Good day and thank you for standing by. Welcome to the Q2 2021 CoStar Group Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. I would now like to hand the conference over to your host, Mr.
Bill Warmington, Vice President of Investor Relations. You may now begin.
Thank you, Chris. Good evening and thank you all for joining us to discuss the Q2 2021 results Before I turn the call over to Andy Florence, CoStar's CEO and Founder and Scott Wheeler, 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 Q3 and full year 2021. Forward looking statements involve many risks, uncertainties, assumptions, in our filings with the SEC, including our most recent Annual Report on Form 10 ks 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 measures The non GAAP financial measures discussed on this call include EBITDA, adjusted EBITDA, non GAAP net income and forward looking non GAAP guidance website located at costargroup.com under Press Room. As a reminder, today's call is being webcast and a 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 Florance.
Thank you, Bill. Good evening, everyone. Good morning to our Asia Pac employees and thank you for joining us for CoStar Group's 2nd quarter 2021 earnings call. Total revenue for the Q2 of 2021 grew 21% year over year to 480,000,000 ahead of the $470,000,000 high end of our guidance range. Net bookings of $50,000,000 $51,000,000 were up 47% year over year And adjusted EBITDA of $150,000,000 was well above the $135,000,000 high end of our guidance range.
CoStar Group saw a substantial increase in the demand for the information on our marketplace as evidenced by a 47% Year over year increase in unique visitors. In total, almost 30,000,000 more people visited CoStar Group websites in And marketplace subscription revenue. Leading the results CoStar Suite had a strongest new bookings quarter in years. CoStar Suite bookings in the Q2 of 2021 grew 19% sequentially And we're almost 10 times last year's level at the start of the pandemic. As a result, we expect CoStar Suite organic revenue to return to double digits by the Q4 of this year, well ahead of our expectations just 6 months ago.
The commercial real estate economy is a tale of 2 cities with examples of both strengths and Weaknesses and Key Indicators. Overall, it feels like the heat economy is driving solid demand for CoStar Suite. CoStar Suite's quarterly renewal rate for the Q2 of 2021 reached an impressive multiyear high At 94.5 percent, that's extraordinarily high. This high renewal rate is all the more impressive because it does not Exclude dissolutions of commercial estate firms as principals and companies normally retire or cease operations. I believe the renewal rate for those clients that remain in business could be approaching 98% plus.
Historically, we have sold CoStar on a module basis, offering clients modules covering basic property information, comparable sales, Tenant information and various geographical modules covering cities, states or countries. Clients buying just a few And internationally, it requires more and more effort to offer our products as limited modules. Perversely, it costs us more money to offer clients Effective this month, we started selling only the full global CoStar Suite product to new clients, which we now simply call CoStar. The CoStar sales team's primary focus is now up selling our existing clients who currently subscribe to less than our full product To the full product, there are approximately 18,000 client firms with partial coverage for our sales team to upsell. Through Friday, early stage of the effort, 553 clients have upgraded their CoStar service, Generating $111,000 in incremental monthly revenue, an average increase per client of about $200 per month.
We expect the up sell process to generate $30,000,000 to $40,000,000 in incremental annual revenue with encouraging initial results leaning towards the higher These upgrades were more than just an incremental revenue generator. We believe our clients are overwhelmingly more satisfied after they upgrade as Evidenced by increasing net promoter scores. We believe that this may result in even higher renewal rates, if that's possible. Of the almost 300 clients surveyed by our quality assurance team, Ashley Upgrader had a conversion conversation about Roughly 2 thirds gave us a net promoter score of 9 or 10. Clients certainly didn't see this upsell as Cost increase, they see it as a value add to their business.
In the Q1 of this year, we integrate CMBS data into CoStar. We have received very positive feedback from our clients and the value of this new content. Since the launch of the CMBS data, our clients have used that detailed loan and financial data Later this year, we plan to launch CMBS Analytics, which aggregates CMBS loan and property data by property type across more than 1,000 markets. CMBS Analytics will include loan origination metrics, distressed loan levels, maturity volumes, as well as detailed revenue expense information. In later releases, we plan to include detailed prepayment information and over 150,000 disposed loans.
We estimate that CMBS data has already generated over $1,000,000 of net new annual revenue year to date. Over half of that revenue signing was in the last month of We've developed with CoStar Risk Analytics to support lenders with risk management, underwriting surveillance and compliance through the CoStar product. CoStar Lender is progressing as anticipated with plans for a full release in the Q1 of 2022. The first lender release will focus on portfolio risk analytics and surveillance to help lenders meet regulatory and accounting requirements. Subsequent releases will We believe these tools have the potential to become the standard for regulatory reporting in the U.
S. That said, these lender tools are specialized, high value applications and so will be priced at a premium to our standard CoStar offering. In April, we released the 1st international version of CoStar. This new release integrated our databases for the U. K, U.
S. And Canada into one system. In addition, we loaded basic information on hundreds of thousands of additional buildings across 200 countries that we obtained through our acquisition of Emporus in October of 2020. In the 60 days since we launched this international product, About 10,000 CoStar users have viewed properties outside their home country 4,600,000 times. We view this as a confirmation of our clients' need for cross border property information.
We know that 1,000,000,000,000 of dollars of capital crosses borders to invest commercial real estate annually and that global corporations have up to a 1000000 facilities internationally. We recently gathered a dozen senior CoStar leaders in Iceland for a week long summit to evaluate and plan our international growth strategy. Obloy, Iceland is one of the few places where staff from multiple countries can gather without a week of quarantine, so it's a good spot to meet. We believe there's a clear opportunity We believe that international expansion presents a unique opportunity to leverage our scale and expertise, And we're really excited about that opportunity. Beyond CMBS, CoStar Lenders, Student Housing, International and Hospitality information, We have over 100 additional product enhancements that we have in planning for CoStar over the next 5 years.
We believe that these future enhancements will help Given the strength we see in CoStar renewals and sales, as well as our clients' good performance, we are restarting annual price LoopNet revenue in the Q2 of 2021 grew 18% year over year, driven primarily by a 71% growth in our Diamond, Platinum and Gold ads that provide unparalleled exposure and branding benefits for our clients. We also saw LoopNet net new sales growth campaign to enhance LoopNet's brand, increase our visibility and support our clients who own office properties and their need to bring people back to the workplace. The campaign also serves as a message to commercial real estate audience that LoopNet is a high value marketplace, connecting premier properties with the most valuable tenants and investors. I hope many of you have seen the LoopNet Space for Dreams advertisements broadcast during the PGA Championship for the U. S.
Open. Or you may have seen the ads airing during prime time at CNN, NBC News, MSNBC, CNBC And many other leading media outlets. In May June, we delivered over 1,000,000,000 high value media impressions across TV, Streaming and social channels. I believe that these pieces are both well done and very well received. Office vacancy rates remain elevated by historical standards and LoopNet is uniquely positioned as the ideal marketplace for brokers and owners to market We believe LoopNet with almost 20 times more traffic than our Closest competitor is the best commercial estate marketing solution available.
Our Space for Dreams advertising campaign coupled with our enhanced SEM investment and the SEO optimization has led to record average monthly traffic of approximately 10,000,000 unique visitors across our LoopNet network in Q2. Traffic to the LoopNet network of sites is up 33% year over year in the Q2 of 2021 compared to the Q2 of 2020. We are seeing quality traffic As well with 887 of the Fortune 1,000 companies searching on Louvet in Q2. Visitors to the site are also Spending 59% more time on the listings this quarter compared to the Q2 of 2020. We've seen the owners and brokers with the properties that are the best year over year.
Our investments in e commerce have yielded positive results with e commerce sales rising 86% year over year based on improvements in the checkout flow and mobile responsive workflows. Today, we are relying on the CoStar sales force to sell both CoStar and LoopNet, which is suboptimal with the market for the Two products being so vast. The CoStar sales force is delivering exceptional results, selling more new business in the Q2 of 'twenty 1 That in any quarter over the past 3 years on a combined CoStar LoopNet product basis, so they're about as productive as they've ever been. We continue to believe that we're in the early stages of a major offline to online shift in marketing commercial property. We are building the recruiting, training, leadership and facilities to support a centralized team of professional dedicated LoopNet sellers in Richmond, Virginia.
Our first sales class on this new model is expected to join the Q3 and grow to 50 or more by the end of the year. We believe the LoopNet brand has so much more growth Beyond the current business, the online advertising shift is a years long journey, so building strong foundation for the business is critical This year, as property owners come to view LoopNet as a must have property to must have to properly market their properties. Our Apartments dotcom platform continues to deliver unprecedented value to our customers. Our 2021 consumer ad campaign starting Goldblum has been our most effective campaign ever, delivering 4,100,000,000 impressions in the 2nd quarter alone. And we have expanded investments into new outlets, including video on demand, streaming, audio, social media and new partners such as Twitch, As a result, in the Q2, we saw record network visits, up 32% year over year to 363,000,000 and record unique visitors up 30% to 177,000,000.
The consumer campaign will continue heavily into Q3 with more top programming as we've already aired in every game in the NBA finals and are currently running across More and more properties continue to make the decision to advertise on Apartments dotcom. There are now over 60,500 paying properties on Apartments dot An increase of 17% since beginning of 2020. In addition, our existing customers are staying with Our renewal rates have increased over the past 3 years and are now at their highest levels ever. That's a trifecta. We've got LoopNet, Apartments and CoStar at their highest renewal rates.
We believe the reason for this is because we've consistently delivered exceptional value to our customers. Site traffic represents viable reach and exposure for our customers' vacancies. Looking back to the start of the pandemic in the Q1 of 2020, apartment site traffic has increased significantly with visitors up 48% and It's up 60% for the Q2 of 2021. As a result, with high quality consumer lease to our advertised properties Have increased a whopping 123% since the beginning of March last year. Leads are up 123%.
Because we held our subscription package advertising rates flat during the pandemic, we essentially more than cut in half We charged our clients on a per lead basis. Our growing competitive advantage in our success in driving such Strong traffic and lead growth had the unintended consequence of creating a half off sale and reducing organic revenue growth for a short period of time. The Q2 of 2020, the average client received 88 leads from our lowest ad level, silver. Silver clients Needed more leads, they often upgrade to our highest ad level, Diamond, and received on average 118 leads per month. With so much success in traffic and lead growth, the average lead flow from our lowest end to add the silver level surge beyond Diamond to 129 leads per month in the Q2 of 2021.
The silver ad package is generating so many leads, clients essentially stopped to our higher ad level spend packages slowing our organic growth. Fortunately, this is a high class temporary problem that's easily solved Our price per lead. Demand for apartments, not the dotcom, the actual apartments, has increased. Vacancy rates have decreased, eviction moratoriums will soon expire and rents are soaring. For investment grade 4 units in Q3 'twenty to $16.34 in Q3 'twenty one.
12% is a pretty big jump in that short time period. The value of investment grade apartment buildings has soared as well. The sales price per door of an apartment building climbed 74% from the Q2 2020 From the low of $102,000 per door to a second quarter 'twenty one price of $263,000 That is a massive increase in price per door. We believe that turnover departments is poised to increase as organizations have been 100% remote returned in office work, resulting employees Shifting back to the cities they just left, that increased churn should drive increased demand for leads. In addition, as landlords raise rents, It drives even more turnover as tenants move to avoid rent increases.
We believe that this combined with the fact that we continue every year to deliver more and more Our customers will allow us to increase our advertising rates for Apartments.com in the 3rd quarter, while still providing the best value per lead our clients have ever seen. We are once again growing our mid market multifamily sales force in Richmond, Virginia. A component of this training class is from the homes.com sales force as we are repurposing a portion of that team for apartments dot And we're really excited to have almost 30 of these reps join our mid market sales effort. In total, we expect more than double the size of our mid market sales force by the end of the year. We believe the U.
S. Department market is a $6,000,000,000 to $8,000,000,000 opportunity and our penetration rate across all segments remains relatively low. We believe that our exceptional price value and ability to once again grow our sales force will return sales and revenue growth to strong double digit levels. The global hospitality industry is finally seeing an encouraging recovery driven primarily by leisure travel in the United States. We are seeing positive signs of activity around the world with the number of hotels providing data STR now over 67,000, which is again 7,000, which is again growing and above the pre pandemic data contribution levels.
SDR's solid performance in Consistent throughout the Q2. Although the pandemic stopped the hotel industry in its tracks only 5 months after we acquired STR, Our subscription revenue is up 10% compared to the trailing 12 month revenue prior to the acquisition. In the 91 days since the release of Fatality performance data in CoStar, we are seeing strong interest in activity levels. 47,000 CoStar users have performed over 94 1,000 analytic searches, including views of market and submarket reports and capital market reports. In total, there have been almost 690,000 The initial sales effort for this product was focused on training existing subscribers and increasing the number of distinct users at customer locations.
At the end of June, we launched a new CoStar sales campaign focused on the new hospitality data prospects. This initial campaign targets 1200 high quality leads with a team of 70 CoStar account executives selected and trained We acquired 10x in June 2020. 1 year later, we've transformed 10x into a very vibrant and a 35% increase in transaction volume. Connecting 10x to our CoStar platform, Increasing LipMed Advertising and producing our highly successful Don't Just Sell It, Can Exit campaign with Michael Keegan Michael Key Have all contributed to this transformation. 10x's value proposition of speed, certainty and market price is platform grew 30% year over year in the Q2 of 2021 and the dollar value of assets grew 80%.
About 80% of the assets we closed in the Q2 of 2021 So this reflects the continuing transformation of 10x from a distressed asset The rate card reduction on high value properties we implemented in the Q1 of this year is clearly working. We have Even with the rate reductions, we have really solid margins on those high value properties. We're seeing an increasing number of higher value assets brought The Q2, we had a $20,000,000 student housing facility, a $120,000,000 multi building industrial portfolio and a $60,000,000 loan moved to the 10x platform. On demand side, traffic grew 18% quarter quarter 140% year over year. Product detail pages grew 110% year over year And the number of approved bidders was up 150% year over year.
The average number of bidders Current asset. There's a 10x distressed asset in.
Taking the next property platform.
It's recycling capital. The average number of bidders per asset increased from 2.9% a year ago to 4.4 in the Q2 this year. The synergistic network effect improving supply and demand is reflected in the total assets Sold as a percentage of total assets brought to the platform known as the trade rate. Q2 of 'twenty one trade rate Reached an all time quarterly high of 74%. Notably, this is about twice the average trade rate for offline property sales.
We are adding to the 10x sales force every month and expect to have a sales team of about 60 by year end. Our experience so far is that our sales training combined with our strong product offering is producing highly effective new salespeople. Almost 20% of 10x Sales pipeline already in the second half of 'twenty one is from new salespeople hired and trained in 'twenty one. Homesnap had an excellent, excellent second quarter, growing total revenue 50% year over year and SaaS revenue 46%. Homesnap Pro registered users grew 14% to 750,000.
Total agent subscribers grew 80% to 63,000 at the end of the second quarter. Total paying agents grew 52% year over year from 53,000 to 81,000 and those agents are spending 35% more in advertising, about $80 per year versus $60 per year a year ago. Our residential portfolio now consists of Homesnap, the leading real estate productivity and marketing application homes.com, a well recognized Residential marketing portal acquired in just May of this year. A combination of homes.com as the homebuyers portal and HomeSnaps, the agent's professional platform, sets the stage for us to offer sellers, buyers and real estate agents a better, more collaborative online home sale and purchase experience. Once integrated, we plan to provide agents with instant access to manage their listings on homes.com, view and respond to inquiries, collaborate with clients, and provision sophisticated digital marketing campaigns.
We believe this direct connection between agents and a consumer portal Would be both very unique and very valuable in this industry. We plan to grow homes.comsitetrack By offering homebuyers accurate real time information straight from local MLS, supported by the best photography and multimedia content possible, Along with good agent interaction traffic and a website that empowers homebuyers to collaborate with agents they trust, CoStar Group's 100 of talented architectural photographers have brought millions of properties alive for millions of renters with of Residential Properties on Homes.com. We began integrating Homes and HomeSnap immediately and have already taken steps to improve the experience If you had looked at homes.com when we acquired them back in May, You probably noticed there was a little bit of room for improvement on the site. We still have a lot ahead of work. We have a lot of work ahead for us, but you might be impressed to see how many improvements we've already made in just a matter of a month or So on the site, the results are tangible with daily leads to the site up approximately 70% since we first made the improvements about a month ago.
Homes.com has a large real estate portal sales force and we are repurposing that to sell Homesnap products to 100 of thousands of additional real estate agents as well as We're using them for middle market advertising sales for Apartments.com. In order to build our integrated residential marketplace, plan to increase the level of integration investment in our residential offering in the second half of twenty twenty one by 25,000,000 Investments split roughly in 2 between marketing costs and additional technology and content generating resources. We're calling you today from within our headquarters building and we've seen most of our colleagues in this building today. We're pleased to report that we're making great progress bringing our employees safely back to work. We believe that being physically in the office It's essential to collaboration, productivity and company culture.
We evacuated our offices last March because of a global pandemic, not because an HR Innovation that discovered that remote work was more productive. Currently in the U. S, approximately 94% of our employees are vaccinated And approximately 85% of our employees have come back to the office. When school reopens, we expect our in office numbers to grow as We're grateful to all of our staff who kept CoStar Group running so well during the challenges of the past year. As CEO, it feels great to see our staff back in the office together collaborating, learning and growing.
I believe that while other companies have yet to come to grips challenges of getting their workforce back to full productivity, we're well ahead of the game at this point. The U. S. Economy is experiencing the strongest rebound in growth of the G20 economies. This strength in turn is fueling Broad based recovery across the commercial real estate sector.
With cash in the bank, plenty of accrued vacation time and vaccination cards Leisure travel is driving a recovery in the hospitality sector. Over 70% of U. S. Hotels have occupancy above 60% in June, the most since October 2019. In multifamily search activity in apartments is trending well above 2020 levels, Consumer demand combined with vacancy rates at 20 year lows and limited supply growth is resulting in unprecedented rent growth.
Single family market remains white hot driven by tight inventories and low interest rates. In retail, government stimulus plus wage growth have driven retail sales well above As a result, both leasing activity and transaction volume in retail surpassed pre pandemic levels in Q2 2021. While bankruptcies and closures persist, they are on pace for their lowest levels since 2016. In industrial, elevated spending in consumer goods, The rise in e commerce and the need to expand industrial supply chains drove leasing volumes to all time highs in Q2 21, up 40% year over year. Despite record high construction, demand continues to outpace supply and produced rent growth of 5% in Q2 'twenty one.
Despite negative net absorption, high vacancy rates, office sector It's beginning to show early signs of recovery. Leasing volume rose above pre pandemic level for the first time in Q2 'twenty one. Sublease In Capital Markets, toll transaction volume in Q2 2021 increased and actually exceeded Q2 20 nineteen's levels. Q2 'twenty one deal volume exceeded 5 year averages in multifamily, investor and retail, but did lag in office. The Stressed sales to date are running about half of twenty twenty levels.
At this point, I would like to turn the call over to our Chief Financial Officer, Scott T. Wheeler. And I suggest the first question in the Q and A be, what does the T stand for? And Scott T. Wheeler.
I think that's a mystery. You might just have to leave unsolved for the remainder of this call. Then maybe I'll decide to answer that one. Keep your guessing. All right.
Well, that was a lot of ground to cover in just a short call. Great summary. It seems like we keep having increasing opportunities with every new component that we add to
this business.
Fortunately, it's easy to summarize financially. We delivered another strong set of results this quarter with revenue, adjusted EBITDA and sales bookings all growing in the strong double digits. Our results include a short period of results for Homes.com in the 2nd quarter, which are not material to the overall revenue or profit for this quarter. Revenue in the Q2 of 2021 increased 21% over the Q2 of 2020, coming in above the high end of our guidance range CoStar, 10x and Homesnap all exceeding our expectations. Organic revenue growth for the 2nd quarter was 13%, Improving from the 11% in the Q1 on the strength of both CoStar and the LoopNet growth improvement.
The product, which we now simply will call CoStar, Group revenue 7% in the Q2 of 2021 versus the Q2 of 2020, improving from 4% growth in the 1st quarter and exceeding our forecast of 5% to 6%. With very strong sales results, improved renewal rates, the launch of the single CoStar product upsell program and the now expect CoStar revenue growth to improve to around 9% in the 3rd quarter and return to double digit growth in the Q4 of this year. This improves our full year revenue growth outlook for CoStar from 6% that we talked about last quarter to approximately 8% this quarter. We fully expect CoStar revenue growth to improve quarter by quarter and return to the historical growth rates in the 12% to 13% range as we move into 2022. Revenue in information services grew 15% year over year in the Q2 of 2021, exceeding expectations for the quarter.
Subscription revenue growth remains strong in real estate manager and STR with both increasing 16% when compared to the Q2 of 2020. Overall, we expect information services revenue growth of around 10% in the Q3 and for the full year. Multifamily revenue grew 18% in the Q2 of 2021, at the lower end of our 18% to 19% range. Roughly half of the revenue growth over the year was in the 2nd quarter is from new properties advertising with us and the other half is growth from the average rate per property. As Andy talked about, the rapid increase in lead generation recently is creating a negative sales mix shift with fewer customers upgrading to our higher level ad packages.
This reduced the 2nd quarter sales levels for Apartments dotcom, which in turn impacts our revenue growth rate outlook for the 3rd quarter. We expect the year over year revenue growth rate of multifamily to be approximately 12% in the Q3 of 2021 And to improve sequentially in the Q4 as we implement new pricing at the contract renewal times. As the new pricing begins to layer into the revenue every month, we expect revenue growth rates to continue to increase into 2022. Also, the recent shift of Homes dot sellers to the apartments mid market team and the ability to hire salespeople as the economy reopens are both expected to contribute to improved revenue growth after the Q3 this year and well into 2022. Commercial property and land revenues grew 73% year over year in the Q2 of 20 Well above our expected 55% to 60% growth rate.
Both 10x and Homesnap delivered revenue above expectations With pro form a growth of over 40% for 10x and 50% for Homesnap. LoopNet revenue increased 18% in the 2nd quarter Compared to the Q2 2020, slightly below expectations as the combined CoStar LoopNet sales team sold a little less LoopNet And more CoStar than we had assumed. In aggregate, the CoStar LoopNet sales team, like Andy mentioned, delivered sales bookings above our forecast in the 2nd quarter and one of the highest levels We've generated for a long time. Accordingly, the combined revenue of CoStar and LoopNet was also above our forecast in the second quarter. We expect this combined revenue growth rate of CoStar and LoopNet to continue to improve in the 3rd and 4th quarters ahead of our previous revenue guidance.
On a standalone basis, we are forecasting LoopNet revenue growth of around 15% for the second half of this year as we assume that the CoStar LoopNet sales force We'll be focusing on more CoStar sales and not quite as many LoopNet sales in the second half and while we build our standalone sales force. Overall, we expect the reported commercial property and land revenue growth rate to be approximately 50% for the Q3 and for the full year of 2021. Organically, we expect growth of approximately 17% to 18% for both the Q3 and the Q4 of 'twenty to 'twenty one. Our gross margin came in at 81% in the Q2 of 'twenty one, in line with our expectations, and we expect gross margins to continue at that level through the end of the year. Net income was $61,000,000 in the 2nd quarter and our effective tax rate was 35%.
The effective tax rate includes an incremental impact of around 10% related to a modification to our international tax structure. This change only affects the 2nd quarter and we expect the effective rate to drop Adjusted EBITDA is up 17% from the Q2 of last year and came in approximately $15,000,000 above the high end of our guidance. The resulting adjusted EBITDA margin of 31% is 300 basis points above the midpoint of the guidance range. This improved adjusted EBITDA was primarily the result of higher revenue, some timing variances for our marketing spend and lower than expected hiring in the Most of the cost favorability in the second quarter will reverse in the second half of the year due to the timing of our marketing The growth in our sales teams that we expect and investments in our emerging residential business. Now look at some of the performance metrics for the quarter, Starting with our sales force, our sales force totaled approximately 905 people at the end of the second quarter, an increase around 64 people from the Q2 2020 and up a little over 70 people from the Q1 of 2021.
The growth is primarily due to the addition of the Homes.com sales team, the majority of which we have deployed to sell Homesnap products and mid market apartments products. The renewal rate on annual contracts for quarter of 2021 was 92%, up from 90% last quarter and 89% a year ago. People are really hanging on to our product. This renewal rate is the highest since the Q3 of 2014 and it's a strong testament to the mission critical nature of our products and the success of our continued investment in our platform. The renewal rate for the quarter for customers who've been subscribers for 5 years or longer was 97%, an increase from the renewal rate of 96% in the Q1 of 2021.
Subscription revenue on annual contracts for 77% of our revenue in the 2nd quarter, a decrease of 1% from the last quarter as a result of adding homes.com to our metric. I will now talk through our outlook for the full year and the Q3 of 2021. We are reconfirming, revising and slightly improving our revenue guidance for the year and raising the range to include Homes.com. We expect full year revenue in a range of $1,940,000,000 to 1,009 $50,000,000 which implies annual growth rate of 70% at the midpoint of the range. For For the Q3, we expect revenue in the range of $495,000,000 to $500,000,000 representing revenue growth of 17% year over year at the midpoint.
For the full year of 2021, we have revised our outlook to include the previously announced adjusted EBITDA loss of for Homes.com along with an incremental 25,000,000 of investment in our residential business that Angie mentioned. Approximately half of this investment is related to marketing and agent engagement, but the other half related to technology development resources and content generation. Accordingly, the full year outlook for adjusted EBITDA is expected to be in the range of $605,000,000 to $615,000,000 which implies an adjusted EBITDA margin of 31% at the midpoint of the range. We expect adjusted EBITDA of approximately $130,000,000 to $135,000,000 in the Q3 of 2021 for an adjusted EBITDA margin between 26% 27%. The 3rd quarter marks the highest quarter of our marketing spend as we will have Apartments.com, LoopNet and 10x marketing campaigns Running throughout the Q3.
Overall, we had a very strong first half of this year and it's great to have the heavy lifting of returning to work Almost behind us. I'm certainly encouraged by the continued strong rebound of CoStar and the great growth potential that we have in our marketplaces of apartments, LoopNet and our new residential business. Thank you everyone for your continued support. And operator, we can now open the call up for questions with a few rules from our friend, Bill Warmington. Bill, back to you.
Thank you, Scott. Chris, would you please assemble the questioner for the Q and A section?
Yes, sir.
And please limit yourselves to one question and make it a good one.
Your first question comes from Sterling Auty of JPMorgan Chase. Your line is open.
Yes, thanks. Hi, guys. First of all, my guess on Scott T. Wheeler is I'm going to go with T for Thomas. Am I close?
Wow! Timothy would be good.
He knows how to use Google very effectively for his impression. I'm not sure.
Thank you. And for my one question, the most popular question I get is Everyone sees the investment that you're looking to make in residential and I think they agree with the opportunity, but they don't know how to think about that investment In the context of your previous 2023 margin target of 40% for EBITDA, can you maybe give us an update on how we should think about it and if that target is still viable?
Yes. Good to hear from you, Sterling. Question comes up frequently. With the investments we just talked about, additional resources and Marketing as we build this platform out, we are still online to hit our 2023 targets and we still consider those the marching orders And so we need
to get through the
integrations, watch the site improvements. Andy mentioned that Traffic, visitors improvements in the sites, a lot of these things are going to depend on what happens for the rest of the year in our integration program. And then we'll decide what next year's plan looks like relative to investment in residential versus our other platforms. So No change to our 2023 guidance. Right now, all our plans for residential we've just talked about, we can still make those numbers and intend to based on what we have so far.
And if that changes or new estimates come our way, we will let you know.
And I would want to To slide the question a little bit by pointing out that 100%, the core business of CoStar Group is solidly on target for that goal. And Should there be a clear opportunity to invest in what would be a significantly different business, We'll communicate that at the point that we are doing that, but the Fundamental business is definitely on track for those goals and is performing really well. So It's probably a little bit hyperbolic. I don't know what that means, but it sounded good.
That sounds like back end loaded to me, but I just want to make sure.
Thanks, Colton.
Your next question comes from Pete Christensen of Citi. Your line is open.
Good evening, guys. Thanks for the question. I was just wondering if we could dig into the LoopNet performance a little bit more here. Obviously, the decels growth there is clearly coming from the silver adds. And you did point out obviously the CoStar Suite guys are doing double duty here, which is likely making an impact.
But I guess I would presume that, hey, you have an easy comp and Real estate activity is improving quite dramatically. I'm surprised that The silver ads are decelerating so much. I was just wondering if you put a little a bit more color on it.
Maybe I don't
understand the relationship exactly To what's going on in the sales force and what's going on in the broader market? That would be helpful. Thank you. Sure. So
a couple of core issues. One is, I mean, so you're correct Point out that the economy is great, the product is performing really well, the product looks really good, the traffic is fantastic, the marketing was well received. We are limited by how fast we can scale that sales force and as you listen to the earnings call, you hear we're adding sales people In this bucket and that bucket, we're clearly hiring a lot of salespeople. And that's great news because we have opportunity for them. Our primary focus is on those upper end adds.
We don't want to just keep on selling the low end adds forever. And we would like to, within the next year, Come up with a more optimal way to sell those entry level ads where we don't charge the same price For all properties in all geographies and we'd rather shift to a More demand based pricing algorithm on those on the silver adds. So we are holding off driving a lot of A lot of activity in there until we can do that. There are some areas where we want to reduce our prices on silver adds and many others We want to significantly increase our prices in silver adds. If you look at apartments.com, the average silver add is Probably 8 times the average LoopNet silver add and we want to basically move towards a way of rebalancing that while reducing Prices on some and then increasing on some other areas where people wouldn't notice it even happened.
So it's more of an evolving dynamic, but the fundamental marketplace is super strong and we're hitting The things we're trying to hit with that right now.
And Pete, if I can just add a couple of the numbers on top of that. The Lister Revenue that you mentioned, silver adds, is about 75% of the revenue for LoopNet, and it's still growing. It's growing at mid single digits. And with Signetrans growing the 70% we talked about, that mixes into that 18% growth rate for the 2nd quarter. So it's still growing.
It's just at a slower level right now. It's not the primary focus.
Your next question comes from David Chu of Bank of America. Your line is open.
Hi, thanks guys. So bookings have clearly rebounded off like the COVID lows. Just wondering what it takes to get back to The prior peak, which I think was in Q2 2019 of like $59,000,000 is it really And then just based on the macro environment, when do you think this would be achievable?
I think the quarter you mentioned all cylinders were cranking. So you had a great quarter for Apartments LoopNet and CoStar, we also have other contributors now like Homesnap and Real of Belvec's BizBuycell, CoStar Real Estate Manager, Thomas Daily Lands are all cranking. So you have a lot of different things happening here. I think there's you're in an organizational flux. We're trying to get past us a return to work or return to normalcy.
There's You want to get your price per lead numbers right, but I think that could happen in the next two quarters. We have a lot of good Going on and all the products are really solid. So I think it's just a question more of transition And friction in this environment right now.
And David, when you look at where we are now on the As we said, the CoStar LoopNet sales force produced its highest level for quite some time. So those are very strong. And we talked about this, the multifamily piece. If multifamily sales go up to, let's just say, the average were doing in 2019, we would have had our best quarter ever in bookings. And the other thing that Andy mentioned, you have Kinx and Homesnap are Two brand new businesses that we have and they are not counted in the subscription metrics because 10x is all transactional So right now, we have about 91% of our revenue is subscription and that typically had been up in the 95%, 96% plus range.
So there is a growth element we have right now in our business that's coming from 10x and Homesnap that you're not going to see in the bookings right now until we convert those to subscription. So you get a little lift out of that versus the numbers we talk about. But that's really It's the price we talked about in multifamily that should return that to better sales numbers and that would move us upward.
Your next question comes from John Campbell of Stephens Inc. Your line is open.
Hey guys, good afternoon.
Good afternoon.
Hey, just back to the residential side.
Andy, I'm guessing there's a way to I guess more meaningfully build out the traffic there without Relying solely on the ad spend to get you there, but I think you might have hinted at a tad in the commentary around the kind of even split of investment spend across the marketing and content in the back half. But I know for competitive reasons you can't you guys aren't going to fully show your hand there. But Andy to what extent you can maybe just provide a kind of high level peek into that strategy?
You're right about not wanting to show our hand. So thank you for the opportunity. But Tina, what we're offering is really quite simple, really brutally simple, which is 90% of the real estate transactions in the United States, A buyer collaborates with an agent. And if you look at our website right now, homes.com, it's All of a month old. So it's not going to be a masterpiece.
But if you look at that website, it's got something We're really unique. It's the only website that I'm aware of in the United States where you can actually look at a property for sale and see clearly see The name and phone number of the agent push a button and contact them. So that puts a 1000000 real estate agents on our side And those million real estate agents are involved in 90% of all transactions to communicate regularly with their clients. We're excited about that opportunity. We love the fact that it's so simple, most people can't understand it.
And we're not afraid to if we think there's a Fantastic ROI that will have a fantastic return for our shareholders. We're not afraid to invest in it, but we are Right now, we're working on the software and the fundamental structures, which are not Wildly expensive. And as I mentioned, 4 weeks of work and the lead flow is up 70%. So that's the first stair of many, but I think that as it evolves and we can talk more with Analysts and investors about the progress we're making and the vision we have for it, I think that people will support our initiatives, but it's still we don't have some secret magical The plan that we're laying out for 2022 or 'twenty three right now, we're dealing with orders of magnitude. We're more focused On software and strategy right now.
Your next question comes from George Tong of Goldman Sachs. Your line is open.
Hi, thanks. Good afternoon. Apartments.comrevenuegrowth decelerated in the quarter because of an effective reduction Can you elaborate a bit more on initiatives to help reverse this trend and when you would expect to return to 20% plus multifamily revenue growth?
Well, that's an excellent question, George. I think that's the question. The lead per ad at the lowest level was unimaginable. If I had told someone 4 years ago or 5 years ago, the number of leads the site is generating at the lowest ad level, it would have been implausible. No one could have believed it.
So, we are helping some very large properties generate a lot of revenue for very little money. And what we've done is worked with the leadership team at Apartments dotcom and we are Rolling out a new pricing strategy and we're also adjusting the lead flow, the nature of the product and how it throws leads To meter them more effectively to the upper end adds and we're also doing more strata in the pricing Structure between the 80 unit properties, the 100 unit properties, the 200 unit properties, 300 unit properties to more Appropriately reflect the value of one of these super high lead generating ads. So It's pretty easy to go after and it will take we're not it will be something that rolls out in the course of 12 months and it begins rolling out As early as next month. So you'll see an advantage there, but this is fundamentally really good news. I mean, this is There's 2 kinds of things you could have problems you could have.
1 is you don't have the traffic, you don't have the leads and the other issue of way too many leads And clearly, our competitive position has gotten very strong recently. And it's been getting stronger and stronger, But it's gotten really strong over the last couple of quarters. So We will throw more power to the dynamo. We'll take more friction off the engine and throw more power to the wheels Over the next couple of quarters, you'll see us return to those growth rates as we go into 2020 and it's
Your next question comes from Huanian Tumasalo of KBW. Your line is open.
Thanks for taking the question. I guess just Following up on Apartments dotcom, curious how you're Andy, how you're thinking about the growth outlook there Beyond the near term disruption and say over the next 3 to 5 years of that platform's growth, There's still obviously market share opportunity in the 100 plus unit category and understanding the comments around the rightsizing of the effective price for lead. How are you thinking about managing
the business as growth at
the high end inevitably starts to slow? And in particular, when do you expect The middle market business really start to bridge that gap. How large of a business do you think that could be? And what types of growth rates are you investing for in that piece of the market over the next
So I actually don't think the high end slows For many, many, many, many years, if not decades, we still are 50% penetrated to the high end and we have Many products and services we can provide as you see us getting into more actively facilitating the actual leases. If you look at a price per lead at the lower end was as little as $2 to $3 or if you were to say 1:7 ratio in lead to lease, $14 per lease, I would not say that we're within decades of maxing out The value of this lease and those leases we can bring to the table where as many as hiring communities are paying a month's rent or 2 weeks rent or $300 or $500 per lease and we're charging $14 to $15 per lease. So we're not going to max out the high end, But it's really exciting what's available in the middle and lower end. We are successfully selling a lot of Properties at the 5 unit level, the 4 unit level, the 20 unit level, the 50 unit level and we're in single digit Growth over single digit penetration in all of those areas. So it's a question Continue to grow the sales force to go after that opportunity, but then also to build out our e comm capabilities To capture without having to have manual intervention.
So it's a great place to be and we And the demand side came at us harder than we ever would have anticipated in the last two quarters. But that's good news. You just have to change the model a little So I think you've got a decade plus of good solid 20% growth.
And Ryan, when you look at the universe of properties out there, over 100, right now they're growing faster than we can add them to our Just given the growth in the general universe that we watch. So actually our presentation into the upper end As stated, 50% or 51% for like 5 or 6 quarters despite our growth, just because of the growth in the universe of properties out there. So We've got a long ways to go just to penetrate the top one, let alone move up those penetrations in the lower ones.
Your next question comes from Mario Cortellacci of Jefferies. Your line is open.
Hi, guys. Thanks for the time. I guess just touching on CoStar Suite, I guess just How much closer are we getting to turning pricing back on there? Obviously, I know you're very focused on the upsell, you have to deliver products, And there's a lot of opportunity there. But I believe that you guys talked about looking for stability within the commercial real estate market before kind of Looking at pricing switch, so maybe you can just talk about what timing looks like there and then how much price is being baked Into the 2021 guide for CoStar Suite.
Okay. So when are we going to begin Normal price escalations on CoStar Suite. Wait for it. Wait for it. Now.
Yes, September. We're doing that now. We have you have to there's a notice period on these There's a notice period on these contracts so that you have a delay, but clearly the conditions are right for it right now. With renewal rates moving to 94.5, 5 year clients up over 97% and all the functionality we're putting into the product and all the functionality we're going The product over the next couple of years, we absolutely should be accelerating our pricing At least in line with inflation. And I think it will be 200 basis points to 300 basis Points above that number.
And so I'm not sure what Mr. What Thomas has baked into The guidance, but I'll let him handle that. Thank you.
The start of the increases that go in, In the next couple of months, you go in on renewals, obviously, so it takes a little while to layer them in. So it adds about a 100 basis points, I think, to the growth in the Q4, but then it really starts to build in next year. But keep in mind that We're doing the conversions to the full CoStar product and so 18,000 of our clients will be getting those increases, which are larger than the renewal price increases. Bill, then the other clients will get the renewal price increases. So in aggregate, we're looking at some pretty good pricing lift going into next year.
Scott, we're not increasing those 18,000 people's prices. We're offering them incredibly attractive terms to expand their purchasing with us.
Actually, they like they look at it as a decrease in price.
Yes. The price
of CoStar nationally previously was much higher. So Wow, let's go get this. This is a good bargain. So it's actually working pretty well so far.
Your next question comes from Stephen Sheldon of William Blair. Your line is open.
Hi, thanks. I wanted to ask a little bit more about the CoStar Suite and that upselling process. I think that you talked about from modules To the full global suite, I guess how aggressive do you plan to be in that upselling motion? And would you also plan to sunset That's the module, I guess, pricing with existing customers at some point. And then you I think you also noted $30,000,000 to $40,000,000 in potential incremental revenue.
Can you provide some more detail on that number? Is that potential revenue uplift at all of your Suite customers move to that full solution? Just any more detail there.
Yes. So the $30,000,000 to $40,000,000 I think is some modeling that our VP of sales has done and it assumes a cancellation rate, it Just going after that $18,000 it's assuming an average price increase. So I wouldn't have the details of that model. I've reviewed and seen that model. In terms of how aggressive we would be with I would look at some of our prior efforts to move people onto a common platform.
And in those prior efforts, we sell very aggressively for 12 months to 18 months. And once we've had success in moving The majority of the revenue into the unified platform, then we typically sunset the prior Because at that point, you're spending money that really isn't adding value to anybody to maintain 2 separate Platforms. So our goal is to focus on intensively for 12 to 18 months and then Streamline the product and have one version of the product and that's sort of somewhat similar to what a Bloomberg does, where you're not buying Bloomberg, but geography and there's a bunch of Modules, you're getting one terminal. As we go more international, we think it differentiates us against any sort of competitor And provides a very unique value proposition having one platform.
Your next question comes from Jeff Miller of Baird. Your line is open.
Yes, thank you. So I guess I'm still struggling a little with the magnitude of the deceleration in apartments Revenue going into Q3. I guess, can you just maybe first comment on Apartments dotcomclientretention, specifically, I caught the overall retention, but it sounds like that's pulled up by really good I caught the overall retention, but it sounds like that's pulled up by really good results in Suite. And then if Retention is stable. I guess does it come to a head now because Q2 is seasonally when you normally see Clients trade up and then that trade up just didn't happen and when it doesn't happen as kind of the season that you expected, That's why you have the meaningful deceleration going into Q3.
Yes. So To be clear, the renewal rate on apartments.com is the highest it's ever been. It is extremely high. Scott will have the number. I think I threw it in there.
I'm not sure. But I believe it is 1 tenth of the cancellation rate on a monthly basis from where we started in 20 15, so insurance down 90%. And the During the pandemic, it wasn't really an environment to jack prices aggressively. And so you sort of came out of the pandemic after the Q1 And after vaccinations really got out there. And then the markets lit on fire.
So it's a question of How fast you can respond to that. And we will respond very quickly. But I think that I don't think it's really just a one quarter of upsell that doesn't happen again. I think that I believe that as people go into the churn, As people have to migrate back to where they were before to return to work and as people churn, As these price increases continue to crank in these apartment buildings and as the eviction moratorium relieves, our Customers are making good money and need more lead flow than ever. And I think there's plenty of opportunity to capture value Next quarter, the following quarter, the quarter after that and ongoing from there.
So it's more of a If you're playing the game for the long haul, you don't want to jack people's prices during the pandemic. But We're well positioned to capture that value now.
Yes. And just the renewal rates 94% For the quarter on multifamily, which is the highest it's ever been. And then to your point, you recall last year, we had this surge in the second quarter of sales In apartments to these record levels given the pandemic. And so that second quarter surge annualizes off in the Q2 of this year. So you have a little bit of a cliff effect when you hit the 3rd quarter because all that weight of those sales goes away and we haven't Repeated that same sales level in any of the quarters since then.
So you'll have some of that on the annualizing before you then look at The up sells weren't as strong in the Q2 of this year. So it's the difference in the growth rate in the second in the third It's around $6,000,000 to $7,000,000 which on an annualized basis is around the difference in that sales level between Q2 this year and last year. So that's mathematically how it all works.
And the number one thing to focus on, if you're looking at a business like this, is 47% year over year growth in unique visitors, that is basically your leading indicator of future revenue.
Yes. And of course, the whole platform is still adding more volume, new people are still coming to platform Apartments and then fortunately when you have these issues that we work through that we've got a great portfolio where 10x and Homesnap, the rest of the business does remarkably well and we ended up holding, if not increasing slightly, our revenue guidance for the year
on an aggregate basis, which is obviously what we want
to do and continue to do. I
am showing no further questions at this time. I would now like to turn the conference over back to Andy. You may proceed.
Thank you. So we appreciate you joining us for the Q2 call today. I hope you share enthusiasm for the abundance of growth drivers in our business. As we've discussed, CoStar Suites had a Strong rebound and growing record net sales. Parvin's record traffic growth and lead flow puts us in a position to begin to share more of the value we're creating for our customers.
Is growing traffic, revenue and our primary goal of driving revenue signature ads is happening and happening well. 10x It's really fantastic gaining great traction and Homesnap and Homes are well on their way in the process of transforming our agents, Thomas, Daley, Lance. They're all doing fantastic as well. And I wish one day they'd give me 2 hours for the call.
As we
move into second half of twenty twenty one, we're working towards 2 important milestones. 1 is our goal of reaching $1,000,000,000 of annualized Revenue run rate overall, so some good milestones on our way to much larger numbers, but we're clearly strong in our core business Right now, as evidenced by our amazing traffic growth, our amazing renewal rates, And we're focused on building that core business, but also working to triple our addressable market opportunity through investments in residential and International Expansion. So we look forward to meeting with you again for our Q3 call on October 26. And until then, stay safe. Thank you.
This concludes today's conference call. Thank you for your participation and have a wonderful day. You may now disconnect.