Ladies and gentlemen, thank you for standing by, and welcome to the CoStar Group First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. As a reminder, this conference will be recorded.
And at this time, I'd like to turn the conference over to our host, Vice President of Investor Relations, Mr. Rich Simonelli. Please go ahead sir.
Thank you, operator, and thank you all for joining us this morning and welcome to our Q1 2015 conference call. Before I turn the call over to Andy and Brian, I have some important facts for you to consider. 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 April 29, 2015 press release about our Q1 earnings our April 29, 2015 press release about our plan to acquire Apartment Finder and the CoStar's recent filings with the SEC, including our Form 10 ks for the year ended December 31, 2014, under the heading of Risk Factors. All forward looking statements are based on information available to CoStar on 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 conference call is being broadcast live and in color over the Internet at www.coastargroup.com where you can also find CoStar's Investor Relations page. A replay will be available approximately 1 hour after this call concludes and will be available for approximately 30 days. To listen, please call 1-eight hundred-four seventy five-six 70 within the U. S. Or Canada or 320-three sixty five-three thousand eight hundred and forty four outside the U.
S. The access code is 35 7,606 and a replay of this call will also be available on our website sooner after the call concludes. I'd like to turn the call over now to
Thank you, Rich. Appreciate it. It's not really broadcasting color, is it?
Yeah.
Good morning, everybody. We're glad to have the opportunity to talk with you today about our very strong financial results in the Q1 of 2015. The tremendous progress we're making with Apartments.com has been phenomenal and we also want to talk about our agreement to acquire Apartment Finder, which we announced last night. Our revenue increased 34% year over year to 159,000,000 in the Q1 of 2015 compared to $119,000,000 in the Q1 of 2014. We achieved net bookings of $21,000,000 for the quarter, a whopping 50% year over year increase.
March net bookings surged well beyond our prior best ever month to $11,000,000 which represents a 91% increase versus March of 2014. March's record sales were a direct result of the successful launch of our new Apartments.com site and our new CoStar Market Analytics product. The magnitude of the March sales jump surprised all of us. Net new sales on annual contracts as opposed to many of the 6 contracts that come out on apartments, the annual contracts were $16,200,000 for the Q1 of 2015, which is up 10% over the Q1 of 2014. CoStar core services grew 20% during the Q1 of 2015 as compared to the same period.
Our annual subscription business continues to enjoy high trailing 12 month renewal rate of 91% with a 98% renewal for those customers with us 5 years or longer. According to Google Analytics, our marketplaces drew their most traffic ever with 22,000,000 unique visitors in aggregate in March of 2015. According to a study conducted by Kipp Casino and Burrell Associates Inc, apartment landlords will spend $1,500,000,000 in online advertising in 20 15. We believe that this represents a major earnings opportunity for CoStar Group. We acquired Apartments.
Com, a major player in the sector, 1 year ago in April
of 2014. In the 1 year
since the acquisition, 100, if not 1,000, of my colleagues have put forth a herculean effort and have redesigned and rebuilt Apartments dotcom from top to bottom. On a great job. In a competitive and rapidly changing industry, we need to ensure that our service will lead that industry. We understand that other competing sites with significant revenue are working with aging business models and that there is a unique opportunity to reinvent the space and capture share with a more renter centric website. We believe that if apartments.com gives renters what they want and need then we will be able to give our paying Prior to the site launch, we wrestled with a number of risks.
There was a risk that our development teams could not rebuild and integrate the site across multiple platforms in our budgeted time frame. There was risk that we would not be able to collect enough content to really improve the renter search experience and drive brand loyalty. Decision to include paid and unpaid content created the risk that advertisers would opt for free listings or that advertisers would not receive enough incremental exposure over free listings to justify their investment. There was risk that the site redesign would cause existing advertisers to reconsider ad spend with us. There was the risk that our sales force would not have the skills necessary to effectively sell ads in our new business model.
There was the risk that our belief in that our efforts to cross sell information and marketing in the apartment industry would not bear fruit. There was also the risk that our SEO would fall dramatically with a complete site rebuild. And there was also a risk that our significant investment in marketing would not drive meaningful traffic gains. Okay. Once or twice I woke up at 4 in the morning during the process of rebuilding apartments.com.
Now that we have successfully launched the new site, driven significantly more traffic, retained the overwhelming majority of our advertisers and set all time That is very important to us. We are more confident than ever about our strategy and execution in the apartment rentals marketplace. The combined Apartments.com sales force and the CoStar sales force are working effectively together and selling successfully. We are confident about our ability to gain significant market share. I believe that our early results demonstrate that our efforts are beginning to show clear payoffs.
The launch of the new marketing campaign on March 1, 2015, featuring acclaimed actor Jeff Goldblum as Silicon Valley Executive Brad Bellflower has been an outright home run for Apartments.com. The campaign is now in full swing with thousands of television spots, hundreds of outdoor placements, a large digital campaign and thousands of radio spots. We can see strong traffic gains as the various ads run. We have received very positive feedback from our customers on the campaign. Senior industry players have told me that they feel that the major branding campaign is having a positive halo effect on the entire industry and they're pleased that it elevates their stature in the business community.
I think that is a great result for us. The only negative feedback is coming from our competitors. Our intensive B2C campaign coupled with our significant investment in search engine marketing, a dramatically improved site experience and strong improvements in SEO is driving massive site traffic gains. You'd be surprised if I didn't spend a moment talking about that. 4 of the leading independent companies that monitor Internet traffic Comstor, compete.com, Experian, Hitwise and Alexa now show apartments.com is Apartments.com
is the undisputed number 1 most
heavily trafficked site in the apartment rentals listing space. According to Comscore, in March 2015, we more than doubled year over year traffic to Apartments.com with 15,000,000 visits and 7,000,000 unique visitors. Our own internal Google Analytics numbers show even higher traffic numbers. But now Alexa now shows us the most recent trailing past 30 day traffic numbers moving even higher with 9,100,000 unique visitors to Apartments dotcom. That is nearly double ApartmentGuide's 5,000,000 unique visitors and quadruple For Rent's unique visitors of 1,900,000.
Dollars These 2 major competitors each have significantly more revenue than Apartments dotcom does today and generally charge half price points and they're charge significantly more for their lesser traffic than we do. We believe that advertisers will find it attractive to switch their lead generation budgets to our more heavily trafficdepartments. Com and save money. It is really a nice sales visit when you can go into a potential client, show them a superior product and save them money in their budget. We believe we can take significant share from these competitors.
Alexa shows much more than just a traffic advantage for Apartments dotcom. According to Alexa, not only are more visitors coming to Apartments.com, but those that do stay visit stay approximately 50% longer in our site and they view more than twice as many pages on our site than any other competing apartment rental ILS site. Alexa measures bounce rate, which shows how many visitors are low value because they immediately navigate away from the site after viewing just a page. An ILS or an apartment website wants to have the lowest bounce rate possible. Apartments.com has the lowest bounce rate in the apartment rentals listing space at 1 third lower than the rate of Apartment Guide or for rent according to Alexa.
Compete.com shows apartments.comdominating the apartment rentals listing space with 60,000,000 page views in the month of March 2015, which is twice the number for Apartment Guide and 6 times the number for ForRent. In their monthly newsletter, compete.com called out apartments.com as one of as stats as shown by pages per visit, length of visit and number of return visits. Experian not only shows us as the leading as leading other apartment rental listing sites in traffic, but they also show us capturing an amazing 51 1% of all of the SEO number 1 slots for critical industry search terms such as apartments. Apartment Guide in contrast is only capturing 7.2% of those key terms and for rent is only capturing 1.2% of them. Again, 51% captured by Apartments.com a key SEO term like apartments versus competitors with 7% or 1.2% capture in that number 1 slot, which matters.
We are very proud of these very impressive across the board results, but we view them as a great start and we are focused on continuing to widen our competitive lead. These impressive increases in traffic are creating massive exposure for our advertisers' listings. It is difficult to give you a fairly representative picture of the true increase in quality leads we're generating for our advertisers. Comparing leads from our old site to leads for our new site is like comparing apples and oranges. Our old site followed the industry standard in that we did not show apartments were actually available or not.
So useless calls generated by renters to an apartment leasing office only to find out that the 1 bedroom they're looking for is not available was counted as a lead. I don't think that makes any sense. Now on our site renters can generally see the actual current availabilities on apartments on our site and the leads that go through are much more meaningful when they arrive in a leasing office because they're prequalified to some degree. Even if we do compare apples to oranges, we can see tremendous lead growth. Leads during the Q1 of 2015 are up nearly 67% year over year.
We have received a lot of positive feedback on results and I can share one I received just yesterday from Diane Callaghan, who manages Vista at Palma Sol Apartments in Florida. She said, we went live with Apartments dotcom on April 6. Since that date, our phones have not stopped ringing and we got 16 leases. To say the least, we are very happy with our decision to advertise our community on Apartments.com. Thank you for all that you do.
You're welcome, Dan. In this quote, the customer is attributing the source of $192,000 of leasing to their roughly $500 ad on Apartments.com under traditional locator model that would have cost them $16,000 When you take all that into consideration, it's not surprising that we are having success selling. March was the 1st representative selling month post launch. March results exceeded our highest sales expectations for the new site. At the end of the sales month, the executive team waits for the results late that night.
Last month as the results went out late at night somewhere in midnight with our first ever 8 digit annualized net new sales result, Net sales on Apartments dotcom in the Q1 of 2015 were up 827% compared to the Q1 of 2014. We had more net property additions in March 2015 than all of the preceding year. We had more net property additions in March 2015 than in all of the preceding year. So in 1 month, we had more net sales than during the entire prior year. I think I made that point.
We cannot expect that pace to continue and certainly 1 month of sales does not make a meaningful trend, but it is a great result. We believe that many of the 1,000 plus apartment communities that signed up with us in March curtailed their spending on competing sites. We do not know that we do know that that was the case with Apartment Finder. After turning in reasonable growth for the past few years, their sales turned down as we launched our new site. Apartment Finder was founded in 1979 and is one of the most recognizable brands in the multifamily Internet listing service industry and has been a significant player across the United States.
In the fiscal year ended March 2015, Apartment Finder had revenue of approximately $79,000,000 and EBITDA of family space. Apartment Finder's business model is very similar to the Apartments dotcom business with approximately 13,400 1,400 properties listed on its site. It combines website mobile apps and social media lead generation solutions with an optional digest sized local print publication. 80% of the leads they generate for advertisers are from apartmentfinder.com and 20% are from their print product. Its main source of revenue is listings, which represent 91% of the Apartment Finder revenue as of the fiscal year ended March 2015.
Typical average monthly spend by client of Apartment Finder is $4.82 They have an outstanding monthly renewal rate of 98%. We like the fact that their product is aggressively priced amongst industry competitors. Finder has 2 product lines that we do not currently offer in the apartment space. Finder Social is a content and social media marketing service for multifamily property customers and apartment communities. Finder staff helps these clients create content and manage online relationships.
About 10% of Finder clients use Finder Social. It is sold as a high value add on or standalone service. This has potentially greater value sold through our larger distribution channel. Finder has another product called Finder Sites, which is similar to our LoopLink product that we believe will be a strategically valuable addition to our offerings. Finder Sites is a service offering that designs, develops and hosts websites for property management companies and apartment communities.
They offer design, full service SEO package, unlimited site maintenance, dedicated personal consultants and monthly website hosting. We began to acquire we began negotiating to acquire Apartment Finder well over a year ago at approximately the same time we were engaged in the process to acquire Apartments dot com. After intense negotiations last year, we were unable to reach agreement on a purchase at that level and both parties walked away more than 6 months ago. At the time, several companies in the apartment rentals ILS space were being offered in the 14 times to 18 times EBITDA range. So people were trying to pick up 14 times to 18 times EBITDA.
1 sold at 14 times placing the valuation of that company at $1,500,000,000 As we have previously communicated to investors, we were unwilling to purchase other ILSs at the same EBITDA multiple that we paid to acquire Apartments dotcom. We passed on multiple potential deals. Using that multiple that was in play last year when we were unable to find a price we wanted, we would have been expected to pay over 300,000,000 dollars for Finder. A year ago, we wanted to focus our energies on successfully relaunching Apartments.com reducing all those risks associated with that acquisition and the relaunch. Now that we have successfully launched Apartments.com, we have reduced so many risks in the business and developed new sales content technology and brand assets that can be readily leveraged across other ILS sites.
Within days of our National Media Blitz announcement and the new site launch, Apartment Finder's owners contacted us and we resumed negotiations at a much lower price. A comment that was made was that they did not want to show up at a gunfight with a knife. We are acquiring Apartment Finder for $170,000,000 in cash, which is much lower than the $300,000,000 number mentioned earlier. This means we are buying the company approximately 7 times EBITDA. This is less than half the multiple we paid for Apartments dotcom.
The price that we paid is very roughly from where we were when we couldn't come to agreement was $80,000,000 less than the bottom price the seller had a year earlier. And that difference incidentally is about what we spent on the incremental marketing campaign that helped us to achieve this lower price and so many other Apartment Finder as we did with Jeff Goldblum for Apartments dotcom. Probably 2 analysts want me to say it again. We're not planning to do an immense branding campaign for Apartment Finder as we did with Jeff Goldblum for Apartments dotcom. That will be the first question.
We are focusing on online marketing for Apartment Finder. However, there is no doubt that the advertising and brand work we are doing for Apartments.com will benefit Apartment Finder because it will give our salespeople who sell both services access to buyers because of the power of an unprecedented Apartments dotcom campaign. So it gives us access across all of our product lines. We expect to achieve a run rate of $20,000,000 of synergies over the next 18 months, which could effectively lower the multiple paid to somewhere around 4 times EBITDA. We believe that we can achieve these synergies while at the same time dramatically increasing our investment in digital marketing for Finder to drive significant traffic to the site.
We are in Atlanta for today's call so that we can get to work right away on our plans to integrate Finder once the transaction is closed in order to leverage all of our new and valuable assets. Our technical leadership is already meeting with their team to begin integration planning as we did with Apartments dotcom. We already had preliminary design specs done for the Apartment Finder site by the time we announced the deal yesterday. We plan to consolidate all of Finder's content, billing and CRM into our new back end that we built to drive apartments.com. That means that once this effort is complete, we will have one cost for collecting amazing content, great billing systems and CRM that's leveraged for 2 brands.
Equally importantly, we expect Finder will gain huge new strengths and competitive advantage in content, while gaining this better billing and CRM system and a much larger sales force. Apartment Finder offers its advertisers a print directory option that is relatively ineffective in driving leads and is expensive to produce and often tough for an organization to come to grips with and eliminate. We plan to eliminate the print offering as soon as possible. Print and distribution spend is $12,000,000 in operating expenses for approximately 800,000 print publications a month distributed through an extensive rack distribution network. Over time, we plan to shift the money Apartment Finder has been spending in print publications to a larger investment in search engine marketing programs to deliver more leads online where most search activity is actually taking place.
We believe that we can replace more than the print leads lost with additional online traffic generated on a new finder site with this larger SEM budget. Apartments.com and Apartment Finder eventually will be powered by the same databases. So we believe that we can also replace any leads lost from Finder Print with silver level ads in Apartments dotcom. We hope to phase out of print in less than a year. While we are phasing out of print, we expect to run both the print cost and the enhanced SEM cost.
We're doing that because we feel the time is of the essence and we want to be aggressively growing all of our each with each with their own distinctively different website experiences and user interfaces. Our goal is that renters will view the brands as very different sites targeting different audiences. Though different looking to the renter, the sites will leverage much of the same technology under the hood and the content will be very similar that we just from what we just built for Apartments dotcom. So we have 2 very competitive sites for half the unleveraged cost. It is obviously valuable to have multiple leveraged consumer brands in the apartments rental website space.
No matter how successful we are, you will never Google the search term apartments for rent and get a Google result page with apartments.com as the only result with a great big white space below us. Wish it was true, it's not. It's much better to compete with ourselves as the alternative choice than with a third party. Because Google, Bing or Yahoo users can retain multiple brands in their recall, we want to also occupy multiple considerations and they're top of mind to capture a larger share of direct traffic as well. Our research shows that renters typically visit 3 to 6 sites in their apartment search.
We want to engage them in as many of these sites as we can. In much the same way, Priceline is a highly profitable $65,000,000,000 market cap company that wisely operates multiple complementary brands in travel including booking.com, kayakrentalcars.com, Agoda and OpenTable. Expedia is another highly successful multibillion dollar company and it operates brands like Expedia, Hotels dotcom, Trivago, Hotwire, Travelocity, Car Rentals, Vineyard and E Long. It's all about the real estate in the online world. Who shows up at the top of search results or top of mind can generate high margin big revenue.
And that's why and it's why we have very consistently operated from this strategy for a long time. When a searcher enters a term like office space for sale in San Diego into Google, the results are awful often not awful, they're great. The results are often multiple CoStar Group brands such as LoopNet Showcase, CityFeet and CoStar and sometimes brokerage firm sites that are powered by our LoopLink product. This way, when the searcher goes in there, we're not not holding other slots on the page or not losing as much business. This is also the strategy that we're consistently using for our 2 brands in the land space and for our 2 brands in the business for sales space.
Generating online leads for their apartment community is a mission critical utility for an owner. They often want to market their property on multiple sites to diversify and generate more leads than they can get from one site. Again, remembering remember that the ad spend online in this space is estimated at $1,500,000,000 in 2015. We're only getting a small piece today and meeting customer demand is a good way to grow share. In focus groups, owners have told us that they would really like it if we could if they could deal with just one sales representative and deal once with setting up online feeds and updating sites, working with just one company.
But in doing this, they want to also be able to hit their goal of moving out to multiple sites. We plan to do that. So with this acquisition, we gained 120 valuable new apartment sales professionals. This team will join our existing 500 plus sales professionals giving us one of the largest sales forces in the industry. Eventually, one salesperson will serve multiple sites for a given owner, streamline the process for the current for the client, while reducing our cost per sale at the same time.
We had a very positive meeting with the Apartment Finder team here in Atlanta yesterday after the deal was announced. We are thrilled with all the new talent we are joining is joining us in our effort to build the premier apartment network. We look forward to working with them for many years to come and accomplishing great things together. We have had tremendous success transforming Apartments dotcom into an industry leader in a very short period of time and I'm looking forward to repeating that success with Apartment Finder. We have an exceptional head start since much of the we've built for Apartments.com is directly relevant and can be used for Apartment Finder, acquire, beat and repeat.
I'll wind up with a quick update on our international operations. The sales efforts in the U. K. Continue to deliver great results as we achieved the highest ever net sales month in March 2015 and annualized new sales of £301,000 We are closing in our 1 thousandth customer for CoStar Suite in the U. K.
Our sales are accelerating with more than 1 new subscriber firm on average every day since the launch of CoStar Suite product in the U. K. We are now advancing our plans to retire the older Focus product completely from the market and expect to complete that before mid-twenty 16. I'm very pleased that we have achieved what we've achieved in the Q1 of 2015 overall. We have unleashed a powerful new sales platform that is driving record sales of CoStar and Apartments dot com.
We are confident we are the only company that can really deliver to property managers and owners a marketing solution along with a comprehensive information analytics platform for an for an exceptional price. We think that Apartment Finder will be a very valuable and profitable asset that will strengthen our service offering. I believe we're on our way to $1,000,000,000 in many years to come. At this point, I will reluctantly turn the call over to Brian Radacki, our Chief Financial Officer.
That wasn't bad for 2 conference calls in 1 Andy. I was expecting to go longer both the quarter and in acquisitions. Thank you, Andy. As Andy mentioned, we're very pleased with our performance in the first quarter of 2015. The investments we're making in marketing are showing positive early results with all time high sales numbers, increased traffic and leads, all the while CoStar Group's core business continues to show solid top line growth.
While we're in the early stages of the Apartments.com relaunch and national marketing campaign, the early uplift in sales and traffic support our view that apartments revenue will accelerate in the 3rd Q4 this year and obviously beyond. We expect the acquisition of Apartment Finder will help expand our market share with property owners as well as our reach with consumers while generating sizable cross selling opportunities in synergies in 2016. The Parton Fiber transaction we announced yesterday will be for with cash on hand of about $170,000,000 which is as Andy mentioned a very favorable valuation at 7 times EBITDA. We expect the deal to close in 90 days or less. This valuation looks even better when you consider the $20,000,000 in run rate synergies we expect to achieve within 18 months after the close.
Given the attractive purchase price and all the benefits that come along with that, we believe we can drive significant value for shareholders. For the fiscal year ended March 31, 2015, revenue for the total Apartment Finder business was approximately 75,000,000 dollars with EBITDA at approximately $23,000,000 resulting in a 29% margin. However, there are several non core assets, which we will likely sell and discontinue over the next 18 months. Example, Rackspace Rentals in grocery stores, banner ads and other delectable items. Apartment Finder's core advertising revenue is approximately $68,000,000 to $70,000,000 for 2015.
The Apartment Finder business as Andy mentioned grew in the low single digits last year and was down slightly last quarter. We believe a refresh of the Apartment Finder website with increased SEM initiatives will enhance the business to contribute revenue and EBITDA to CoStar in 2016. We expect to realize the longer term cost synergies by running 2 distinct branded sites using the same IT infrastructure, same data collection, research for both Apartments dotcom and Apartment Finder. Just as we've done with Apartments dotcom and LoopNet, we expect to leverage the technology research marketing and sales with the Apartment Finder business, which will translate to significant revenue and EBITDA to CoStar. Turning your attention back to CoStar's results for the Q1 of 2015, the company reported 100 and $59,000,000 of revenue, an increase of 33.5 percent compared to the Q1 of 2014.
As previously discussed, the company made significant marketing investments in the Q1 for Apartments dotcom. Therefore adjusted EBITDA was $23,800,000 non GAAP net income was $10,800,000 or 0 point 3 $4 per diluted share and net income was a loss of $6,100,000 Strong gross margins of $113,600,000 for the quarter or 71.5 percent of revenue is similar to the gross margins reported in Q1 of last year, even though it includes the investments in research for multifamily in Canada we've discussed the prior two quarters. Reconciliation of non GAAP net income, adjusted EBITDA and all non GAAP financial measures discussed on this call for their GAAP basis results along with definitions of those terms in our press release issued yesterday are available on our website at www.costar.com. And if you have any questions just hit get rich at costerigroup.com. Cash and investments increased to $558,400,000 as of March 31, 2015, up $14,200,000 from last quarter.
Cash and investments exceeded total short and long term debt of $380,000,000 as of March 31. Now I'd like to give some additional color on a few metrics to highlight our strong performance in the quarter. As Andy mentioned, we achieved 16,200,000 dollars annualized net new sales of subscription services on annual contracts in the Q1 of 2015, an increase of 10.3% over the Q1 of 2014. This has been a consistent metric we've been providing for quarters. Our annualized net bookings in the Q1 climbed to over $20,000,000 an increase of 50% over the same period last year.
This is our best quarter ever of net bookings by a mile. This metric picks up all the 6 month apartment contracts that are not included in the annual metric. Obviously, viewed in conjunction with the annualized net new sales of subscription service metric, these are good indicators of future revenue growth. As of March 31, 2015, we had approximately 504 salespeople across the country, which is consistent with prior quarter and obviously does not include the additional salespeople we'll pick up with Apartment Finder. Revenue from subscription services on annual contracts was up 1 $106,500,000 for the Q1 or 66.9 percent of total revenue.
For the trailing 12 months ended March 31, 2015 subscription revenue from annual contracts totaled $404,700,000 up 18.2% from the 12 months ended March 31, 2014 reflecting our continued success in growing annual subscriptions faster than the non subscription pieces of the business. The year over year growth in annual subscription revenue has remained in the 18% to 20% range for the past 6 quarters, which is important to remember. We expect to continue to grow revenue from subscriptions on annual contracts back up into the 70s in the near term and eventually to the 80% 90% of our total revenue. This continues to be a focus across the company. Renewal rates for annual subscription revenue remained high during the quarter.
The 12 month trailing renewal rate for CoStar subscription based revenue was 91.3% the Q1 of 2015, which is fairly consistent with last quarter's 91.5%.
As we've discussed for the
last few quarters, the introduction of more annual LoopNet contracts in soon Apartments and Apartment Finder into the subscription base is expected to cause a 12 month renewal rate to edge down slightly, possibly 1% or 2%. Therefore, we continue to expect to be in the 90% to 91% range. But remember the renewal rate for CoStar subscribers who have been with us for 5 years or longer continues to remain high at 98%. It's actually 98.43%. We're so close to getting back up to 99%.
Can't wait. One additional item we expect to impact our renewal rate in future quarters is GE's announcement to sell its real estate portfolio. GE is a long time subscriber of CoStar and CoStar portfolio strategy, so this transaction could have a short term impact on our reported renewal rates, reducing the annual size of the renewal rate by approximately 0.5 to 1 percentage points. We believe our revenue guidance range adequately accounts for the uncertainty related to this customer. Now I will now discuss our outlook for the Q2 and full year 2015.
For the full year 2015 is that okay? Double check it. We expect the revenue of approximately $688,000,000 to $698,000,000 Based on our strong Q1 2015 sales results, we are raising the full year 2015 guidance for the core business by $3,000,000 on both the top and bottom end of the range. We expect revenue trends to continue to improve in Q3 and Q4 of 2015. Additionally, we've incorporated Apartment Finder into our annual outlook range by adding an additional $30,000,000 to $35,000,000 For the Q2 of 2015, we expect revenue of approximately $162,000,000 to $163,500,000 This includes previously disclosed deemphasizing services changing over the new apartments.com website and does not include any revenue from Apartment Finder for Q2.
We expect non GAAP net income per diluted share in the range of $1.98 to $2.08 for the full year 2015 and approximately $0.10 to $0.14 for the Q2. This outlook assumes minimal impact on non GAAP net income per diluted share for the Apartment Finder acquisition. For the remainder of 2015, investments in the Apartment Finder website and increased search engine marketing are expected to approximately offset their earnings we pick up. As we mentioned earlier, we expect the Apartment Finder acquisition to be significantly accretive in 2016 and beyond as we integrate the websites and utilize 1 backend and 1 information. Compared to our Q1 2015 outlook, a large portion of our Q1 favorability in earnings is related to the timing of the marketing investment, approximately $5,000,000 in costs shifted from the Q1 to the 2nd quarter, while total cost total incremental cost of the marketing campaign remains at the $75,000,000 We still expect the media spend to peak in the Q2 of 2015 to coincide with the prime season for apartment renters.
I should note here that we just signed the Apartment Finder acquisition on Monday and we'll obviously be doing a lot more work on our integration plans and our forecast. So we look forward to updating investors on those plans and the impact on our outlook next quarter. In summary, I'm very pleased with CoStar's financial results for the Q1 and we're off to a great start with Apartments.com's traffic and sales. I look forward to reporting our continued progress in the coming quarters. As a reminder, we achieved a 35% adjusted EBITDA margin in Q4 2014 before launching the Apartments dotcom campaign.
With the potential synergies available with the Apartment Finder deal, this allows us to continue to remain even more confident in our prior stated goal of $1,000,000,000 of revenue with 40 plus percent adjusted EBITDA margins exiting 2018. Now as our confidence grows and 2018 gets closer, we look into the future. What was that something what was the tagline? Change your apartment, change your world. Bradism.
Therefore, we're going to establish a new longer term range goal for 2020 or a 2020 vision if you will. I can see the vision of $1,500,000,000 in revenue run rate with a 5% to 50% adjusted EBITDA margins. So $1,500,000,000 in revenue run rate with 45 to 50 $1,000,000,000 adjusted EBITDA margins. Everybody get that? So we're not going to adjust the 2018 goal.
We're obviously confident in that, but we're going to set a new 5 year goal. As always, I look forward to sharing our progress towards these goals with you in the coming quarters. And now we'll open up the call to any questions.
Thank you, sir.
Sir.
And we'll go to the line of Sterling Auty with JPMorgan. Please go ahead.
Yes. Thanks guys. I appreciate it. In terms of the Apartment Finder acquisition, when you look at the 2 properties, I understand the marketing delineation that you're trying to drive for, but how do you not end up cannibalizing your higher monthly
are you referring to the free ads versus the paid ads? Are you referring to a price differential between Apartment Finder and Apartments dotcom?
Namely the price differential because aren't you going to end up with free content on both?
We will. And we're very pleased with what we've seen in the site behavior and the differential between the significant exposure the premium content gets versus the relatively insignificant exposure the free content gets. So the paid is getting really good traffic comparatively. So we're actually very comfortable with that and we really like the numbers. They're very consistent.
So we're not really concerned about the cannibalization. But it is very important to the renter that they find that complete content. They're always searching for that diamond in the rough And we believe they prefer a more comprehensive organized site. So that draws additional traffic. And then you gain this differentiated or this funnel that drives more of that additional traffic to the premium listing.
So we feel good about that. The finder price point is actually higher than the Apartments dotcom average price point for so we're but relatively similar compared to other solutions out there. So some of the other solutions are charging maybe in the range of 40% to 80% more on average than we are. So we are able to do high margin sales along with information sales at a lower price point than some of these other players. And we like being in that situation, a superior product at a profitable lower price.
So we like that lower price. We're not worried about any sort of cannibalization there. Did that answer the question? And I'm glad there was a question. I was worried there'd be no questions today.
And next we'll go to the line of Bill Warmington with Wells Fargo.
I wasn't sure if I should be asking the tax rate in 2020. It's probably the top question. So first of all congratulations on the deal very impressive and the performance as well in the quarter. Thank you. With one question, I'm going to ask about the new metric.
You given the net new subscription sales historically. You've given the net bookings now. The 4 $800,000 difference between the $16,200,000 and the $21,000,000 is that all apartments? Or does that include anything else in there that would be short term?
It includes anything else in there Bill. But obviously with the strong performance in apartments in March, the biggest piece of it is apartments. Yeah. But it does include everything else. I mean, I think it's a metric we used to talk about years ago.
Obviously, the company really focuses on annual contracts. We're trying to move LoopNet to annual contracts. And when we first at the apartment space, we were told that people won't sell annual contracts and of course lots of people are now. So I think we'll continue to push people up to the annual contracts, which obviously has so many benefits, but it sort of includes an all in number. And I've always said this, I don't think you look at any one metric, but I think when you look at the metrics combined, it obviously gives you trends, right?
And it gives you trends that the future looks bright for revenue growth for CoStar.
And that monthly bookings number that you had there, how do we look at that in that context?
Well, obviously, it's by and far a mile the highest number we've ever seen. So what that says is as revenues as that continues to go higher, you're going to obviously translate in Q3, Q4 into next year with higher revenue growth, which what we said. We said listen the first half of this year was going to be about getting the site converted, launching the marketing programs. And obviously having such success gives us even more confidence in the back half of the year, which is why I raised up I didn't really raise up Q2 that much a little bit, but really it's more about the back half of this year and obviously going into next year. So
And if you look at so the industry we came into was a 30 day industry. And it doesn't make sense, because these folks who own these 300 unit communities, their need to generate leads and traffic into their leasing office does not go away at the end of 30 days. So we're giving them compelling reasons to do a moderate commitment of 1 year. And part of that successful formula is giving them a fantastic information solution CoStar Market Analytics, which allows them to now take those leads that we're giving them and then optimize the pricing using our system or help them to supervise the yield management system using our really detailed granular competitive pricing information. Industry that were considered not possible before.
1, the industry that were considered not possible before. One is people are a lot of people are going to annual contracts, which rarely ever happened before. And secondly, historically people moved 1 or 2 properties at a time between ILSs. We're now seeing a regular occurrence of people moving a significant percentage of their portfolio from one ILS over to us. And that's because we're giving them a good solid deal for buying doing bulk purchase, doing an annual contract and including information purchase.
So this doesn't mean we want to turn our back on a lot of revenue that isn't ready to go beyond 6 months. And part of that's just it depends which person our sales force went and met with them. They there's probably some of our salespeople getting 100% annual business now and some are have spent 5 or 6 years doing 30 month 30 day and 6 month contracts. So the
And next we'll go to the line of Andre Benjamin with Goldman Sachs. Please go ahead.
Thanks. Good morning.
Good morning.
I know you guys just signed the deal and have some work to do, but I want to dig a little bit more into how the sites will actually differ beyond just giving you the ability to fill the 1st page of Google results which does have some value? Maybe a little more detail on how the interfaces will be different, differences in the branding? And what is the difference in the typical customer you hope to target or the property manager that would list on one site versus the other?
Good question. And I appreciate your prefacing it with the fact that we're one business hour into the announcement. So having said that, it's pretty the folks 100,000,000 renters in the United States, it's a very diverse group. And what drives who those people are and what drives them is very different. So if I take that 18 to 30 or 18 to 27 demographic and I do quartiles on up to 70 years old, you've got big audiences in each of those sectors.
Obviously, those audiences are looking at the world, their apartment rent in very different ways. And you also have people who are moving 15% of the world is moving in their rental because they've been relocated to a new location. 50% is moving because of financial drivers. They're either trying to avoid a rent increase. They're trying to reduce their spend on rent.
They've had an income adjustment. They're trying to get a larger apartment for the same price. So 50% are very price sensitive. So there's a rich variety of options on how you actually target a site to different audiences and different needs of these very different audiences. We've done a ton of research into who these people are.
We've literally interviewed 10,000 renters. We have done focus groups with 100 and 100 of renters in cities all over the United States. We've also done segmented focus groups looking at these different age groups. Now we've got at least 6 Zulia employees on the call today. So I'm not going to go into too much detail, but we've done really innovative things in the design like use the color orange instead of the color green for the new design.
We did tricky things like move the placards from the right of the map to the left of the map. And I have to tell you working with designers who have worked on the first site, it takes a lot of discipline to make sure that the site really develops an honest unique personality. People keep trying to use things from the prior design. So ultimately when we're when all is said and done, we will have maintain these unique UIs. And and they'll maintain these unique UIs.
And there will be content on one site that does not exist on the other site. So we'll make a genuine different renter experience on each site to cater to these very different marketplaces. Initially, Finder feels like it could be a great opportunity to focus on those people who are driven primarily by economics and their decision. So we might be exploring that. But we'll show you more hopefully pretty soon with the launch.
And just to add to that, I mean, is that Apartment Finder has been around and founded in 19 9 as Andy said. And it probably somewhat focuses on some of the smaller geographies. So it has its own sort of core following that's been following it for a long, long time. So I think that obviously will also continue to drive it. It has its own unique sort of
And next we'll go to the line of Michael Huang with Needham and Company.
Thanks. Good morning. Congrats, guys.
Good morning. Thank you.
Just a quick question for you. So for your advertisers that you're acquiring for Apartments dotcom, I was wondering, do you have a general sense for what percentage of their advertising budget that you're capturing? I mean, how much more room is there to grow at these customers? And do you actually believe that Apartment Finder helps to deepen penetration? Or is that more to help acquire new customers?
Thanks.
So without a doubt, there's an awful long ways to go with these folks. So as we go into Apartments dotcom, whenever we're going into a meeting with one of these prospects, we try to understand we try to actually we require that the salespeople really give us a solid estimate of what they're spending on all the other sites out there, what their market budget looks like. And we are generally a pretty small percentage of their overall marketing budget. So we set goals for what sort of share of their marketing budget we want to get. And we are absolutely at the very beginning of that process.
Now I am struck by the fact that when you look at these different owners and their advertising plans, they're almost always running on multiple sites. So that's important to them and you cannot get to these people and say, no don't advertise. If I'm Nick don't advertise on the other site, they feel the need to have diversity and diversification across their plan, especially when they're in a lease up situation with new construction, which is very common right now. They like to hit multiple runs. So Finder allows us to go in there.
And I've been on some meetings where will see that we have about 10% of their budget and then another site has got 20%, another site's got 40% another site's got 10% another site's got 5%. This allows us to go in there and do a percent. This allows us to go in there and do a fairly big deal where we take up an additional 15% of their marketing budget by virtue of having 2 different viable solid well recognized brands that they can market on. So this allows us to go for bigger hits. Now the size of deals we're pulling in right now are upper quartile of these deals are probably 4x or 5x anything Apartments dotcom has ever seen before.
And the addition of Finder allows those deals to be even bigger again once we've done the technology and pulled the offerings together. So did that answer your question? Or do you want to refine that question? Or did get moved into the next call? Okay.
Well, hopefully, you'll circle back if you want to get more on that.
And we'll now go to the line of Sarah Gubins with Bank of America. Please go ahead.
Hi. Thank you. I'm hoping you could give us an update on core CoStar sales to institutional investor clients. And also on the LoopNet price increases, any update on how that's going? I know that you've talked about a $10,000,000 to $15,000,000 revenue headwind for the year that's in guidance.
But I'm wondering if there are any signs that you're actually losing 2 clients to a point that might support that headwind? Thank you.
Hi, Jess. So I'll start with LoopNet and
then turn it over to Andy to talk about debt and equity. So we expect the impact of the LoopNet to continue to be in the range of sort of what we had. Our strategy is somewhat evolved as we've instead of shutting down the channel in the short term. So it reduces competition with sort of the CoStar services instead of shutting down the channel in the short term. As planned sort of subscribers are declining.
You're not picking as many of them up and they're declining. And we'll obviously continue to evaluate that strategy. As the LoopNet base declines, we expect obviously over the next few quarters to sign many of those up to higher value CoStar contracts. But we'll be continuing to monitor that and tweak that. How we go about it might evolve, but essentially sort of the strategy what we have we believe is working.
And
to answer your other question about our debt and equity sales and the core CoStar and what that looks like right now, I was looking at the list of salespeople who would be able to attend one of the big industry conferences in June 2 days ago. And I did notice that the regular names or the regular suspects in our sales force who sell debt and equity outside of the traditional this new Apartments.com sale of debt and equity information. Those folks were looking really solid and were turning in some really good numbers. So I don't have detail on that, but I just see those guys those folks producing good solid numbers. And that would not likely be the sort of combined info apartment cross sell numbers.
Those are those do qualify as institutional debt equity sales or debt and equity sales. The without disclosing some specific names, we had a we had one very big win, dollars 500,000 competitive win taking away from another player in the debt and equity space this month that we're very thrilled with. And we think it is a strategic win that could allow us to get additional new wins across that space. So that's going well. But one of our problems here one of our problems great problem.
One of our problems here is that the sales force is watching what's going on and they're seeing people get some very big ticket sales on this combined Apartments dotcom CoStar Market Analytics sale to the multifamily world. And now there's a line a mile long of salespeople going after that space and they're all and in fact we've had to rely on our new commission structure to keep people focused on LoopNet. So our new commission structure I think we've mentioned in the past, your percentage commission rates are set by how much you filled up the 3 core buckets of CoStar Apartments and LoopNet. So that's the only thing keeping salespeople focused on some of the traditional things when they're seeing these big numbers in the apartment space.
And next we'll go to the line of Andrew Jeffe with SunTrust. Please go ahead.
Hi, guys. Hi, Andrew. Good afternoon.
Question for you Brian on the Apartments.comrevenuecontribution this quarter just trying to back into organic revenue growth? And then what your expectations will be given these strong bookings numbers for organic revenue growth in the back half? And maybe what you think the sustainable rate of underlying revenue growth can be looking out?
Sure. Yes. I mean, I think sort of pro form a I don't have the exact number around, but I think it's around 13% sort of pro form a. Obviously, when
we switched over the site, there's some revenue that falls off the site, got switched over
basically at the end of February. So sort of 1 month's worth and then obviously that will roll through the Q2. So we feel pretty good. Core business continues to grow in that 12%, 13%, 14% range. Once we get through the switchover and some of the things that we talked about, we think obviously these bookings are just a great sign for what we believe can happen in Q3, Q4 and obviously as you go into 2016.
So the stated goals out there is that we'll sort of in the back half of this year start to grow the Apartments business into sort of the high teens. And as you go into next year getting to 20 plus percent. And yes, I think it's sustainable. I mean, I think that when you have a current estimated $1,500,000,000 space that I believe is going to be $2,000,000,000 to $3,000,000,000 as more and more advertising dollars go offline. I believe we can run that piece of the business at 20 plus percent for many, many, many years to come.
So obviously looking into my crystal ball, I'm not going to people a
lot of people ask me and one of
the reasons why I put out my 2020 vision so to speak is that I'm not going to change 2018, but the revenue number obviously becomes very achievable with where we are today with the acquisition. Obviously, we're also committed to the EBITDA line, which is I think important to a lot of people. But the 2020 vision tells you that when you look at the combined business, we can continue to grow in the 14%, 15%, mid teens sort of percentage points for a long, long time to come. So we're pretty confident we have a huge opportunity here that we can execute on over the next 5 years.
Next we'll go to the line of Peter Lowry with JMP Securities. Please go ahead.
Hi. Congratulations on a great quarter. Obviously, the marketing campaign has been very successful so far. Can you talk about how you address concerns that marketing spend may stay elevated after the campaign ends? Well, at this point, it has been very successful.
It's driven a lot of traffic. It has differentiated our brand in the space. It's allowing us to take a lot of share and set record sales numbers. It's obviously really early in the process though. We only have 1 month of sales.
So we're not at this point setting our 2016 budget or strategy or plan. But remember that one of the things we're doing here is we definitely I think the world has changed and that similar to the travel world, the apartments world will be a world in which people will make investments in branding to consumers. It is a massive, massive marketplace and will remain so. So I think this is the new reality to some degree. Now it takes a lot more money to build a brand than to maintain the brand.
And we've tried various weeks where we pull back on the campaign or just part of our preset plan was certain weeks where we pulled back on the campaign and just watched traffic as that happened. And we're pretty happy with the way site performance remained up despite the fact that we pulled back in certain weeks to test. But it's so early. And one of the things we're conscious of as we look at an acquisition of a Finder is that it gives us additional scale, high margin scale, so that you can actually maintain a significant B2C in some component of your formula and leverage that across a broader revenue stream. So it's very early, but nothing's changed from our earlier feeling that our overall branding component of our campaign would moderate in 2016.
And I think just to add to that, we talked last quarter and the quarter before about our goal is to have $500 plus 1,000,000 in this space over the coming years at a 50% margin. And so I think that that remains and that's really when you look at when you look out in the 2020 vision where we believe the business will be. So really what you're doing is you are going to have you're still going to have marketing dollars going, but you're obviously spreading those dollars over a much bigger revenue base. And with higher revenue growth, obviously, you can in the future, you will be able to spend appropriately on the marketing, but you'll obviously have the earnings that people are looking for. And if you look at other industries, that is exactly when you look at like a price line or other companies Expedia, I mean they're growing they have EBITDA margins in the 40%, fifty percent range.
So we feel pretty confident in the long term vision of the company and the profitability that it can hold. The other thing to
sort of point out is that in the launch of this campaign, it's very aspirational or visionary. You don't have an immediate near term ROI calculation because it's all theoretical. As you move into 2016, you actually can begin to move into a more calculated ROI for each specific investment. And then each year that goes by, you'll be able to give more clarity as to what and why and how.
And next we'll go to the line of Brett Huff with Stephens Inc. Please go ahead.
Good morning, Andy, Brian and Rich. Good morning. I need to follow-up on a question that was asked before on the $10,000,000 to $15,000,000 of the sunsetting of the loop rev this year. Brian, I think you answered that question. Yes.
What I'm trying to get at is the sales or the net new bookings of annual contracts on subscriptions was up 10% all in. The info was up 20% and implies LoopNet was down. The question is how much of that $10,000,000 to $15,000,000 I know that's a revenue number, but how much of that sun setting is negatively impacting that net new number on the loop side? And are we have we burned our way through the $10,000,000 to $15,000,000 and we're now moving on? Or how does that kind of look will the net new for loop get better through the year I guess is my question?
Yes. I mean obviously I think the net new for Loop will get better. I think the majority if you look at the stuff when you raise the price as dramatically as we did, we are losing subscribers, the premium searcher and most of those are monthly. So that's actually being picked up in this bookings number, the 20,000,000 bookings number. So as we lose those subscribers, it will be picked up on that number.
And obviously, as we pick up and that now eliminates sort of the or we believe it really reduces the competition with the core CoStar service. As we then go out and sell those clients over the next few quarters, yes, I believe that will contribute to the LoopNet annual number getting better and better. So I think essentially instead of shutting it down, we're obviously sort of spreading it out. We're doing it a different way with increasing the price on the LoopNet info stuff. But I think overall you end up with a very similar impact on the revenue number for the year.
So obviously we monitor that and we can pull the levers on that. So we're feeling good with where we're at.
Okay. Thank you. Thanks.
And next we'll go to the line of Phil Stiller with Citi. Please go ahead.
Hi, guys. Thanks for taking my question. Hey, Phil. I guess I wanted to get a little more detail on the Apartment Finder assumptions. So you gave the revenue and EBITDA numbers and then the synergy numbers.
So I'm just trying to understand, I guess, what the EBITDA impact is of getting rid of some of their legacy products? And then what is assumed in the $20,000,000 synergy rate? Is that kind of a straight expense synergy number? Or does that assume any benefit from some of the cross sells that Andy was talking about earlier? Thanks.
Yes. I think it's combined. So Andy talked pretty in detail about this. When we pick them up, we're obviously going to move fairly quickly on the search engine marketing side by increasing that before you can get to a lot of the expenses. So we obviously are going to rebuild the site with a goal by the end of the year.
And you'll then look to transition over to 1 platform which then gives you the synergies. I think Andy mentioned a $12,000,000 number on the print publications and those types of things that we'll look to obviously aggressively move out of. You can't move out of that until you get to the new site. So you sort of are you're going to immediately start moving and spending on the digital side and you'll get the benefits of the synergies as you move to the new platform, which really should happen in 2016. So, yes, I think you're going to get the $20,000,000 of synergies, which is going to include it will include some cross selling of the 2.
Obviously, there's they have a ton of clients we don't have and vice versa and you can go back to those clients that obviously offer both services at a great price and a price that's lower than the competitors' prices out there. So I think 2016 will look great from that standpoint.
And next we'll go to the line of Brandon Devel with William Blair. Please go ahead.
Yes. I just want to leverage that last question for a second. The synergies versus the I guess the site refresh and I would anticipate a marketing campaign once you get kind of find or organized like you wanted to get. How do we think about the offset there? Are you going to save money to spend money?
Should we expect the timing on those things to be not synchronized? I want to make sure I start the puts and takes as you move into owning it.
Sure. So there are multiple different kinds of marketing specific to the finder site. So one would be SEM spend basically search engine marketing. That's a very efficient way to acquire leads and actually measure the specific cost of the leads. It also has the benefit of competing with other players for the same lead.
So that is a very measurable ROI which is an investment that we won't give the specific number, but it would be something that would probably offset the print investment area, which is not insignificant. Setting out 800,000 copies to 119 cities is large. So that they offset each other pretty closely. So direct SEM and similar kind of digital acquisition of leads. We do not envision there being a huge any kind of materially huge branding activity Craig around Finder.
A site can live on the Internet without that kind of branding. At this point, we don't see it. I mean that could change at some point in the future, but we'd be able to clearly not say why. And then you're going to have we ran through a whole bunch of so you have sort of an offset there between the print and digital marketing. And then you have a whole range of other efficiencies that are coming in the business here.
Like it is expensive and difficult to pull content from your advertisers, keep it up to date, keep the high quality there. And virtually all of the content that Finder currently spends a lot of time and money managing and pulling, we already since we're full inventory, we already are pulling that content and we already bear that cost. So once you come together, you have a duplicative cost there for content that goes away. And you end up with because you have more sites being populated by the same effort, you have a more motivated lister or giving you direct access to their accounting systems and their property management systems. So that's just one example of where you're getting cost savings.
So we see this over time, layoff here in any near term way, but there's just across the board in your technology, your content, your customer service, your billing, everything you've got all sorts of leverage against your costs. So I believe that Apartment Finder will become a very profitable site in a remarkably quick period of time and that the cost savings will come in the form of attrition and the like that is natural with any business. So if you look at LoopNet, we obviously achieved massive cost synergies and I think we laid off 4 people. So I think we have a similar scenario here and I'm very excited about margin of an apartment finder. It is significant.
And we will have a follow-up from the line of Thirlane Otty with JPMorgan. Please go ahead.
Yes. Thanks. Hi, guys. Can you give us an update on where you are in the projects and investment? You mentioned London, but how about with all the efforts that you laid out for Canada?
Canada. Well to be honest with you February was not an attractive time to be focusing on Canada. No offense to my sister or brother up there. But the no, that's progressing well. I understand that they're having a decent sales month up there at this point.
And that we are bringing online Calgary, Vancouver. I think Ottawa is a little bit farther behind on that and we're actually cycling up research in Montreal at this point. So I walked in on a research meeting the other day with 6 en francais, 6 researchers parlaying. And so I think it's going well. And does that was there anything a second part to the
yes? No. That was it. Thank you.
Okay.
And next we'll go to a follow-up from the line of Andre Benjamin with Goldman Sachs.
Thanks for the additional question. So despite the valuation of the strategy that you've laid out, some investors that we've spoken with are still focused on the fact that this is somewhat of a reversal from prior statements that you didn't intend to be a consolidator of apartment sites. So I just wanted to clarify, do you intend to use the rest of the cash to make more acquisitions for 1? And 2, should we expect those to be other apartment sites or other types of assets?
Well, first of all okay, right. So first of all, I do want to clarify that we were I think pretty clear in saying that we passed on in specific reference to the marketing investment we made in Mr. Jeff Goldblum, which has been very successful, we felt that we were looking at a set of options, which were either acquire other ILSs at valuations similar to Apartments dot com the Apartments dotcom acquisition or the Provident Equity acquisition of a share of Apartment Guide. And we just we looked at the ROI that we saw with branding and share gain there versus acquiring folks at 14 times EBITDA and we felt there was simply no question. There is we feel that it's obvious.
It's an obvious choice when you can acquire great share, gain momentum, get scale, get cost efficiencies, acquiring folks at somewhere in the 4% to 7% EBITDA range. And we would entertain additional opportunities that were highly accretive. In that range, we felt that they fell within our operational capabilities and that they would be really good values. People it is a it's a situation here where we picked up Apartments dotcom. We had less than 7% share of the online spend of the apartment industry.
That was not the trump card. No one no analyst had us pulling $1,000,000,000 of revenue in 2016 for the apartment space. So we're we want to get a major share here and picking up very cost effective scale in 6% increments of the spend or 5% increment spends could be attractive. And each time you do that, we think it's a prisoner's dilemma for remaining players where their value goes down faster based upon scale growing in other spaces. So I would encourage those investors to keep an open mind as we perform on this.
And remember that there was a lot of skepticism around our acquisition of LoopNet. A lot of people said, hey, you're making tremendous progress with your online marketplace. Don't acquire LoopNet. You're capturing share from them. But we feel very good about our decision to acquire LoopNet.
It was obviously at a much higher multiple than Apartment Finder and obviously it was much more consolidation. But the folks that are a little skeptical about these things at the time they happen often don't circle back and say, oh you were right. But we'd ask people to give us a little bit of room on this one because we feel pretty confident that this is straightforward.
So and just to add to that, just to remind everybody of what actually happened. When we did apartments, I think we discussed that there was more deals out there than we had ever seen and that we were looking at other deals. I think that was pretty clear and communicated to investors. I think we came back to investors after looking at the price point that people wanted and said, no, we don't want to do that. And by the way, we want to focus as Andy mentioned getting Apartments.com and building that platform out and getting to a success.
So I think now coming being able to now pick up other assets with having complementary brands like the Expedia, like the price lines now at a good price point specifically when all the risks are behind you and now you can have the significant synergies both on the cost side and revenue side, I think it makes a ton of sense. Now we'll of course we'll focus down on integrating this platform also. And in the future, we'll again evaluate where we are with things. But I saw that posted out there that people that we made changes in our strategy. I think if you actually go back and look at exactly what was talked about when we did apartments, we did say we were looking at other ones.
We passed on them based on valuation, wanting to focus on our core integrating of apartments. 12, 18 months. Yes. I'm not buying that stock at 6, 12, 18 months. Yes.
I'm not buying that stock at that price. I will buy that stock at half that price.
And thank you for holding. That was our final question. I'd like to turn the call back over to Mr. Andy Lawrence.
Thank you very much. I appreciate it. And we did not acquire Apartment Finder because my initials are AF and Apartment Finder is AF and my favorite color is orange. But anyhow, thank you for joining us for this earnings call. And we look forward to updating you on what's going on in next quarter and have a
good day.
And ladies and gentlemen, that does conclude our teleconference call for this morning. Again, thank you very much for your participation and for using the AT and T Executive Teleconference Service. You may now disconnect.