. The normalization of business use of Zoom creates much better opportunities to couple benefits of centralized sales force with the effectiveness of virtual face to face client presentations.
We are still only single digit penetrated into the vast lower end of this rental marketplace. So we are we believe, very strongly, We have decades of high growth runway ahead here. In the same way that Apartments dot Home revenue overtook CoStar Suite in 7 years. I believe homes.comrevenue could overtake Apartments.comrevenueinthenext7years. And that's not because we're expecting any slowdown in Apartments.comgrowth, quite the contrary.
It's because the opportunity in residential is so large, our strategy is so differentiated and our assets have so much potential. We believe there's a huge gap today between how the leading portals currently leverage the digital real estate marketplace opportunity and an optimal way to leverage digital marketplaces to more effectively sell homes online. We think the current online players are overly focused on capturing agents' fees. In contrast, we believe there's a bigger and lower risk opportunity to facilitate selling homes faster and with greater certainty By digitally empowering established and entrenched channels. We recognize and are comfortable with the fact that our initial This position is, in fact, modest today.
2 weeks ago, we announced our agreement to acquire Homes.com from Dominion Enterprises. Back in 2018, Dominion Ian sold us ForRent. Thank you, Rusty. Members of the ForRent team became key members of our Apartments dotcom team that helped build that business. Homes.com will similarly bring with it a talented team of managers and an excellent intuitive URL with an existing base of residential traffic.
We believe that our plans to combine homes.com, houses.com and the agent marketing and workflow tools Homesnap and even CoStar will create the foundation of a differentiated solution to offer a much better alternative To the old 1st generation Restate Web portal models. Not sure we're putting the call, but Somewhere you have to admire or at least appreciate the branding benefit of how homes.com meets or fits with apartments.com. Apartments.com, homes.com, homes.com, apartments.com. There's some serious marketing there, Hills. I'm very pleased to report that LoopNet is crossing a $200,000,000 revenue run rate milestone right now and continues to enjoy robust traffic Growth with 34% quarter over quarter growth in unique visitors to site.
The site reached a record 10,000,000 unique monthly visitors in March. LoopNet sales continued to show strength in an adverse commercial real estate market in the Q1, with revenue growing 14% over Q1 2020. The The year over year growth number was negatively impacted by the depressed subscription sales for LoopNet last year during the chaos of the 1st couple of months of the pandemic. However, during the Q1 of 2021, we saw significant growth in our higher tier advertising solutions with diamond, platinum and gold ads growing 50% over the same period a year ago. Demand for prominent placement with these higher tier ads on LoopNet As strong as average listing prices for these ads grew to $9.84 a month average in Q1 2021, up from Just $7.10 a month Q1 2020.
Year over year revenue growth for our high volume lower tier silver adds Only 6%, which is how we like to manage volume adds to avoid saturation and internal competition with CoStar. We ended the quarter on a strong note in the month of March with our 3rd highest monthly net bookings result. Pandemic restrictions this past year have made it difficult to effectively onboard and train additional sales resources to sell LoopNet. If you have any children learning from home during the pandemic, you know what I mean, and you can appreciate how ineffective Zoom based school can be. Fortunately, with the ability to return to the office and travel, we plan to start adding sales resources later this quarter to accelerate LoopNet growth further.
Even before that, we were still able to achieve an outstanding sales result in March by cross commissioning and incentivizing our large experienced general commercial real estate sales force to sell LoopNet. Mark and Drew did a good job making that happen. We are seeing more and more of these sales professionals put up Impressive results in both LoopNet and CoStar simultaneously. We continue to make significant To LoopNet's e commerce sales channel, the e commerce LoopNet sales contribution is growing and increased 24% Q1 'twenty one through Q1 'twenty. With the pandemic's negative impact on commercial office leasing, the availability rate for office space has jumped 400 basis points over the pre pandemic availability rate.
The availability rate as a percentage of office space being actively marketed for lease is the highest level we've I will deliver to owners who need to find tenants to fill their vacancies. It couldn't be more important. As such, we're maintaining our plans for increased investments in marketing LoopNet to owners, brokers, investors and tenants. The RU in the Loop campaign we ran from February through March of this year targeted brokers and owners in an effort to elevate the LoopNet Brand to top of their mind. That campaign generated 58,000,000 impressions of high impact creative across a variety of direct media partners, Social media channels as well as programmatic video and display partners.
The initial campaign served as a teaser to our Broader $20,000,000 campaign launching this May called Space for Dreams, which targets tenants And reinforces LoopNet as the most popular place to find a space. We're working with this on RPA, the agency we use to produce the excellent Apartments dotcom work to produce this upcoming campaign. They have tapped Nyle O'Brien as Director and accomplished Director and Fine Arts Photographer It captures the pride of ownership inherent within buildings and showcases the breadth of buildings on the LoopNet marketplace. NILE has the ability to Buildings in their best moment bring the design intent of the architects to life. He creates an excitement around the properties and the opportunity they represent.
The intention of this campaign running through the rest of the year across broad based media is to continue to elevate the LoopNet brand and increase brand awareness. While the campaign targets tenants, we're really actually targeting owners and brokers as a pass through audience. We believe the striking high end architectural imagery will resonate with owners of ultra high value properties and position LoopNet As a brand appropriate channel for high end, high dollar property advertising. All this, so I can tell Scott, that our ASP per ad is going up. We have put in place many foundational elements for LoopNet to succeed this year and in the years to come.
We can clearly see the enormous scale of this opportunity. Though we're crossing a $200,000,000 revenue run rate milestone, Our penetration rate is still only a low single digit number. There are tens of thousands of very high opportunities out there for us and 100 of thousands of valuable opportunities overall and we're focused on winning those opportunities and growing this business. 10x delivered another solid quarter and continues to benefit from the CoStar and LoopNet driving potential buyers to 10x. 10x unique monthly visitors rose 45% quarter over quarter.
On a year over year basis, overall account creations increased 61 With CoStar LoopNet source creations up over 1,000 percent from 330 to 3,700. Average registered bidders per property rose from 5% to 13%, a 160% increase and average live bidders per Property increased from 2.5% to 4%, a 68% increase. The growth in the number of bidders is key because when there are 3 or For bidders at an auction, there's an 85% probability of transaction. That's Excellent number that draws properties to our network. As a result, in March, the trade rate, the percentage of properties that came to auction and sold hit an all time high of 81%.
These strong metrics are excellent proof points Work effect from combining 10x with the CoStar platforms. During the 1st quarter this year, we grew our 10x sales teams by 39%, launched a best in class 6 week sales training program and led And lead generating training program and capitalizing on this growing momentum by launching a new national marketing campaign called 10xit, Starring comedian Keegan Michael Key, great, great actor. We believe this campaign will further establish 10x As a leading brand for online commercial real estate transactions, drive market awareness that there's no faster or more certain way to exchange commercial real estate. And that 10x as a part of the CoStar network will become an exponentially Better way for buyers and sellers and brokers to exchange commercial real estate. As the campaign says, why just buy it Sold savings rates, relaxed COVID restrictions and warmer weather have boosted consumer sentiment and spending Help in the labor markets, retail sales, restaurants, service industries and travel.
The office sector struggled in Q1, setting a record for the largest single quarter of negative net absorption. Overall, leasing activity remains depressed.
Many companies are still evaluating their
workplace strategies, but in person These are still evaluating their workplace strategies, but in person tours are restarting. I'm doing one first thing in the morning. And vaccinated workers are gradually returning to in person environments. For multifamily, the defining trend of 2020 was weak demand in the densely populated urban centers and strength out in the suburbs. While the Q1 couldn't be described as a reversal of that trend, Demand has recovered to normal levels in urban centers, while staying strong in the suburbs.
Record search activity at apartments.com Continued strong multifamily demand. Fiscal stimulus and improving health conditions are helping the retail sector, especially the service of
Cubisto.
Continue to improve by leisure travel and are hurt by continued weak business travel. The industrial sector continues to Outperformance set new quarterly leasing volume records, driven by the double digit acceleration of e commerce. Despite the wave of new construction in the industrial sector, Vacancies there ticked down in Q1 and remain near all time lows. The capital markets have rebounded on the back of Strong portfolio trading activity and a return of large national buyers. With record levels of dry powder, investors are on the lookout for distressed opportunities, So far concentrated on hotels with expectation for distressed retail assets to follow.
We just need to make sure they 10x those opportunities instead of just buying them. Last March, as you know, we quickly evacuated all of our offices and our staff moved to safely work from home. Our team did an outstanding job and that was difficult. They all made it work for our clients, our shareholders and one another. The safe and effective vaccines now widely available And with the help of a number of CoStar Group organized vaccine clinics on-site, more and more of our staff are now vaccinated, I believe it's the majority.
Employees are now safely returning to our offices by the 100. While it's early days, it feels like we're moving towards a more normal and productive 3 d, real, face to face, collaborative workplace we used to enjoy. I believe that companies with teams that are able to Together face to face, we'll always outcompete remote dispersed teams. Our offices feel like a return to a college campus after a long, long summer break. I see thrilled colleagues smiling behind their masks when they run into close colleagues they've not seen in ages.
It's really quite nice to see. At this point, I'm going to hand the call over to my face to face real 3 d present sitting right here next to me, At work colleague, our CFO, Scott Wheeler.
Thank you, Andy. I'll be using my 2 d voice today. So hopefully you'll notice the difference for all of you who are listening.
It's 2 d from last family members. Last year
I used my 2 d voice. But, yes, I think that last part is the best news of all. Of everything you talked about, going back to our offices, rolling out vaccines to protect our teams and their families, And getting to welcome our friends and our team members back to our offices every day, it really is super fun. And we had a great Q1 financially. I'll call it hitting for the cycle with double digit growth in sales bookings, revenue, adjusted EBITDA and non GAAP EPS.
We included HomeSnap currently in their rookie season with CoStar in our financial results for the first time this quarter and they were great. And we also signed up a strategically important prospect in the online residential spaces, homes.com. So on to the results. Revenue in the Q1 2021 increased 17% over the Q1 of 2020, which is Above the high end of our guidance range, the organic revenue growth in the Q1, which excludes HomeSnap and 10x, was a strong 11% year over year as we come around to 1 year after the start of the pandemic. Going forward, we expect organic revenue growth to improve to approximately 12% to 13% for the 2nd quarter and for the remainder of the year.
CoStar Suite revenue grew 4% in the Q1 of 2021 versus Q1 2020 at the high end of our expectations. As we begin to lap the low sales months that began in March 2020 as a result of the pandemic, we expect to see CoStar Suite revenue Growth improved sequentially. CoStar Suite sales in the Q1 of 2021, along with contract renewal rates, returned to pre pandemic levels. So this is certainly very encouraging and is the much faster recovery than what occurred in the last recession for CoStar Suite. We expect CoStar Suite revenue growth in the 5% to 6% range for the Q2 of 2021.
Our outlook for the full year has improved to approximately 6%, With 7% to 8% growth rates expected in the second half of the year for CoStar Suite. Revenue in information services grew 7% year over year The Q1 of 2021 to $35,000,000 Both the Real Estate Manager and STR turned in strong double digit subscription revenue growth The Q1 with Real Estate Manager subscription revenue up 19% and STR subscription revenue up 15% compared to the Q1 of 2020. Subscription revenue growth was moderated somewhat by that drop in transaction revenue, which is a one time revenue in STR, that drop which occurred in the first part of pandemic in the Q1 of last year. Overall, we expect revenue growth from information services to improve sequentially to a rate of 12% to 14% in the second the Q1 remains strong at 21% compared to the Q1 of 2020, which is at the high end of our expectations. The number of properties advertising with us was up 10% in the Q1 with growth in the average rate per property also up around 10% as Properties continue to upgrade their advertising packages and increase our exposure.
The mid market revenue growth rate was up 35% in the Q1, as Andy mentioned, With growth balanced pretty evenly between the growth in number of paying properties and growth in the revenue per property. We expect revenue from multifamily to grow at the rate of approximately 18% to 19% in the Q2 of 2021 compared to the Q2 of 2020. Commercial property and land revenue grew 48% year over year in the Q1, in line with our expectations. This includes the impact Of the 10x and Homesnap acquisitions, organic growth was 11% year over year in the Q1. We expect Commercial property and land revenue growth rate to be approximately 55% to 60% for the Q2 of 2021.
Organically, we expect growth of approximately 18% to 20% for the Q2 with improved growth across all of the marketplaces in As we lap the initial pandemic impact from last year. Within commercial property and land, LoopNet revenue showed solid growth in the Q1, increasing 14% compared to the Q1 2020, just a touch below our expected range of 15% to 16%, as it's been difficult to effectively onboard and trade Additional sales resources to sell LoopNet during the pandemic, as Andy referenced. We expect LoopNet revenue growth to improve sequentially and grow approximately 19% to 20% in the second quarter. Our gross margin came in at 81% in the Q1 of 2021, in line with our expectations. Covestone.
Gross margins to continue at that level in the Q2 with gradual improvement throughout the end of the year. Our profitability was strong in the Q1 with net income, adjusted EBITDA and non GAAP EPS results all ahead of the guidance we issued in February. Net income was $74,000,000 in the Q1 with an effective tax rate of 20% This quarter, the first quarter effective tax rate was higher this year compared to the Q1 of last year, and that's due to fluctuation in the amount and the timing of share based payment deductions. Those wacky share based payment deductions, you just never know what they're going to do. 1st quarter adjusted EBITDA was $160,000,000 up 29% from the Q1 of last year and came in approximately $15,000,000 above the high end of our guidance range.
The improvement adjusted EBITDA was primarily the result of higher revenue, lower personnel expenses and timing variances in the number of operating expense progress across the P and L. The operating expense variability is early timing to incur some of those expenses later in the year. The resulting adjusted EBITDA margin of 35% in the Quarter was 320 basis points above the Q1 of last year. Now we'll talk about some of the performance metrics for the quarter. At the end of Q1, our sales force totaled approximately 835 people, which is lower than the sales force number reported at the end of 2020 By approximately 65.
Part of this reduction is actually a modification of how we count direct sales. So a little bit of a restatement, if you would. We moved approximately 25 positions out of the sales count in the Q1, positions that are focused on account management or managerial responsibilities that don't really directly impact sales. So the remaining decline in sales headcount sequentially of around 40 people is from 1st quarter attrition in the CoStar and LoopNet sales teams primarily, which from a timing perspective Was not replaced in the Q1 given the difficulty of hiring and training new sales resources while we work remotely. We expect to not only replace but Increased the size of both the CoStar and Louvet sales teams this year.
The renewal rate on annual contracts for the first Covestone. Quarter 2021 was 90%, unchanged from the Q4 of 2020. And the renewal rate for the quarter for customers who've been subscribers for 5 years or longer was 96 Percent, a slight improvement from the renewal rate of 95% in the Q4 of 2020. Subscription revenue on annual contracts quarter and our revised outlook, let me say a few comments about the pending Homes.com acquisition, which we have not included in our outlook for 21. Today, homes.com generates approximately $10,000,000 in revenue per quarter and it's not profitable.
Subject to the deal closing, which we expect to happen by the end of the Q2 this year, we intend to evaluate existing product revenues and discontinue certain services that are inconsistent with our outage. As we wind down these services and record typical acquisition accounting adjustments, we expect to record approximately $5,000,000 to $10,000,000 in revenue for Homes.com in the second this year. We're too early in the process to providing specific guidance on the profit impact to our business. But at a high level, I would expect the transaction to be just Modestly dilutive to earnings in the second half of the year as we work through integration. I'll now talk through our outlook for the full year and the Q2 of 2021.
We expect full year revenue in a range of $1,930,000,000 to $1,945,000,000 for 2021, implies an annual growth rate of 17% at the midpoint for the year. On an organic basis, excluding the impact of the Homesnap and 10x acquisitions, We expect growth of approximately 12% to 13% for the full year 2021. For the Q2, we expect revenue in a range of $465,000,000 to $470,000,000 representing revenue growth of 18% year over year at the midpoint of the range. For the full year 2021, we're raising our outlook for EBITDA to a range of $645,000,000 to $655,000,000 which implies an adjusted EBITDA margin of 33.5% at the midpoint We expect adjusted EBITDA of approximately $130,000,000 to $135,000,000 in the Q2 of 2020 for an adjusted EBITDA margin of between 28% 29%. Our marketing campaigns for Apartments.com, LoopNet and 10X all accelerate in the 2nd quarter, which results in the lower sequential margins, which isn't the case in most years.
Our marketing spend in the 3rd quarter is expected to remain at or near 2nd quarter levels before Back down into the Q4. So overall, it was a great start to the year and even better. So I'm fully vaccinated. Andy is fully vaccinated. We're very excited to see 3 d people here in our office.
Bill here, he's still in 2 d.
Flat Stanley. He looks
like Flat Stanley. We're going to call him flat Billy. All right. Billy, back to you. We're going to let you open it up for questions from the flat Analyst on the call.
Well, thank you very much, Scott.
Thank you.
So for everyone out there, one question per participant, please. So make it an exceptionally Sightful one, but not a multipart one. Gabriel, would you please assemble the questioners for the queue?
Absolutely. Your first question will come from Andrew Jeffrey of Truist Securities. Please go ahead.
Thank you very much. I guess I'm going to have to accept being too late for
now. Thanks, Andrew.
Andy, Residential obviously has grabbed a lot of attention, right, this last quarter or 2, what was for Logic and all. Could you elaborate, I guess, a little bit beyond the relatively small deals you've done, albeit of important In terms of how you intend to build that out, do you need to buy data? Do you need to buy a database, build a database? Just trying to think about how you get From Point A to Point B in that big tan.
Yes. So we already have a HomeSnap already gives us a Very solid seat at the table. It connects us with 100 of 1000 of Important players, also leaders in the industry who can set up the access we need. We already subscribe to a wide array of residential information sources, but we think we can work with Homesnap and Homes and put together a very interesting strategy. And we think we'll get a lot of support From market participants for that strategy.
So the 1st generation models operate At scale for an extended period of time and they never really ever produced any meaningful profits. We think there's the ability to actually build Much more profitable lower risk models by adopting a different business model, not trying to take the agent fees, but actually Facilitating the power of the Internet, the reach of the Internet to find buyers with greater certainty and greater speed. So We're going to develop that plan a bit, over the months to come. We're beginning to do retreats around that and Build out that business plan and we'll be rolling that out later in the year. There's not a specific additional company we need to buy today to execute that strategy.
I'm sure that things will come up that will help and support our strategy. We are I think we are Confirm with what we're doing without any involvement in the for the CoreLogic acquisition. And I don't want you to worry that if that The deal were on the table that gave the CoreLogic shareholders will be getting $101 We're not reinstituting that. There's nothing happening Covestockcom. No, we did overpay for it, Rusty.
That's a joke. That's just to the guy, the seller, Negotiating a little more time is tough to negotiate with.
Your next question will come from Sterling Auty of JPMorgan. Please go ahead.
Yes. Thanks. Hi, guys. Hi, guys. Andy, you outlined I'm well.
You outlined a lot of growth initiatives And in your prepared remarks, and I guess what I need to better understand is or help me better understand, How do each of those ramp in the timing? Because it seems like there's a lot of opportunity where I think investors are going to wonder, Are you going to accelerate that organic growth and to what extent and over what time frame?
Yes. So a lot of the stuff is Somewhat dependent. I know you have kids. Some are probably are been on schooling for a while, not as effective as actually in person schooling, especially not when you're Starting a new school. It's been hard to build sales forces effectively during this whole thing.
And as we start to get Back to a little bit more normal. I'm very much looking forward to being able to effectively build some of the sales forces. So the opportunity to accelerate growth in apartments has been there. We've got the marketing engine that's just cranking. We have the opportunity at the middle and lower end that's Really proven effective and some more sales resources behind it.
The lube is proving effective and it needs just needs It can accelerate growth with more resources. It's already accelerating growth, but it can accelerate more with some more sales resources. I'm very excited about This sort of centralized advanced virtual selling opportunities, What we can do with technology, so I think that's going to be pretty cool. The CMBS launch is out there. The global launch is going to start hitting Next quarter, meaningfully next quarter, the apartment launch is out there.
I mean, the Hospitality launches out there, 10x is also, we nailed the demand side. We're seeing what we want to see there. We're getting those 13 registered bidders up from 5 or 4 or 5, whatever it was. We're getting the flow there. And now what we need to do is bring more supply.
That's where the more rev comes from. We've begun to train the researchers on generating those leads and we've got an excellent training program in place And we're going to build out the sales force there, which should bring an acceleration to that one. So it's all sort of coming together here as we Come to the middle of the year and I love Pfizer, I love Moderna, I love JJ, just Getting back to actually growing the teams to support this effort. So Scott, is there anything that's like I'm missing in terms of When these I mean, I think that the one thing that is not this year is CoStar lender, we have excellent product there, excellent product potential, Great product team there. John Vecchione is running that group.
That will be a great product. The script had said Q4 of 2021, I bumped it to Q1 of 2022. It's a complicated product, but it's Pretty cool. I think it will be very compelling. So that one's more of a 2022.
Our next question will come from George Tong of Goldman Sachs. Please go ahead.
Hi, thanks. Good afternoon. CoStar Suite had its best So you had a sales quarter since 2019 and that was helped by new product enhancements. Can you talk about What the sales strength reflects in terms of whether it's new institutional customers that are being brought on versus penetration on brokers versus increases in pricing that's coming back?
Yes. So, there is I don't believe there is any material impact of pricing increases. There are no pricing increases occurring right now. Going forward later in the year, I think there will be not price increases, but there will be Average purchasing amount increases. So, people, I believe, will step up from 1 module or 3 modules as they go to the Global Suite.
So that's effectively more revenue per customer. But so far what it is, is higher renewal rates. People aren't the cancellation rate Coming down has a big impact as people feel more secure about the business and they see light in the tunnel. And then it is, I think more seats from some existing institutional owner players. The CMBS data is now Really valuable in our product.
The STR data is extremely popular with anybody who is doing work In hospitality, our rationale for acquiring STR was
We can see it was
a great product valued by the actual operators of hospitality, investors in hospitality. But we can see that SCR did not have a distribution channel into those people appraising and brokering Hotel sales and developing hotels. And we could bring that to we could bring their product to market quickly and that's been A big benefit to us, bringing STR data in there. Would you want to add anything to that?
Yes. I think, George, when you look at the stat on CoStar usage right now, As far as subscriber numbers, this is the Q1 we went over 160,000 subscribers. So certainly after the dip in the Q2 last year, it's been coming back well. And as Andy said, clients are adding seats and adding users, particularly to take advantage of some of the new information. When you look at the number of sites that are using CoStar, that's also at a high level now that we hadn't hit before over 38,000 101 and 71 sites, it's right up at the top of where we've been.
And then when you look at the number of new subscribing firms coming on, This quarter was as big as it was right after we did Exeligent. Which is amazing. Exeligent bankruptcy. It's like the Q2 of 2018 after that first peak At pretty high levels, but now we're adding again at those levels at average contract sizes are probably 30% higher than what they were back then. So you just kind of look at whether it's sites, whether it's subscribers, whether it's users, all of them are rising across these different customer sets.
Your next question will come from Pete Christensen of Citi. Please go ahead.
Good evening, guys. Thanks for Shin and really nice friends here. Andy, I really appreciated the homes.comapartments.com comparison. I thought that was pretty interesting. But certainly looking back to that era, the Parts dotcom required a ton of marketing investment and
I think it was 100
at some
point? We are not in a place today where we have any sort of specific plan of that nature. There's nothing On Scott Wheeler's desk that analyzes those sorts of investments, we obviously are exploring the broad Opportunity. I'll tell you that looking at the residential opportunity for me feels an awful lot like Rinse and repeat. We've got a bunch of these information back ends that support a front end marketplace in real estate, And we've been doing this for a number of years and as LoopNet crosses over $200,000,000 as apartments becomes the biggest segment of our business, It is sort of like what we've been doing for a while here.
And as you do, do that, you do make investments in marketing. So Right now, if you're watching Squawk Bikes, you might see a 10x ad. Shortly thereafter, you see a LoopNet ad. That evening after you switch over to Peacock, you might see Apartments.com. I think that's part of our formula And you do usually invest in the marketing ahead of revenue.
So we go after an opportunity, which I believe could Generate over time 1,000,000,000 of dollars of incremental additional EBITDA. It does take our shareholders' capital to open up that wonderful opportunity. So it's possible we might use the weapons Our shareholders have given us some day, but it's a multiyear effort. And the first component is generally software, Which doesn't really show up as anything terribly visible to the analysts or shareholders.
Our next question will come from David Chu of Bank of America. Please go ahead.
Hi, thanks guys. So you mentioned that signature ads were up about 50% in the quarter. I think that was about similar to 2020. So do you expect the new marketing campaign and a step up in the sales force to accelerate growth this year? Just wondering besides the marketing campaign and the sales force additions, what are the other key levers to accelerate this?
Yes. So, we do expect that lube net year over year sales number to start moving around the 20% Zone again pretty quickly. And if we're more successful with adding salespeople that know how to do it and if the Trend with the existing large CRE sales force, they keep on selling both CoStar and LoopNet. Yes, we get some good acceleration. I think that we are getting real buy in from the high end folks.
They used to view LoopNet As being something that where people predominantly marketed lower end properties, suburban properties, industrial properties for sale, These marketing campaigns really don't leave those smaller partners behind, but really sort of focus on Branding super high end, dollars 1,000,000,000 properties. And I think that will open up A lot of opportunities at the high end, which is really where we're trying to go because if I take our high target prospects, 50 some 1,000 high target prospects 2 or multi 1,000 a month opportunities, we're only 3.8% trying to trade into that segment. And moving that number up to 20% on some sales force growth and some And marketing that talks to that audience, I think, would have a huge impact on revenue acceleration. So we have a winner. It's just sort of tuning the different components.
Your next question will come from Mayank Tan of Needham and Co. Please go ahead.
In addition to margins, given the investment priorities and the growth initiatives, what are some of the levers you have to increase margins and get that 40% Targeted goal by 2023. And has your thinking changed in terms of that target and how you can get there given the change in the cost structure in the midst of the pandemic? Yes. So as we go forward to 2023, we've got organic growth coming back up Primarily with CoStar hitting its low quarter, 1st quarter and then rising the rest of the year. So organic revenue growth would increase.
We'll continue to add Yes, revenue in modest places as we have with acquisitions. And then our cost profile right now is Pretty well, a decision investment decision profile every year. So we can still grow our costs 8%, 10% or a little more percent over the next couple of years. And that revenue growth will just bring that margin up. So it's all about the fixed cost leverage, Maintaining that organic and increasing that organic revenue growth, which is the investments we put in place over the last year and then in this year That are creating these opportunities.
So we've got the right fuel in there to get that revenue growth up. And then it's a matter of monitoring that cost growth again between the 8% to 12% range over the next couple of years, and we'll hit that 40%. So which is nice. We've been able to increase this year Big ad campaigns for 10x and LoopNet. Last year, we did it for apartments.
But still, even with big increases in marketing every year, we can still grow our margins. So the scale of the business and the leverage profile of the business now is really helping us do things that in the current and future environment, Years ago would be scary and take a lot of our profit. Now they don't impact it nearly as much and it gives us a lot of firepower in all these sectors we're in.
Your next question will come from Ryan Tomasello of KBW. Please go ahead.
Thanks for taking the questions. Just in terms of M and A, it's hard to ignore that the cash balance and the balance sheet. You said publicly recently that you intend to focus on acquisitions in areas which CoStar does not directly compete meaningfully today. And it's clear that residential is going to be a part of that playbook, but maybe you can elaborate on other areas of the business that you see as potentially being synergistic With the broader CoStar portfolio, for example, I believe in the past you've referenced areas like workflow and facilities management software as examples?
Sure. So, I guess we are 3 deals into this year Roughly? Yes. So we've done 3. And I anticipate we'll continue to Like we are constantly evaluating deals that are out there and they do come from a range of different sectors.
Facilities, sure, that's Azan, we look at we're looking at a range of different things in residential. Most of them are domestic. And for us, it was a small exception to that. And These things are generally sort of tough to discuss specifics before they happen. And lately, they've been Smaller deals.
So there are things out there that we're kind of like we're probably talking about 20 deals at any given moment. There are 20 things on the radar screen at any given moment. But Just the last couple, we've done it have been small. There was one you may have noticed that was potentially massive. But We're resetting and focusing a lot of opportunities.
So there's zero chance that CoStar won't continue what it's done consistently for 30 years. It'll just and they'll be similar to what we've done before, which is closely related to what we're already doing Generally strategically additive to some broader theme we're trying to pursue. And as you go into residential, That's a pretty big theme with a lot of opportunities. I have to tell you that the flow of deals It's absurd at this point. I think I probably have 3 of my LinkedIn a day.
So, but It's more of the same, more measured continued flow there. Do you want to add anything? No, not really.
So you say the residential pipeline It's throwing everything at us right now. We still see things coming in the apartment sector quite frequently. In commercial real estate Small information plays. There will still be others internationally that are coming at us. So all of the things we've talked about before are still reactive, but residential just added another dimension and higher volumes, a lot to sift through.
Next question will come from Mario Cortellacci of Jefferies. Please go ahead.
Hi guys. Thanks for the time. No worries. I wanted to talk about I want to talk about the new sales people you're adding and maybe you can just talk about the timing to productivity for these new sales People, you're building out the middle market team, the LoopNet team, 10x. I mean, we've heard other companies within the information services space talk about, So yes, 3 year timeline and so they hit their max productivity.
Do you guys have an idea of what that looks like for these new hires? And then also because of what we're seeing in the labor market with the government support and stimulus, there's been commentary from a lot of other companies saying that Been hard to hire, basically competing against the government. Is that a concern of yours at all? And does that create any type of wage inflation or And increased labor expense or comp expense for you?
Yes. Well, Your observation on competition with the government for employees is accurate.
It tends to be
a little bit more in the restaurant industry and some of the service industries where, yes, I hear about folks who can't hire because They earn more working for it, not working for the government, but whatever. Yes, there's definitely So in terms of hiring, I am definitely focused on particular I'm focused on the centralized sales We have a great field sales team with apartments. We have a great field sales team with CoStar, the CRE team there. For the 10x effort and for the mid market apartments effort and for the LoopNet effort, I am Looking at a centralized effort, I have been able to recruit some very experienced trainers and leaders to central to Richmond, where we think that we have The ability to compete aggressively for talent there. And Our training we're investing a little bit more in our training programs than ever before.
So we are looking at 6 12 Weak training programs, but with a expecting a much higher success rate of deployment. On LoopNet, we believe the people can get on the boards and start selling Within 3 months. With 10x, it might be 6 months. With apartments, we think it's 3 months. And then in terms of peak efficiency, they probably start to get up to I think that LoopNet Apartments probably we would expect them to climb up at about 18 months to sort of Full production level and 10x might be 24 months.
But if we can get them on the boards in the first 3 to 6 months, we have a good idea of what that ROI looks like for those salespeople and it's strong. And the situation we have here is this is a we have The prospects in our database, we know what their economic need for marketing is. There are many, many, many of them. There are more First of them that we can reach with the existing team we have. So we have the benefit of and there's not a lot of competition for what we're selling.
So our offering is highly differentiated. Our intelligence on who to sell to is excellent. And so, yes, I think that answered that. But I would I do look forward to the time when there's less competition from the government for the sales force.
Great. Thank you.
Yes.
Your next question will come from Stephen Sheldon of William Blair. Please go ahead.
Thanks. On the CoStar Suite, the global platform, I guess, what percentage of your CoStar Suite Scriber base do you think could be interested in this? And what could the revenue uplift potentially look like over the next few years if you're able to drive meaningful adoption?
Yes. So there's 2 things happening there. There's 3 things happening there. One is, for The first time really focusing on module upsells. So someone buying just information on the properties, getting the tenant the comps and more functionality The overall for the city they're already operating in, that is thousands and thousands of upsell opportunities.
The next one is someone operating, getting the data. The most common thing is someone just getting the data for the city they operate in. At this point, the way commercial real estate works, that's Kind of silly, because 30%, 40% of your clients are coming in from out of town. You really should know what they're doing outside your market. That one's pretty straightforward.
Going up to when you go to global, that's going to move more into private equity firms, institutions And investors who are cross border. So if I'm looking at New York or London, if I Institutional properties, 50% plus of the capital for those bigger and higher end properties are crossing borders. We think we'll be able to offer that group a Unique offering. So it's like from the small all the way up to the gigantic. And I think it also is something It's 100 of 1,000,000 of potential revenue, but it's also a transformational Positioning of CoStar Group, where today, if I am a Commercial Real Estate Professional in London or Toronto or Madrid, I sort of look at these our current solutions as being A London solution.
I might even yes, London solution as opposed to even a UK solution. I'm just used to thinking of it as How we service our local needs. I don't think it will be that hard for us to build out a fairly robust pan European product and I think that pan European product will change the game as to how people view our product in At the local level. And I think it will be pretty I think that will be pretty powerful. If I think about if I go back 10 years, 20 years and I Think about how 20 years ago, how people viewed CoStar when we were really just servicing a handful of U.
S. Cities, our value proposition might have been a 50 on a 100. Once we were serving all the major U. S. Markets, we went to 100.
There was an exponential value growth to the consumer, The professional user, when we covered their entire investment footprint, which is generally multinational. So we're focusing heavily on Investment sales tools, selling tools, comparable sales tools, news of international. And I think that will Change the way we're viewed and how we're positioned. So I don't know if I answered your question at All but I threw out a random stream of consciousness on international and suite upsell, which is exciting. It's pretty cool.
Your next question will come from Jeff Meuler of Baird. Please go ahead.
Yes, thanks. It's Sweet. I caught a lot of metrics on apartments traffic and lead quality and revenue, but I don't think I caught a apartments Net bookings trends, I would love some detail on that or if not, maybe just a random stream of consciousness on something else. Sorry, you got
to start. You want to do a rent and street country? Yes, it's
my turn
to the country. Yes,
we didn't talk Specifically about apartment sales, but I mean, you can do the math on our total sales numbers and kind of assume if CoStar goes up quite a bit. We're going to have other sectors that will come down a bit. LoopNet stayed strong. Information Services stayed strong. And I'll say the volatility in Apartments is within the range of volatility it does every quarter.
So it happened to be down a bit this quarter. But if you look back over the last 10 quarters of apartment sales, which Appreciate, Jeff. We don't give these numbers because of this fact, because they are volatile. Apartments net bookings move up and down on an average $5,000,000 In each quarter. So you'll see this kind of up and down in the pattern, but over time, the growth obviously is there because we're still pushing the thing At 20% revenue growth.
So we had such good quarters mid to late 2020 in apartments. I think property owners had used a lot of budget then. They trimmed them back a little bit in the Q1, waiting for the Q2 season mostly, And then seeing where they're going to be positioned when we come back to these moratoriums, the eviction moratorium. So you saw a So you saw a little hesitancy, I think, in property owners in the Q1, which moderated the apartment side a bit. Yes.
But CoStar picked up the slack and
But To be clear, apartments.com is rocking it. We have Yes. Like January is not the most exciting time for renting Apartments out there, never has been. Historically, it was probably before we owned Apartments dotcom. It was a period in which the revenue actually fell very often.
But the eviction moratorium is also a wet blanket. So We anticipate there'll be much more enthusiasm coming into the spring summer. And again, I think the marketing campaign we've got going right now, when we're the only ones really doing it, it's just super strong. So and then Firing up the mid market. So fluctuations Scott talked about is there and goes up, goes down, But overall, it goes up, up, up.
And we have a
last question from Joe Goodwin of JMP Securities. Please go ahead.
Great. Thank you guys for taking the question. On the payments that the rental payments that are occurring through Apartments dotcom, can you just talk about the economics that CoStar gets from those payments? And then is that a will that develop into a larger opportunity? Is that more The toolset that you're offering to these folks.
Thank you.
Yes. Let do you want to hit this, so it's like credit card we're getting.
Yes. We get a few small percentages off of the cards. We don't get anything off the ACH Type payments. So, you get a little bit of margin off of the payment tools and a Keepblon Month to month, which is virtually important when they've filled up their units. It's not intended to be A primary revenue driver for us, but one of the tools that drives the advertising and the other services.
As it gets up into tens of 1,000,000,000 or to 100,000,000,000 It would become much more meaningful. We do offer an ACH acceleration that has a fee on it too, but that's Only a portion of the audience takes that. The real value there for us By a mile, the real value for us is these folks, the owners who are liking our applications and our payments and our renewal Tools tend to open up their wallet to purchase a $200 or $300 online ad to get higher up in the presentation. And that tends to dwarf the credit card earnings sort of ACH acceleration piece. So that revenue potential of them Buying the overall bundle of all the services we offer the independent owner is a multibillion dollar revenue opportunity at high So that's where we're focused.
Not to dismiss the revenue potential of that Significant growing payment, but we're really trying to get the membership platform going. And it also Feeds content. So the more participation we get in the marketplace, the more robust that marketplace is, which brings more renters in, Which brings more advertisers in. So, as part of the whole cycle, we long ago felt we needed to provide a broad range The service is the independent owner, which does not have the scale to really serve to really do it in house or implement things in house.
And we have no further questions at this time. I'll turn the call back over to the presenters for closing remarks.
Well, we appreciate you joining us for this Q1 2021 earnings call and we look forward to updating you on our progress. We obviously have a lot of stuff going on. And I think we may be appearing optimistic. And that is
As We are.
How we are. So thank you very much for joining us. We look forward to talking to you again.
This concludes today's conference call. Thanks for joining. You may now disconnect.