Welcome to the CoStar Group Second Quarter Earnings Conference Call. I'd now like to turn the conference over to your host Mr. Rich Simonelli. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to CoStar Group's 2nd quarter 20 15 conference call. Before I turn the call over to Andy, I want to have Seqin to talk to you about some really important facts. Certain portions of this discussion contain forward looking statements, which involve many risks and uncertainties that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in our July 29, 2015 press release and our Q2 results and in CoStar's 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 at the date of this call and CoStar assumes no obligation to update these statements whether as a result of new information, future events or otherwise. As a reminder, today's call is being broadcast live and in color over the Internet at www.coastargroup.com, where you can also find our Investor Relations page. A replay will be available approximately 1 hour after the call today and will be available for approximately 30 days thereafter. To listen, call 800-four 75-six 701 within the U. S.
Or Canada or 320-365-3844 outside the U. S. The access code is 344,170. It will be available within an hour. So I'd like to turn the call over to Andy Florance.
Good morning and thank you for joining us today for our Q2 earnings call. I'm sorry for the slight delay in getting going this morning, but the city began jackhammering outside my office right at 5 of 11. So we'll keep it moving. And as you know, I always keep these calls very short. So, as we reach the midpoint
of the year, I feel that
we can say that our expanded focus and investment into the multifamily sector is clearly succeeding. In fact, while our acquisition of LoopNet was widely heralded as a major success, I believe that we are potentially having an even greater success being competitive apartment Internet services landscape for both the company seeking to provide marketing solutions and for the company seeking to provide information analytics solutions. I believe we have brought a greater level of commitment and conviction than our competitors have. We are using the playbook we capitalized on with the LoopNetCoStar merger, integrating selling success. To price optimally, the multifamily owner needs daily competitive rental information, which none of the legacy information providers are adequately supplying.
With the benefit of our research and technical expertise in our Apartments dotcom marketplace, we are providing the users deep content with daily pricing on tens thousands of apartment communities. To minimize vacancy losses, the multifamily owner needs a steady stream of qualified leads and to achieve that they need to reach the largest possible audience of renters. By leveraging our technology and content and by initiating the first ever significant business consumer apartment marketing campaign reaching tens of millions of potential renters, we have built the most heavily trafficked apartment Web site. We believe we have the best in class information and marketing solutions and by package them together, we offer the most compelling lowest cost solution. With that powerful combination, we are taking a lot of business from a range of competitors.
We hit the ball out of the park on 2nd quarter sales. We achieved our highest sales quarter with $34,000,000 in company wide net bookings. That's a 95% year over year increase in net bookings in the second quarter over the Q2 of 2014 and were up 66% sequentially over net bookings of $21,000,000 in the Q1 of 2015. This marks consecutive quarters in which we have achieved tremendous sales levels. Net new sales on annual subscription contracts were $25,000,000 for the Q2 of 2015, up 59% over the Q2 of 2014.
This was by far our strongest quarter of annual subscription sales in our company's history. Our revenue increased 16% year over year to $171,000,000 in the Q2 2015 compared to 148,000,000 dollars in the Q2 of 2014. Our annual subscription business continues to enjoy a very high trailing 12 month renewal rate of 91%. We closed the acquisition of Apartment Finder on June 1. Like Apartments dotcom, Apartment Finder is one of the leading digital marketplaces serving millions of renters looking to connect with apartments.
Apartment Finder service offerings include digital advertising on apartmentfinder.com with approximately 13,400 properties advertised on its website. Apartment Finder's core marketplace revenue was approximately to $70,000,000 for the fiscal year ending in March 2015. Apartment Finder will remain a distinct complementary brand to Apartments.com with a unique user interface, but will be similarly powered by CoStar's information. The brand will focus on the sizable component of renters who are focused primarily on finding the best financial deal possible. And these are people at all different sorts of income levels.
We know from various studies that most apartment hunters use the Internet to look for an apartment and most of those renters visit multiple sites in their search for an apartment. By offering multiple online marketing solutions, we believe property managers and owners will get more exposure for the listings, more leads, cast a wider net. CoStar expects by the end of this year to have integrated the back ends of Apartments.com, CoStar and Apartment Finder, thereby leveraging the same research, systems, support and sales platform to power Apartments.com, Apartment Home Living, CoStar and apartmentfinder.com. We anticipate that this will create cost synergies and greater operating efficiencies. Work on this integration is well underway and we expect to complete it this year.
Apartment Finder has approximately 100 and 10 field sales representatives located across the United States. Ghostar has combined its sales forces and already the advertising sales forces are cross selling all of our apartment marketing solutions. I've had the opportunity to spend a significant amount of time with the Apartment Finder sales force and I feel that they are valuable addition to our sales force with tremendous selling capabilities and customer relationships. As previously mentioned in other calls, we're in the process of eliminating the print component of Apartment Finder. Print is a less and less effective way to market apartments nowadays.
Print produces a very small percentage of Apartment Finders leads and is disproportionately laborious and expensive. We plan to eliminate these costs or those costs this year and invest an equivalent amount into digital marketing to drive greater digital traffic to the finder site. During the process of converting those Apartment Finder clients that are buying a combination of print and digital marketing, as we move them into pure digital, we will be carrying the expense of both print and the replacement digital investment. This is to be able to show the clients that we have more than replaced the leads lost from print with the enhanced digital marketing. In the 1st full month that our sales team has been converting these combination accounts into pure digital, we have converted 15% of the business or over 1,000 some contracts.
This will be one of our sales team's highest priorities this year and I believe it's a manageable task. We're keenly focused on expanded online marketing efforts for Apartment Finder and it is working. In just our 1st month of owning Apartment Finder, combined team of existing finder staff and CoStar staff have successfully driven significant increases in traffic to Apartment Finder, accelerating visits to the site an astounding 135% year over year. And that's just for June of 2015. This was exceptional progress considering that Apartment Finder visits grew in the single digits year over year in April and May.
Additionally, Apartment Finder unique visitors increased 64% year over year in June of 20 15. In order to offer a simple, but powerfully compelling value proposition, we're marketing our digital apartment marketplace offerings as 1 Apartment Network. An apartment manager who had been advertising an Apartment Finder earlier this year would receive the benefits of a site that generated about 2,000,000 unique visitors a month and a print distribution of 1 1,000 books, a couple of 1,000 books in a market. Once they're converted into a pure digital contract, their Apartment ad will run on Apartment Finder, Apartments dotcom, Apartment Home Living. Then the advertiser will receive the benefit of 3 sites with combined unique monthly visitors of approximately 14,000,000.
That is approximately a 700 I'm sorry, we believe that with this sort of unparalleled exposure, we will convert the majority of Apartment Finder's combination print and digital business to pure digital by year's end. As we achieve this goal, we also expect to achieve significant cost savings. Okay. At this point, I'm going to put my glasses on, which should help. And of course, we're sitting here in a conference room that is LEED Platinum certified, which means it has no life.
Okay, back to the call. Apartment Finder offered a social media marketing service called Finder Social. The service was not profitable and in fact was indirectly competitive with our profitable products. After careful consideration and review, we've decided to eliminate Finder Social and its associated significant costs. We believe the ultimate best value we can provide our clients is delivering the best network of digital apartment marketing websites and the highest quality leads that turn into leases.
We believe that once we have eliminated non core Apartment Finder products and have achieved integrated operating efficiencies, Apartment Finder will be very profitable. We used the National Apartment Exposition held in Las Vegas in June to announce our acquisition of Apartment Finder and showcase a tremendous value proposition our network of apartment sites and CoStar Market Analytics can offer. The NAA event was attended by 9 1,000 multifamily professionals, a record for the event and our prime target audience. We created an enormous amount of buzz brand recognition. We hosted a Never to Forget client party at the event with 4,500 clients and prospects attending.
Well more than 3,200 attendees visited our booth on the exhibit floor. We gave hundreds of product demonstrations in our integrated multifamily offering and spoke to thousands of clients and prospects. It was really exciting to see our salespeople processing signed contracts well past the end of each day's session after the rest of the conference vendors had left the Exposition Hall. In just 2 days, we signed 350 new communities. Even better was that our salespeople came out of NA with our websites are now generating more than 24,000,000 unique visitors each month.
That's the equivalent of every person down under in Australia visiting our websites last month. It's quite some traffic. For the 4th month in a row, Apartments.com is the undisputed number one most visited apartment listing site according to each of the 4 leading traffic authorities Comscore, Experian, Hitwise, Amazon, Alexa and Compete. We are just 4 months into the relaunching and marketing campaign of Apartments.com and we have established Apartments.com as an absolute leader. Apartments.com has experienced a 70% year over year increase in unique visitors and a 65% year over year increase in total visits in the Q2 of 2015 according to Comscore.
In June 2015, we significantly increased the year over year traffic to Apartments dotcom with over 14,000,000 visits and 6,000,000 unique visitors. Our own internal Google Analytics numbers show much higher traffic numbers. Even more impressive than the traffic numbers is the behavior of consumers once they come to our sites. Apartments.com is engaging consumers as shown by time spent on-site and page views. According to Compete, we had more than 3 times the number of page views on our site in June than Apartment Guide, which was the closest competitor.
According to Comscore, we also had 50 percent more time spent on our site than Apartment Guide in June. Clearly, customers like what they're seeing on Apartments dot com. We are very pleased with our success and continue to grow traffic for our advertisers. We believe that with more traffic than any of our legacy apartment competitors, many of whom are charging more for less traffic, we can take significant share from our top competitors, who combined have nearly $500,000,000 dollars in revenue. We're already seeing good success in moving advertisers from ApartmentGuide, Rent.com and ForRent into our platform.
We're not taking our early successes for granted and we're working hard to move Apartments.com even further ahead. 1 of CoStar's strengths is collecting and building content. No competitor is matching us and providing the depth of data that our team of researchers, writers, field researchers, sales force, economists and analysts are able to generate. We know that on the Internet content is king and we're taking a number of innovative steps to increase quality and breadth of content on our site and therefore consumer engagement traffic and we believe eventually sales. Our market research indicates that renters place an extremely high value on apartment reviews when they're searching for a new apartment.
We know from other successful consumer sites like Yelp and TripAdvisor, the users really like to provide feedback about their experience and other users want to be able to read what consumers like them are saying. Consumer ratings matter and just recently Harvard Business Report published a study that found a 1 star rating increase for restaurants on Yelp correlated to revenue gains of up to 9%. So reviews are really important for folks when they're looking at these apartments. In July, we launched an innovative in fact, 21st, we launched an innovative campaign to encourage renters to provide quality reviews of their apartments. Apartmentsdot com will give away free rent for a year to 12 weekly winners.
Renters who write reviews that are rated as helpful will also be eligible for free rent for life grand prize drawing, which will take place October of this year. We expect that this will this promotion will draw many renters to our websites and drive more value for our advertisers. We are combining this objective consumer ratings with our objective fact based scoring system driven by the data collected by our researchers. By combining facts and opinions, objective data and subjective experiences, we can create a rating system that we believe renters want, one they can count on to inform them for one of the most important decisions they have to make. As part of our previously announced marketing budget, we have also initiated national marketing campaign to promote the newly released review functionality at Apartments.com.
We're promoting this campaign on national and local television, cable TV, digital, local radio and social media. Our advertising customers have been given tools and resources to promote the campaign within their own communities. Prior to the campaign, it took Apartments.com 3 years to collect 12,000 reviews. We surpassed that number in the first 36 hours of this new campaign. At this very early stage of the campaign, we have 35,000 reviews submitted.
I've read through them and many of them are really quite good. And the cost per review, I estimate is running about $20 to $30 which is a really good value. In another technology innovation in the apartment space, we've been adding immersive 3 d virtual tours for to Apartments.com site with a technology known as Matterport. It's great technology. Runners can virtually walk through the apartment and get a true feeling for the space in a unique way that pictures and floor plans do not capture.
Property managers and renters love them. We now have over 20,000 Matterport 3 d images on the Apartments.com website and we're adding approximately 1500 per week. We have almost reached 2,000,000 renter views of these 3 d immersive apartment walk throughs, so they're really working. Accurately advising our clients on new construction that will bring new supply and competition to the market is an important value proposition for CoStar Market Analytics. And additionally, we generally derive $6,000 or more per year for each property in the critical marketing phase post construction around initial lease up.
While tracking new construction has always been a strength of ours, we are working to build an even more accurate picture by flying over U. Cities to monitor new construction in a way not possible with Google Maps, commercial satellites or ground based researchers. We have expanded our field research fleet to include a Cessna aircraft equipped with a seriously state of the art augmented reality computer software and camera systems. It will help us survey commercial real estate in a way that's never been done before. In the 1st 10 days, we've completed 4 test markets.
And during these 10 days, we discovered and added over 100 new construction properties, 8,600,000 square feet of new construction and 2,375 new multifamily units to the CoStar database. Clearly, this will add to the depth and richness of our database and provide valuable information about upcoming supply in the marketplace. Several of our clients and prospects were given demo flights at NAA and even one was moved to sign a contract worth several 100,000 of dollars in the plane up in the air. Great thing is as a researcher that asked for the business not a salesperson. Great.
Our advertising agency RPA and a third party independent research firm has been providing us with detailed analysis from the 1st 4 months of Apartments dotcom national campaign. Through the end of June, the campaign has created over 3,000,000,000 impressions, including 1,900,000,000 digital impressions and 7,200,000 social media ad engagements. As of June 2015 compared to February 2015, our unaware awareness is up more than 50% with a quarter of the respondents listing Apartments dotcom in the top five top four mentions. In June, Apartments dotcom was ahead of all other apartment listing sites in awareness with only Craigslist edging us out. In several key markets like Philadelphia, Houston, Los Angeles and Phoenix, we experienced 100% growth which nearly doubled from 11% in February to 21% in June.
The perception of Apartments dotcom as a leader surpassed key competitors and ranks in the top 3 based on the same study with its strengths being characterized as smart and ally, honest and trustworthy. Ultimately, the best judge of success of the campaign though is sales included in the Q2 2015 and June were all time highs in sales, casting a vote of confidence for the effort. In addition to the work done by our agency, each of the past 3 years, Apartments.com has commissioned an independent national study that surveys multifamily professionals survey period covers the 1st 60 to 90 days after our national advertising campaign began, so it captured the trade's initial reactions to the new apartments.com website. Nonetheless, we learned a lot of interesting things and I want to share some of those highlights with you. We asked apartment listing sites trade professionals, which when we asked folks which sites they were familiar with, the survey showed that Apartments dotcom is now tied for 1st place with Craigslist.
Aided awareness for Apartments dotcom was 94%, up 200 basis points from the prior year, while Craigslist was down 200 basis points. All three of our largest competitors by revenue saw declining awareness. 30% of survey respondents selectedapartments.com as the most effective source of quality prospects, while 24% select Apartment Guide, 22% selected Craigslist and 4 percent selected rent.com. Barbers.com achieved a positive net most effective score of 22% when survey response were asked to select the most effective advertising platform for delivering quality prospects. Craigslist net effective score was the worst at negative 14% because of low quality of leads.
Zillow, Trulia, rent.com all were negative as well. Our net value score climbed into the number one position at 19%, while Craigslist and Apartment Guide came at 7%. All other primary competitors including rent.com were in negative territory. If you look at trends on net value, it really points to how well we're doing. Craigslist net value dropped from 31% in 2013 to 7% in 2015.
Apartments increased from 5% in 2013 to 19% in 2015. Our marketing campaign has been very effective in reaching potential clients with 93% of survey respondents indicating they had very high awareness of the campaign. Can't drown it out. Since the launch of our new multifamily services, cross sales of our Apartments dotcom and our multifamily debt and equity information analytics product CoStar Market Analytics show similar potential to the success we had in cross selling between CoStar and LoopNet. CoStar Market Analytics has been significantly contributing to driving sales of Apartments dotcom.
The insights provided by CoStar Market Analytics are extremely part managers and owners and we're able to help them identify rental trends more quickly with better accuracy. Year to date and since the launch of the new services 4 months ago, we have sold $8,000,000 of annual subscription combined packages of Apartments.com and CoStar Market Analytics, dollars 8,000,000 cross selling activity. With a full 4 months behind us, we are more confident than ever about our strategy and execution in apartments rentals marketplace. Sales are growing as a result of providing an excellent destination and positive consumer experience for renters, which in turn is causing property managers and owners to advertise their properties with us. Quick update on LoopNet.
LoopNet marketplace remains vibrant as we rapidly approach 10,000,000 registered LoopNet members. Average monthly searches are up 30% year over year. During the quarter, sales increased just over $6,000,000 annualized value of new businesses on LoopNet. There was a component of that that is connected with an accounting change, but the revenue continues to grow. After we complete the software integration of Apartment Finder late this fall, we plan to move to integrating the LoopNet land and CoStar backend databases together.
We believe this will allow us to significantly reduce research costs, improve data quality and position us to most effectively migrate remaining LoopNet premium searches to CoStar platform. In preparation for that migration, we continue to seek and are achieving higher prices per user in an effort to reduce internal competition and cannibalization. Year over year, our average new selling price per premium user has increased 45% from $98 to $142 On July 1, CoStar completed the acquisition of a Madrid, Spain based commercial real estate information provider called Belbex. They're very small and young. Belbex is the leading commercial real estate data service in Madrid and we believe that with time we can grow it to become a significant business for our European operations.
Madrid is both the 3rd largest city and metropolitan area in Europe, so it is a valuable chess piece in a longer run strategy. We plan to in a longer run strategy. We plan to
invest in the business,
but that is not expected to have a material impact on our overall financials. The new company will be managed out of our London office and will be led in Spain by Belvec's General Manager, Juan Medina. Because the scale of the market as well as our leadership team in both London and Spain, I'm very optimistic about the business potential of our growing European operations. Finally, I want to share a few recognitions our team has recently earned. The 2nd year in a row CoStar Group has been recognized by Forbes Magazine as one of the most innovative growth companies in the world.
Citing our rate of innovation and sustained appeal to investors, Forbes ranked CoStar number 15 in the annual ranking of the top 100 most innovative companies, up from I believe the 27th position and ranked us among the top 10 most innovative companies in the software and services category. John Coleman and our legal team have been included in the National Law Journal's annual roundup of Washington Legal Departments of the Year, recognizing the company's superior in house legal team. Our legal team was winning the big deals category and recognized successfully supporting the company through several major recent acquisitions. Finally and most importantly, CoStar Group was named by the Washington Post as one of the best places to work in the Greater Washington area. We are recognized in the large company category of the Post Prestigious Top Workplaces 2015 list.
The top workplaces are based solely on employee feedback with a survey conducted by Workplace Dynamics, an independent research company. Factors considered include employee satisfaction with benefits of their job and corporate leadership. The economic strength of the U. S. And its real estate, especially compared with international options, drove an exceptionally large flow of capital U.
S. Commercial real estate sector in the first half 2015, specifically $280,000,000,000 in sales in that time was 27% higher than a year earlier, the highest since 2,007. Fundamentals in the market continue to be strong and occupancy rates for all the major property types
are at
the highest level since 2008. Corresponding to strong occupancy rates, rental rates grew well over inflation ranging from 2.6% for retail to 5.1% for and logistic rents hit their highest point in this recovery. In response to stronger rents and occupancies, new construction has increased, especially in apartment office and warehouse. So far demand is still growing faster than supply. However, with the exception of the apartment market, we believe most markets should see declining occupancy rates over the next year.
The apartment sector performed solidly. Was up 11% in the first half of twenty fifteen from a year earlier. A high number of household formations drove the demand for apartments and allowed vacancy rates decline to a real estate cycle low of 3.7%. And year over year rent growth is of 3.8% is up from 2.8% 1 year earlier. In the office sector, net absorption of 38,000,000 square feet in the first half of twenty fifteen was up 4% from a year earlier, the highest net absorption rate of this real estate cycle.
The 60 basis point decline in vacancy to 11.2% over the past year allowed office rent growth to hit 4%. A 35% increase in office sales has been especially good for commission based brokerage clients. The story of strong demand, high occupancy and high investment sales volumes is similar for other real estate sectors, including retail, logistics, light industrial, hospitality and specialty. The broad based strength in both fundamentals and sales has helped support increased demand for CoStar products and services. I'm very pleased with what we've achieved in the first half of twenty fifteen.
The Q2 of 20 15 was exceptionally strong as our powerful sales team is driving all time high sales. Congratulations to Max and his team. We are well on our way to $1,000,000,000 in revenue and 40% margin in 2018 and we will continue to actively grow our powerful commercial real estate platform. We believe we are exceptionally positioned for strong growth and financial success for many years to come. Gosh on that note, I'll turn it over to Brian for his key hard time financial officer.
Oh boy. Go with that Brian.
They just never are dull. Thank you, Andy.
As Andy mentioned, we're very
pleased with the performance in the Q2 of 2015. The investments we're making in marketing are showing great results with all time high sales numbers, increases in traffic, leads, all while the CoStar Group's core business continues to grow at solid top line. We just closed the Apartment acquisition Apartment Finder acquisition last month and are aggressively integrating the business while providing our sales force with another service to sell in our to our multifamily customers. In the Q2 of 2015,
you just does that to see
if you can just mess with me before I start. The company reported $170,700,000 of revenue, an increase of 16% compared to the Q2 of 2014. Gross margins was $126,000,000 for the Q2 of 2015 or 73.8 percent of revenue, the highest gross margin we reported in the company's history. So the continued margin expansion shows the leverage and strength of our business model even with the research investments we've made in Canada and in multifamily, so the highest ever gross margins, which I we believe will continue to climb. Adjusted EBITDA of $11,300,000 for the Q2 of 2015 and non GAAP net income in the Q2 was $2,400,000 or $0.08 per diluted share, both of which were impacted by the investments in marketing for Apartments dotcom as well as expenses for the Apartment Finder acquisition.
Net income in the Q2 of 2015 was a loss of $15,000,000 Reconciliation of non GAAP net income, EBITDA, adjusted EBITDA and all non GAAP financial measures discussed on this call to the GAAP basis results are shown in detail along with definitions for those terms in our press release issued yesterday and are available on our website at www.coastar.com. Cash and investments were 367,800,000 dollars along with short term and long term debt outstanding of $375,000,000 as of June 30, 2015. Now I'd like to give some additional color on a few metrics to highlight the strong performance in the Q2. As Andy mentioned, we achieved $25,500,000 in annualized net sales of subscription services on annual contracts in the Q2 of 2015, an all time high and increase of 58.9 percent over the Q2 of 2014. This is an outstanding performance from our entire sales force and reflects the impact of our marketing investments.
We've been providing this metric consistently each quarter, this key metric and it shows the strong results of our continual efforts to move customers to long term contracts. As of June 30, 2015, we had approximately 624 salespeople across the company, which includes the addition of approximately 110 reps that came to us from the Apartment Finder deal. We are actively working to integrate our sales force resources and ensure that the field sales teams are appropriately sized and managed in each of the markets. Revenue from subscription services and annual contracts was $110,900,000 in the Q2 of 2015 or 65 percent of total revenue. For the trailing 12 months, subscription revenue from annual contracts totaled $420,100,000 up 17.4 percent from the 12 month period ended 2014.
Reflecting our continued success in growing the annual subscriptions faster than the non subscription services. We expect to continue to grow revenue from subscription services on annual contracts back up into the 70s range in the near term and eventually back up into the 80% 90% range of our total revenue. Renewal rates for annual subscription revenue remained high during the quarter. The 12 month trailing renewal rate for CoStar subscription based services was 90.6% in the Q2 of 20 15, while a 12 month trailing renewal rate for customers who've been with us for 5 years or longer was 97%. As we discussed in our last call, this metric ticked down slightly in the quarter as GE, a long time subscriber, sold its real estate portfolio.
Now I'll discuss the outlook for the Q3 and the full year 2015. Full year 2015, we expect revenues of approximately $707,000,000 to 712,000,000 dollars Based on our strong Q2 2015 sales results, we're happy to be able to raise the full year 2015 revenue guidance again despite the fact I just announced an increase on June 8. At this point, the top end of our annual guidance range is now $52,000,000 higher than our initial 2015 guidance range. Apartment Finder contributes $40,000,000 to $43,000,000 of that increase, while the remaining upside is organic revenue growth resulting from the outstanding sales results in the first half of twenty fifteen. For the Q3 of 2015, we expect revenue of approximately $187,000,000 to $189,000,000 We expect non GAAP net income per diluted share in the range of 1.6 $2 to $1.70 for the full year of 2015, which is up $0.03 at the midpoint from the range we provided you in June.
For the Q3, we expect non GAAP net income per diluted share of approximately $0.42 to $0.45 which includes the impact of shifting some spending from the 2nd quarter into the 3rd quarter to support the recently announced Rent for Life campaign. For the Q4 2015, we the range to increase to approximately $0.79 to 0 point 8 $4 per diluted share. The investments associated with the marketing campaign to trend down as we get past the peak rental season for 2015 and we expect that trend to be reflected in our quarterly earnings later this year. The sales results have been impressive in the short time since we launched the new site in February 2015 and the start of the national consumer marketing campaign in March of 2015. However, please remember that it's only been 4 months.
Our models moving forward do not reflect continued sales growth at 50 plus percent rates on apartments revenue forever. I'd like a few more data points before people start modeling and extrapolating out 4 months of sales results into their model for every quarter going forward, but obviously we're extremely happy with where we are. At this point, I'd like to talk about the growth trajectory for the business. As we still see the core business growing annually in the 11%, 12%, 13% range moving forward and we as we previously discussed, have a target for Apartments.com growth rate of 25% to 30% going into 2016. Based on the strong early results I'm seeing, I think we'll be at the high end or slightly above that range.
As we integrate Apartment Finder, our expectation is to add about $70,000,000 ish of revenue in 2016 as we discontinue the non core products and transition Apartment Finder away from print and into all digital. We continue to believe that we can reduce the cost base of our combined Apartments business as we integrate Apartment Finder. And we still expect the Apartment Finder acquisition to be accretive to the bottom line in 2016 and beyond. As we've consistently stated, we'll be evaluating effectiveness of our 2015 apartments marketing campaign as we get close to the end of the peak rental season and begin planning for next year. I think it's clear that the campaign is achieving our goals of expanding consumer awareness, driving traffic and leads to our clients and supporting a very strong sales momentum.
I look forward to updating investors on our plans for 2016 as we finalize those next quarter. In summary, I'm very pleased with CoStar's financial results for the Q2 2015 and we're off to a great start with the Apartments.com traffic and sales in the first half of the year. We believe our historic sales results keep us well positioned to achieve our stated financial goals of $1,000,000,000 of revenue and 40% adjusted margins exiting 2016 and our new goal of $1,500,000,000 revenue run rate with 45% to 50% adjusted margins exiting 2020. As always, we look forward to sharing our progress with you on these goals in the upcoming quarters. Now before I open up the call for questions, I have some additional news on a decision I have made.
After 18 spectacular years at CoStar, I've decided to take a sabbatical for the next year to spend more time with my family. Now I know this sounds very cliche, but the simple fact is I'd really like to spend more time with my family. As much as I love my job, I love my family much more. For anyone who knows me, it's been almost always on day or night for CoStar and has been nearly non stop work since the beginning. And unfortunately with my all or nothing personality, striking the right balance between work and personal life has been a struggle for me.
Truthfully, I enjoy working. I enjoy working really hard and all of CoStar's success has made it very easy for me to keep doing what I like doing. Quite frankly, I have the best CFO job in the world, even if it means working long hours. To be
the best, there has been
a lot of late nights and weekends. Spending more time with my family has been something I've thought about for years, but like most of us, it's been elusive for me because work has always been We've been in the middle of something exciting or about to close the next big deal. But over the past few years, time seems to accelerate it and the thought of 1 of my 2 high school kids leaving for college next August has had my head spinning. How much time have I spent with them? Has it been enough?
Have I been the best father or husband I can be? I could pretty much go on and on. While contemplating these thoughts and talking to a good friend of mine, he simply advised me to list out what was important to me, what I should be doing and not doing, stack rank it and go for it. So needless to say when I do this, it's pretty crystal clear. Health and family comes first and everything else including the work I love comes after that.
So let's be clear, I'm not going anywhere for a few months, albeit CoStar working with Andy and the team as long as it takes to have a smooth transition. Therefore, I'll see many of you at various conferences including next week that we'll be attending during the quarter. I'll also be working closely with Scott Yinger, our VP of Finance for the past 5 years who most of you know. Scott will be the interim CFO while the company interviews both internal and external candidates for the position. He's been in the trenches with me every step of the way, so the company will be well served during this period.
Really it's been impossible for me to sum up the words CoStar has meant to me, but I want to thank all the truly incredible people I've worked with for all that you have done for both me personally and professionally. CoStar and everyone I've worked with side by side for all
these years has really been
a second family to me. So again, thank you all. But mostly I can't thank Andy enough. He is truly one of a kind, special in many ways, a real visionary and a good friend of mine. He's been amazing and as usual we are both on the same page.
I couldn't be more excited about what we've accomplished to date building a great company which grew from a $14,000,000 valuation when I started to nearly $7,000,000,000 today, resulting in 1800% shareholder return over 10 times the NASDAQ average since our IPO. Wow, that's some serious shareholder returns. But even with all we've done, I'm still even more excited about the massive opportunity that lies ahead for the company and I have no doubt we'll dominate everything we turn our attention to. I realize this decision may be surprising to some, but I know in my heart it's the right thing for me today and I look forward to spending more time with my family and reconnecting. At the end of the prepared remarks, we'll only be taking work related questions in the Q and A.
So I'd appreciate keeping my private life exactly that private. If you still have questions related to my sabbatical, feel free to contact me directly. So let's take some questions on the fantastic quarter we had and the outstanding future of the company. Au revoir, Gopher, Andy. Okay.
So on behalf of CoStar's Board of Directors, our investors and all of Brian's colleagues and most especially myself, I want to express our deep appreciation and respect for all of Brian's achievements and contributions over his 18 years with CoStar. I must say 18 chronological years is a deception. Though Brian started 18 years ago, he's worked not a minute less than the equivalent of 45 years. I clearly remember when Frank Archetti, our EVP for Operations hired Brian back when Frank was our CFO. The week Brian started, Frank and I headed off to New York City to meet with Venture Capital and we left Brian in Washington to run the shop.
We left him with a bank statement on his 1st day of work with $0.50 in it. We let him know payroll was 150,000 dollars on Friday and we encouraged him to get collecting. I know he called his wife that day and told her that he thought he might have made a mistake leaving his stable job. We made payroll that week and with Brian at center stage, we've built an exceptional business that positively impacts tens of millions of people, employs 1,000 and has generated great returns and will thrive for a very, very long time. This quarter when opportunity arose to make an opportunistic investment like acquiring Apartment Finder for $170,000,000 or a non material multimillion euro company in Madrid, we can do that from cash on hand.
That is thanks to how far Brian has brought us from that $0.50 bank balance. Rest assured, Brian's greatest accomplishment is the strength and depth of the finance team he built. We will not miss a beat in transition with a team like Charlie Culligan, Don Wilson, Mark Zebra, Matthew Green, Tim Klutter, Rich Simonilli, especially Scott Yinger and so many more. Scott Yinger, our VP of Finance already leads the team and with the highest qualifications he will step into the interim CFO role as we transition to a new permanent CFO. As Brian stated, he will remain on board on a reduced schedule to assist in a smooth transition.
We have retained Russell Reynolds and the search for a new CFO is underway. I owe Brian more than I can ever repay him for. He's been a close colleague, a genius, a fighter and most importantly a friend. The truth is he spent more time with me over the last 8 years than he did with his family. That's a mistake, because he has a wonderful family and time is too short.
The best I can do to repay him is to wish him well as he heads off in a well deserved sabbatical and hope he gets busy making new memorable wonderful experience to his family. He will always have a big office waiting for him here at CoStar. At this point, I'll turn the call over to questions. I would reiterate Brian's request that we focus questions on the business and respect Brian's privacy. Questions?
And we'll go to Andre Benjamin with Goldman Sachs. Please go ahead.
Thanks. My question is actually now on apartments with the core CoStar Suite. I was wondering if you could confirm what the organic growth rate was just for core CoStar and the LoopNet platforms ex the for this quarter ex apartments? And then more deeply, how you're trending with just that core broker customer?
Sure. I'll start and then hand it over to Andy. Thanks, Andre 3000. So the core platform, the major brands that people think about CoStar, LoopNet and all that they're all sort of growing in the 11%, 12%, 13% rate the last few quarters. So I think they're still growing fairly strong.
Obviously, there's a lot of focus around this recent release the last 4 months. But as we talked about on prior calls, we've devised a commission structure for people to be filling up sort of the 3 major buckets on commissions. So we think over time that will be still to be continue to be
strong area of growth. And with that, the reality is that we are seeing good growth in the core business, but there is an unusually strong opportunity for our entire sales force in the apartment opportunity. And that on a good for good reasons diverts salespeople attention to those big commission dollars on the apartment side. So with so much growth over there, I'm very impressed that we're maintaining the those double digit growth rates in the core business.
We'll go to the line of Sarah Gubins with Bank of America Merrill Lynch. Please go ahead. Hi. Thank you. Brian, thanks for your comments.
And I feel a little bit petty about asking a couple of members questions. I'll go do it anyway.
Don't make it easier on me. Please do. I love numbers.
I'll throw them all in here. Could you help us break down revenue from Apartment Finder and Apartments dotcom in the quarter? Was there any revenue to speak of for Apartment Finder Social that you'll be shutting down? And just a broader question on Apartments.com if you're seeing any competitive reaction?
Yes. So I'll talk to the numbers and Andy loves talking about competition. So I'll leave that Pete to him. So yes, so in the quarter for the year, I think we said I'll go back and look at the transcript, but I think it's $40,000,000 to $43,000,000 it's plus or minus $6,000,000 in the quarter. So that's all in the quarter.
I think we disclosed all that for Apartment Finder. Their core business is sort of a net $68,000,000 to $70,000,000 So there's probably about $10,000,000 of revenue that we are currently shutting down. So as you approach sort of the end of the year for the conversion, it's about $10,000,000 are going to go into next year that you'll lose. So I think I just mentioned, we'll sort of expect about $70,000,000 ish. I'm not giving guidance for next year, but just so people can sort of start gauging their numbers from Apartment Finder for next year.
So obviously, once we get through all those conversions, we get rid of the print, we get rid of the social and all the stuff that we have going on, we convert to the new website and we start selling it, then obviously we think we can grow that longer term at sort of corporate rates mid teens or so. But that will be it's going to take the next 12 months to get through all that transition and then start getting the engine going on the sales there and competition.
And you're really the social will elimination of social will increase profitability without a doubt? Correct. Correct. So the competitive situation frankly Brian's right. I like competition.
This may come as a surprise to people. And the competitive front has been a lot of fun. There were a lot of players in the apartment space as we entered it. We have moved into number 1. There have been reactions here and there.
The our single largest competitor RentPath has for the first time begun to do some advertising to try to brand in reaction to our marketing campaign, national marketing campaigns. They've made some interesting choices. The vast majority of their revenue is on Apartment Guide. They decided to spend their marketing on rent.com, which is the minority of their revenue. Our survey show that rent.com is less popular with apartment owners and managers, Apartment Guy is more popular.
Watching Alexa, it would appear that there was spending really ahead of the NAA conference and no material traffic movement in dotcom, which would look like to me initially who knows where it goes looks like a somewhat ineffective response. The CEO of that organization was replaced last month or this month. So I think that also might be an indication. And then I feel like we're in a very strong position with some of the other players that we're up against there. On the information side, I think we're having we're taking a lot of share from some of those smaller players providing multifamily information.
I took a quick glance the iPhone at a red light on the way down to the office this morning at the only other publicly traded company providing multifamily market information. And it would appear that their subscription revenue was absolutely flat for the first time in years and that their revenue growth was all from consulting. And those of you track have heard the term zombie company. It's when you move to consulting instead of leveraged revenue. So I think that shows that we're taking a lot of share there.
And then folks who are in the space, but not directly competitive folks providing general real estate websites that begin with a Z and end with a W. They're pretty busy right now on a lot of other issues. And we are not seeing any share movement one way or another with them. So they have very little revenues in the space and don't appear to be a big factor. So I have to say it's been really rewarding to come in and with our team build a really strong product offering join up with the finder folks and apartments.com folks, apartment home living folks and take a tremendous amount of share right now from everybody.
So if you want to ask get back in line ask the same question again, I'd love it.
And we'll go to the line of Sterling Auty with JPMorgan. Please go ahead.
Yes. Thanks. Brian, congratulations on an excellent tenure and enjoy the sabbatical. On to the business stuff. Can you give us an update in terms of you talked about coming into the year the elimination of I think the premium searcher with LoopNet.
Where are you in the process? And is there a chance that you end up doing the same thing with Finder Social where maybe it's kind of a wind down and not a complete elimination?
Okay. Yes. I'll start and Andy can jump in. So I think Luca and again we keep pulling the levers. I think it's the same as we talked about on prior calls.
We've jacked up the price significantly and we are losing some people on the searching side. I mean, again, overall LoopNet is growing a little bit less this year. We got a little bit less revenue this year than growth in last year, still in that sort of 10%, 11%, 12%, 13% range. But we're essentially getting the effect of what we wanted. And I'll let Andy talk about it.
I mean eventually we will move all those people off of there and make it a pure marketing site. On the social thing, there will be 0 chance and Andy can obviously overrule me, 0 chance that we will not eliminate that revenue and 0 chance we will not shut down the print. I mean that is an absolute we're already starting the process. And obviously, we want to get to pure digital play in those areas. So and we're feeling great about where we are in a little over a month on this.
Yes. So the folks who are who were prior doing the social and printer actually have been given their warrant notice and we are actually moving people into other job opportunities and that is a fait accompli. The only thing delaying the premium searcher is apartments.com and then Apartment Finder and the fact we're working really focusing on that. And again, the price when we acquired LoopNet for a premium searcher was roughly $30 some today it's roughly $300 yet it continues to grow. By taking it up there and moving it towards parity with CoStar property, It will make the transition easier as we do that.
But again, it continues to grow. And we really want to have the back ends integrate between LoopNet and CoStar Groups that there is a 100% clear upgrade path for all customers. And that if a customer wants to use the CoStar content inside the LoopNet interface, they'll be able to do that as well. So we're making we'll make progress on that this year, but again it's just delayed by Finder and Apartments dotcom successes.
And just to add one thing on that, we've got about 120 people or so that we've given notices to. Most of them will be here through the end of the year, some a little bit going into the Q1 of next year. So we're well underway. As most people know CoStar moves at light speed and we've done lots of very, very successful integrations and acquisitions. And so I think we're well underway maybe better than ever.
And we'll go to the line of Andrew Jeffrey with SunTrust. Please go ahead.
Hey, thanks for taking the question, Brian. I hope your sabbatical doesn't mean we have boring conference calls for the next 4 quarters. I'll
see you in Boston next week with Andy. Don't worry.
In Apartments both apartments.com and finder visavisprice? I wonder how much of the blowout sales growth is a function of underpricing the competition? And at what point you start to kind of price for value, integrate data and start to drive some greater yield? Or if today and for the foreseeable future share is your primary consideration?
Well, we in acquiring Apartments.com, one of the considerations was we looked at all the other players and looked at their price points they were charging people. And we have experience though decades decades ago of converting from advertising medium to a digital information platform or digital marketing platform. And it's common that when someone converts from a print ad solution to a digital ad solution, they maintain the cost structure of the just religiously maintain the cost structure of the print platform, which has ink, Heidelberg presses and trucks involved. And that always that isn't always the right solution. You can actually when you have no direct cost for acquiring additional ad other than the sales commission, it's possible to very profitably go for volume and leave a And
clearly, the renters have told us they
care about higher volume. And clearly, the renters have told us they care about higher volume. And so that's sort of the strategy we're going after. And the fun thing is it's hard for the competitor who set a strategy on high price, low volume to respond to that quickly. So I'm very comfortable with the prices we're charging.
Again, we have these differentiated scales. So we have silver, gold, platinum, diamond. We're intentionally bringing people in on level 3 and leaving open the ability to move them to level 2 and 1 over time. Buildings moving into lease up or with vacancy problems move into will pay dramatically more. They'll pay more than twice or 3 times as much to go into the top sort of position with the most prominent ad.
I believe that if you get some softness with over construction, some market areas will get a lot more share and that people move into that 2 in one position to get greater marketing exposure. And then the other thing is we just have a cost advantage here. I mean we are we've already collecting all this content about the buildings. We don't have to hire people to collect that content in connection with the sale of an ad. So our costs are being distributed across the advertising platform and the information platform.
So, I feel very comfortable where we are right now and I just think we're lucky as heck to have a better have a cost advantage and to not be afraid to be a little bit bold and changing the business model up a little bit. So does that answer your question? Okay. I'll assume it did.
And we'll go to the line of Brett Huff with Stephens Inc. Please go ahead.
Yes. This is James Rutherford in for Brett. Just wanted a quick update on kind of hearing what multifamily owners are saying about lead quality and if there's any change there? And then on the volume that they volume kind of leads are getting after switching NAA in Vegas.
And, I met with a lot of owners recently with NAA in Vegas and was extremely pleased with the feedback I received. So across the board, the most senior principals of firms and then the marketing leadership across the board. Everybody I spoke to acknowledge that they were happy with and we're seeing a material improvement in lead quality and quantity from Apartments dotcom over prior year. And in particular, one of our strategy differences from other competitors has been we are not focused lead quality. So a lead is a cost item, a lease is a revenue item.
And the industry got into a game where it was drive leads to the telephone of the leasing office regardless of whether or not that lead was even remotely qualified. So specifically, you don't tell the person if the apartment the one bedroom is available or not. You haven't called the leasing office to find out. That's a waste of the leasing office's time. So what we've done is we're telling people there's no one bedroom available here.
Don't bother calling unless you're really, really desperate. And that brings lead volume down a little bit. The marketing and the traffic reads lead volume up, but it's more qualified leads. And so we're getting I was really pleased with what we heard. And I think now especially for the 13,000 communities have been advertising with Apartment Finder, I believe we're going to blow their minds.
I think we're going to give them an increase of leads like they can't believe when you go from 2,000,000 unique visitors to 14,000,000 unique visitors and you go from again this sort of murky lead shotgun game to really qualified high quality leads. I think it will work really well.
And we'll go to the line of Bill Warmington with Wells Fargo. Please go ahead.
So good afternoon everyone.
Hi Bill. Hi Bill.
And so I heard a rumor that you were trying out for the Washington Capitals and you're still on the ice. Is that could be pro this time?
Trying out. I already got a spot.
I'm behind. Anyway, so congratulations on that and we're going to miss you.
Thanks, Bill.
So a question for you on the sales force structure. I know you gave out the number of 624 and that included 110 coming in from Finder. But maybe it would be helpful if you could sketch that out for us now how the sales force is actually organized across all the different products and how we should think about that in terms of how it's organized?
Okay. So over simple
It can't be too simple for a sell side analyst.
So if I extract out inside sales selling LoopNet in tertiary markets and I extract out verticals and real estate manager and things like that. These are little sales teams of
Right.
They're smaller sales teams, which are not significant. There's probably 100 some people there. And I focus on the core businesses. It really breaks into a CoStar information oriented and commercial real estate oriented sales force and then an apartment marketing oriented sales force. One of our one of my big concerns this time last year was that I I did not have as big an apartment marketing sales force as my competitors did and that was one of our disadvantages.
So I was pushed to move the CoStar information salespeople into supplement what we had whole and has been exceeding expectations for the result. So for and especially, it's something different about this apartment business than from the ops industrial retail business is that the smallest cities in America play an outsized role. So Greens borough and Biloxi and Baton Rouge, Albany, Buffalo, they actually generate material revenue in these apartment sectors. So we did not have strong offices or personnel in those really, really small cities. And Apartment Finder brought that to us.
So it's complementary geographic distribution between where the Apartment Finder folks were strong and where the apartment.com people were strong. The tenure of the Apartment Finder people we're bringing on is excellent. I mean it's not atypical that's 8 years, 12 years, 14 years. At NAA as I moved from little group to at the party for a little group of clients with a salesperson, a little group of clients to salesperson, I heard several times that this client this salesperson was in this client's wedding party. So that's fantastic.
And what this is that's done is given us real strength in the tertiary markets and good relationships. And then also some strength in the prime market. So for instance, Apartments.com had 6 salespeople in Los Angeles and Apartment Finder had 6 people in Newport Beach. So it tells me that no one really managed salespeople down there before because you can't go from Newport to Santa Barbara effectively sell. And by bringing those two groups together, you actually begin to able to sign out L.
A. In a realistic territory pattern. The thing that's key is the teaming between the information salesperson and the marketing salesperson that's working like a home run. People are teaming up and they end up getting a lot more revenue and taking a lot more share when they go with a combined offering. And the other nice thing about that is historically the marketing people were gatekept at the leasing office of the community.
So they were often selling one community at a time to the leasing manager. When you bring in the CoStar rep whose information, they're used to selling to the C suite of the organization and that group has an interest in it. So they're bringing the marketing person up to the C suite and now we're it's not atypical. We're getting a lot of deals that are 20 communities at once, which was prior unheard of, which is allowing us to move so much share so quickly. And I without anecdotally, I would hypothesate that our maybe 6 or 7 competitors we're dealing with right now, I would guess that many of them are down 10% of their revenues carefully at the subscription base of our public information competitor.
I think that this teaming and the sales force is working incredibly effectively, moving thousands of communities to us. So there'll be there's some overlap in some areas, but we want to grow that sales force for the there's an unlimited need to grow that marketing sales force on the LoopNet side in the field and the lands of America, which is still a very promising vibrant business with a great future. So I would I know you're not supposed to look in acquisitions say that the sales force was like a real linchpin. You wouldn't spend that much money for just a sales force, but we did get a fantastic set of sales forces here. And I am personally thrilled to finally look at like a Charlotte office and see real strength, see like 15, 16 solid salespeople and a real CoStar presence in that community.
So we're really a meaningful member of that business community. So that's happening all over the country and I'm very thrilled with it. It will be competitive strength.
And we'll go to the line of Michael Huang with Needham and Company.
Thanks very much. And Brian, so have fun with family and good luck with everything. It's been great working with you. Just a quick one here. So I appreciate the comments around not extrapolating from the strong bookings performance that you've been seeing here.
I was wondering, was there anything kind of one time in nature that benefited kind of the quarterly bookings? And I guess as you think about the year, I know that you're not going to be extrapolating aggressively here. Like what should we be assuming around bookings growth for the year? Should that tail off a little bit? Or what like is there a way you can walk us through that?
Thanks.
Yes. I'll talk about it. So I'm going to focus on the annualized contracts bookings number, the $25,500,000 number. The other number is a good number too. There's a lot of monthly stuff that comes in and out of there.
Obviously, all the finder stuff is monthly now. We're moving most of the apartments to annual, but there's still a lot of monthly stuff there and a lot of monthly and 3 month stuff at LoopNet. So on the annualized number, which is really to me the key metric that we're tracking, that's obviously up fairly significantly. And that's the number I don't try to guide to it because I'll tell you quite frankly we're in uncharted territories here, right? And that's why I say it's 4 months into this and I don't want to extrapolate things.
I think after I've always said this the last few calls like let's get through 1 full year of the marketing campaign and the sales stuff and then really know what the trajectory is. Do I think we can grow that number and continue to grow it at 50% plus for the next 50 years now. But can we continue to grow it at that rate? Possibly. We've never done it before.
I mean, so we're the 4th month in and I just think it's a spectacular number. Now obviously, as we keep getting more experience each quarter, then we will continually sort of update that number. So in the annualized bookings number there's nothing as far as I'm aware that's one time in nature. So I think we'll just have to see how that plays out. I mean, obviously, there's NAA.
There's a lot of big bang things upfront. So I think you have to get through a full 12 month cycle to sort of see where you go on that.
And we'll go to Peter Lowrey with JMP Securities. Please go ahead.
Hi, great. Thanks. It sounds like the synergies in between the recent acquisitions and the information and the analytics side of the business may be going better than expected. You mentioned the sort of revenue synergies in terms of how the territories lay out. But is there anything else that's been sort of surprising on that front?
And when you say surprising about what you mean in terms of specifically the synergies?
Like worked out better than expected. Yes.
We initially thought that the focus would be on selling the information product to the asset manager at the owner or at the property more of an asset management tool with our product. More of an asset management tool with our product. And what surprised us was that often the very same person tactical rental information. So you go meet with tactical rental information. So you go meet with somebody and sure the asset manager is in there and they're kind of interested.
But the direct VP of Leasing has to manage and understand every day what all of their competitors are charging for rent and need to watch where people are raising or lowering their rents and that same person is responsible for lead generation. So what thrilled us was that person when you could solve a problem that no one else could solve, because no one else is solving this problem we're solving here. There are other people that provide information on apartment buildings, but they are updating a very small set of properties realistically with a very, very small staff and they're doing it on a bimonthly basis typically or a quarterly basis. And we are updating more properties and their rental information each day than I believe any of our competitors update all year long like update quarterly. So we're providing these people with really good pricing competitive intelligence and that is really compelling to them.
And the great thing is they have the they control a massive budget for marketing the properties. And then the other little secret there is that they it's appropriate, there's nothing wrong with it, but the they have a big budget for marketing these 30 buildings they manage. But the marketing budget goes directly into the partnerships on the buildings and that they can get packages that allow them to get discounts on information based on the spend at the building. They can get very low cost information at the general partnership and they really like that. And you could make an argument that you could allocate information costs against the limited partnerships that the building sit in, but we do that for them.
So in many cases, if somebody moves substantial advertising budget for 20 or 30 properties from a competitor to Apartments dotcom, they can get free information to manage the rentals and their asset management, their underwriting, the whole 9 yards. And I really enjoyed the other day listening to a sales pitch from a direct competitor where it was quite clear at the end of the presentation that the CoStar market analytics was a better product and was free because of their marketing. And the competitors salesperson just sort of chugged and disappeared. So that's a surprise. Thank you.
So I believe at this point, we have no more questions. So thank you all for joining us in this call. And we look forward to those who are going to be up in New York at the Needham Conference. And for those who are going to see up in Boston the day following that, we look forward to seeing you. Again, thank you very much and look forward to hearing from you all next quarter and look forward to Scott leading the call next quarter and Brian making comments from the peanut gallery.
Thank you very much.
Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you for your participation and for using AT and T Executive Teleconference. You may now disconnect.