Costar Group Inc (CSGP) — Q1 2019 Earnings Call Transcript

Thank you very much, operator, and welcome to CoStar Group's first quarter 2019 conference call. Before I turn the call over to Andy Florance, our CEO and Founder; and Scott Wheeler, our CFO, I'd like to share some very interesting and important items that could actually make your day. Certain portions of our discussion today may 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 CoStar Group's April 23, 2019 press release, on our first quarter earnings and our company outlook and in our CoStar filings with the SEC, including our most recent Annual Report on Form 10-K and our subsequent Q reports on Form 10-Qs under the heading '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. A reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call including non-GAAP net income, EBITDA, adjusted EBITDA and forward-looking non-GAAP items are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at costargroup.com. As a reminder, today's conference call is being broadcast live on our new investment-improved Investor Relations website. Please refer to our press release today to know how to access this call going forward. Remember, one question, so make it a good one. And I'll now turn the call over to Andy.

Thank you, Rich. So let's move to this call quickly so that we can all get to the definitions of key financial terms in our press release. Thank you for joining us for CoStar Group's first quarter 2019 earnings call. It's just eight weeks ago that we reported superb year-end results, and we are pleased to be back so soon reporting another strong quarter with solid revenue growth and even stronger profitability growth. In the first quarter of 2019, CoStar Group total revenue was $328 million, up 20% year-over-year. We generated $55 million more revenue in the past quarter than we did in the same quarter one year ago. Apartments.com led the way with 30% year-over-year revenue growth. LoopNet's revenue increased 17% year-over-year. CoStar Suite revenue grew 13%, which was at the upper end of our guidance. Our rural lands marketplaces grew 21%, and our business-for-sale marketplace revenues grew 12% year-over-year. CoStar Real Estate Manager continues to be a major contributor with 95% year-over-year revenue growth. With high incremental margins on each dollar sold, our strong revenue growth continues to translate into even higher earnings growth. In each of the last two quarters, we've generated the highest quarterly net income in our history. Net income increased to $85 million in the first quarter, up 63% from $52 million in the first quarter of 2018. We generated $113 million of EBITDA and $125 million of adjusted EBITDA in the quarter. When annualized, that's consistent with our expectations of generating $0.5 billion of adjusted EBITDA in 2019. Our $55 million year-over-year increase in revenue in the quarter generated a $43 million year-over-year increase in EBITDA. Effectively, $0.78 of every incremental dollar sold translates into EBITDA. In the first quarter of 2019, adjusted EBITDA margin was 38%, an increase of 700 basis points compared to the first quarter of 2018. Company-wide net new bookings grew 36% year-over-year to $48 million in the first quarter of 2019. For the second consecutive quarter, Apartments.com generated our best bookings quarter ever as our sales force continues its strong momentum, with a 40% increase in net new bookings year-over-year. Last year, we communicated that our entire Apartments sales force was investing significant time and effort into the important job of converting the newly acquired ForRent contracts into Apartments network contracts. That investment yielded great results but also meant they had less time available to generate net new sales last year. Now that we have completed the ForRent conversion and have more time, you can clearly see that the Apartments sales force's productivity is surging. These results are more impressive because of the quality of customer service the Apartments sales force is delivering, while also delivering great sales numbers. During the first quarter of 2019, the Apartments.com sales force conducted 80,000 sales meetings and earned an audited Net Promoter Recommendation Score of 9.8 out of 10. That is clearly outstanding customer satisfaction. LoopNet net bookings were up 27% in the first quarter of 2019 over Q1 of 2018. In the first quarter of 2018, we achieved record CoStar sales results when thousands of stranded Xceligent clients rapidly migrated to CoStar. Not surprisingly, while CoStar sales were strong in this quarter, the bookings did not rise over the Q1 2018 exceptional high watermark. We have grown the CoStar sales force by 6% from the fourth quarter of 2018 to the first quarter of 2019. We intend to continue to grow the CoStar sales force by approximately 30% overall from Q4 2018 to Q4 2019. We have a robust product pipeline for CoStar, CoStar Analytics, and the LoopNet marketplace, so we want to grow our sales force to meet the scale of our future opportunity. As we add salespeople, they typically have a material revenue impact about a year after they join us. We attribute a big part of our Apartments.com sales success to the priority we place on customer service. Our CoStar sales commission plans over the past year now reflect these same values. As a result, our salespeople are spending more face-to-face time with our clients and prospects. CoStar's sales meetings were up 43% year-over-year from 30,000 in the first quarter of 2018 to 43,000 in the most recent quarter. On a per salesperson basis, meetings were up 33%. Net Promoter Recommendation Scores for the CoStar sales force have climbed to 9.02 on a 10-point scale. I believe this is a leading indicator of client retention and future sales growth. Apartments.com continues to increase our industry-leading position among Internet listing services by achieving all-time highs in unique visitors and the number of visits as reported by comScore for both the month of March and the first quarter of 2019. In the first quarter of 2019, the Apartments.com network had 162 million visits, up 35% year-over-year and averaged 20 million unique monthly visitors, an increase of 30% year-over-year. According to comScore, the Apartments.com network hit an all-time high of 61 million visits in March. That's an increase of 18 million visits over March of 2018 and is up 40% year-over-year. We have been the number one most visited apartment network for the past 41 months. Also according to comScore, as a network, we have twice the number of monthly visits and monthly unique visitors compared to the RentPath network that had in the first quarter of 2019. On a site basis, Apartments.com had four times the number of monthly visits than Apartment Guide had. Apartments.com tracks a list of 10,000 apartment keywords that we believe are important for marketing multifamily communities online. As of today, we hold the number one organic position in Google search results for 93% of those keywords when compared to other listing sites. Our primary competitor, RentPath, only holds 2% of them. We continue to pull further away from the competition, and I believe that in 2019, we will see a strengthening continuation of that trend. We launched our 2019 Apartments.com marketing campaign, which focuses on the reality that the apartments you choose will change your future. We have four new TV spots with the highest production quality and special effects we've ever produced. Of course, they feature Jeff Goldblum as our spokesperson, Brad Bellflower. We've already received great feedback from our clients, renters, and the media on the campaign, and we're excited that the heaviest portion of our media plan kicks in during the second quarter to support the peak rental season. We're also excited to announce that tomorrow, we plan to launch a completely redesigned ForRent.com website just in time for peak rental season. The new site has a completely redefined renter search experience. Key features include a beautiful new design, lightning-fast performance and optimization to rank at the top of Google searches. It is the first site in our network of 11 sites that offers renters a more focused view of the independent or smaller properties by highlighting them at the very top of our search results to give renters the feeling that this is really a condo or small independent owner website, as well as having large institutional properties. We plan to support the new site launch with aggressive levels of marketing support including paid search, display advertising, social media, e-mail marketing and strong push by our direct sales team. We look forward to the new site delivering even more traffic, leads, and leases to our advertisers. We've identified the need that some advertisers with properties in lease-up, low occupancy, and highly competitive market environments have for additional lead generation, even beyond our existing top-level diamond package. In response, we have introduced a newer higher-tiered advertising level called diamond plus, which guarantees advertisers placement in the top three search results in a given submarket. The diamond plus ads average approximately $4,050 per month or nearly $2,500 more per month than the old basic diamond ad. We believe diamond plus ads will continue to positively impact our net new bookings throughout 2019 and beyond. In March, LoopNet visits grew 23% year-over-year, and we had nearly 6 million unique monthly visitors coming to the site. We are steadily rolling out a number of enhancements for LoopNet, as we continue to focus on improving the user experience. This is similar to the strategy we successfully deployed with Apartments.com marketplace. We continue to show strong success with sales of higher-priced Power Ads to owners on the LoopNet platform, which remain a major part of our growth strategy. We had nearly $3 million in annualized net new sales of Power Ads in the first quarter, and the highest priced diamond level ad sales showed the strongest growth at 87% compared to the first quarter of last year. In the Premium Lister product, we continue to focus on raising the quality of the listings, eliminating unlimited listing plans, which were steeply discounted, and increasing prices on many of the older underpriced listing plans. The average price per listing for this product was up 49% compared to the same quarter last year. Realla is our United Kingdom emerging version of LoopNet. I'm very excited about the potential of that product, and in fact, we have seen a 346% year-over-year growth in unique visitors on Realla. Belbex is our version of LoopNet for Spain, and its organic unique visitors are up 163% year-over-year. Right now, we're investing in these sites, building out the traffic, but we intend to begin monetizing them later next year. We continue to deliver a steady stream of enhancements to the CoStar products. Dozens of these enhancements are new commercial real estate analytic tools. These include tools for accessing the probability of selling and leasing in various time frames, animated weather map-like time-based market trends laid over digital markets maps, market overview videos from our team of analysts and economists, daily rental rate detail, new statistical exports, retail property underwriting reports, and much more soon to be followed by even more enhancements. We recently announced a strategic relationship with Fort Worth-based Buxton, an industry leader in retail site analytics. They analyze and model a retailer's successful store's competitive threats and store-to-store cannibalization among other factors and then determine ideal potential new locations that are likely to achieve above-average sales. Now Buxton clients, who are also CoStar clients, will be able to search CoStar for properties that are within ideal trade zones identified by Buxton. This combines the best strengths of each company to provide greater convenience and value to our mutual customers. Both firms intend to cross-sell to one another's client bases. In the first quarter of 2019, CoStar Real Estate Manager revenue was up 95% year-over-year. It continued its strong performance with an increase of 15% in net new bookings in the first quarter of 2019 compared to the same strong quarter last year. Real Estate Manager continues to add Fortune 1000 customers such as HP, Archer Daniels, Campbell's Soup, AECOM, AraMark, and many others. CoStar Real Estate Manager has staked out a leadership position in the lease accounting software market, and Q1 represents the first quarter of reporting under the new ASC 842 standard. Continued opportunity exists with later-reporting public companies, as well as a full slate of large private companies. We expect to continue to leverage this market leadership position throughout the remainder of 2019. As we continue to add more institutional and analytic services to CoStar Suite, we've begun to enhance our research coverage of REITs, CMBSs, and institutional investors. In the first quarter, we completed audit reconciliation upward of 12,000 REIT-owned properties, which encompassed 1.6 billion square feet. We added nearly 4,000 true owners to current or formerly owned REIT properties. We reconciled CMBS filings back to 2015 and stayed current on 2019 filings, adding thousands of new lease comps, rental points, and new deals. Brokers using Listing Manager continued to be solid contributors to the database. In the U.S., more than 40% of our listings are added each month by our users, and new users are steadily joining the ranks of Listing Manager. We plan to market Listing Manager to encourage more use of this service. We believe that the Listing Manager function in CoStar and LoopNet will help us deliver higher quality data, more effective marketing benefits, and greater convenience to our clients, all at a much lower cost than some of our historical data collection methods. Commercial real estate continues to attract unprecedented levels of interest from investors. Total deal volume has set new records in each of the past few years, and pricing continues to rise. The high level of interest in commercial real estate is justified by sound fundamentals, characterized by strong leasing, consistent demand, limited supply, and the lowest vacancy rates since 2000. The robust health of the sector has benefited the industry at large, including brokers, appraisers, underwriters, owners, and lenders. In the multifamily sector, high levels of construction have been boosting advertising revenues for platforms like Apartments.com, which is a near necessity for communities in lease-up. Barring any surprises, the U.S. will set a record -- the U.S. economy will set a record in July 2019 for the longest post-war expansion on record, with 102 months of consecutive job gains. We see no obvious imbalance threatening this remarkable streak in the commercial real estate markets, and consensus forecasts place CoStar's house view as growth continuing into 2020, albeit at a slower pace. International concerns around Brexit and China may grow slightly, but may also perpetuate the flood of international capital that has fueled U.S. asset price gains, including in commercial and multifamily real estate. The slow and steady growth of the past few years has produced consistent demand in rent gains across all property types. Apartment rent growth accelerated last year, posting 3% gains for the first time since 2016, despite increasing supply, but a broad shortage of housing, especially for-sale product, has produced unprecedented demand for new rental products. Transaction volume continues to set new records as investors clearly believe in the multifamily story. The office market features enviable fundamentals and limited supply, at least outside of major markets, which are undergoing wholesale reinventions, like Hudson Yards in New York, the Boston Seaport, Amazon's HQ2 in Crystal City, likely Union in Seattle, and South of Market in San Francisco. However, single-digit office vacancies have delivered only mediocre rent growth at just 2% over the past year. Perhaps the most remarkable feature of the office market is the consistency of rent growth. Eight years of slow, steady increases, a welcome departure from the boom/bust cycles of 1999 and 2007. The outlook calls for more steady, if modest, rent gains thanks to low vacancy levels, even if demand weakens. Demand for industrial properties remains at historically high levels, driven by the growing trend toward online purchasing and same-day delivery. Yet, vacancy rates appear to have bottomed out amid record-setting deliveries. Persistent rent growth of more than 5% has drawn record-setting sales volume, resulting in price appreciation exceeding 10% year-over-year. The growing economy has yet to reverse lackluster dynamics for the retail sector though, as structural change in the industry weighs on demand for physical space. While well-located properties continue to perform well, historically low vacancy rates are still mainly a result of limited construction and have yet to fuel significant rent gains. We expect the record levels of interest in commercial and multifamily real estate to continue across all property types, and in any economic outcome, CoStar Group offers products and services that are essential to owners, lenders, brokers, investors, and property managers alike, as they participate in commercial real estate's increasingly competitive ultra-high stakes marketplace. It's been a great start to the New Year for CoStar, and I'm extremely excited about the rest of the year and particularly the coming decade as we continue to execute on our long-term vision. At this point, I'm going to liven up the call by turning it over to our CFO, Scott Wheeler.

Well, thank you, Andy. A flattering introduction. Here comes the lively portion of the call. I'm going to call it call plus. Okay. All right. Well, we did have a great start to 2019, great sales numbers that produced great revenue growth, and these both allowed our leverage model to give us increased levels of profitability and strong cash generation. So, as Andy mentioned, revenue in the first quarter of 2019 increased 20% over the first quarter of 2018, which was near the high end of our guidance. Looking at revenue performance by services, CoStar Suite revenue growth was 13% in the first quarter of 2019 versus the first quarter of 2018. The growth is primarily driven by both brokers and owners, and it's evenly balanced between existing clients and new logos. As previously communicated, the revenue growth rate for CoStar Suite is expected to be in the 11% to 13% range for 2019. Revenue in the Information Services group grew 25% year-over-year in the first quarter, primarily as a result of CoStar Real Estate Manager's revenue growth of 95%. The adoption of the new lease accounting standards created strong demand for our Real Estate Manager product, which we do expect to continue although, slightly moderated throughout the year as we move past the peak adoption date of the new lease standard. Information Services revenue is expected to grow at a rate of 11% to 13% on a year-over-year basis. Multifamily revenue growth for Q1 remained strong at 30% over the first quarter of 2018 just in line with our expectations. Going forward, the second and third quarters of 2019 are expected to reflect lower growth rates than the first quarter of 2019 for two reasons, both related to the ForRent acquisition. First, we've now lapped the anniversary date of the ForRent acquisition. Second, there will be a modest negative effect on the 2019 growth rate because certain products and duplicative revenues were eliminated since the acquisition, forwarding our 2018 base results. The growth rate in the second quarter for 2019 is expected to be in the low-teens, increasing to the high-teens by the third quarter. On a pro forma basis, when you include ForRent for all of 2018 and exclude the discontinued services, the year-over-year multifamily revenue growth will be approximately 20% in both the second and third quarters of 2019. Multifamily revenue is expected to exit 2019 in line with the 20% full-year outlook for multifamily. Last but certainly not least, commercial property and land revenue grew 17% year-over-year in the first quarter of 2019. This is due to continued strong sales of LoopNet marketing products, including our tiered advertising products, which grew approximately 37% year-over-year in the first quarter. Our land business also contributed to strong growth with 21% year-over-year revenue growth, and we continue to expect organic growth in the commercial property and land sector in the 18% to 20% range for 2019. Gross margins came in at 78% in the first quarter of 2019, in line with what we saw in the fourth quarter of 2018, and we expect this level of gross margin to continue around 78% for 2019. Operating expenses of $164 million for the first quarter of 2019 were slightly below our expectations, primarily as a result of modest timing delays in our marketing and some G&A spend. First quarter adjusted EBITDA of $125 million represents a 49% increase compared to adjusted EBITDA of $84 million in the first quarter of 2018. The adjusted EBITDA was approximately $3 million above the midpoint of our guidance range and about $1 million above the high end of our guidance range. Resulting adjusted EBITDA margin of 38% is 90 basis points above the midpoint of our guidance and 740 basis points above the 31% margin we achieved in the first quarter of 2018. Net income for the first quarter of 2019 of $85 million increased 63% or $33 million compared to the first quarter of 2018. Our effective tax rate in the quarter was 13%, reflecting benefits associated with share-based payment transactions. Non-GAAP net income for the first quarter increased 54% to $92 million or $2.53 per diluted share and includes adjustments for stock-based compensation and acquisition-related expenses. Non-GAAP net income for the first quarter assumes a tax rate of 25%, which does not include discrete items such as the impact of the share-based payment transaction. Cash and investment balances were approximately $1.2 billion as of March 31, 2019, up $132 million since the end of 2018. Now let's look at some of our performance metrics for the quarter. At the end of the first quarter, our sales force totaled approximately 757 people. The renewal rate on annual contracts for the first quarter was in line with the rate achieved in the fourth quarter of 2018 at 90%. Our renewal rate for customers who've been subscribers for five years or longer was 96% in line with the 96% renewal rate in the fourth quarter of 2018. Subscription revenue on annual contracts now accounts for 82% of our revenue in the first quarter, up from 79% this time last year. The improvements are primarily the result of our successful migration of the ForRent customer base to our Apartments.com network and to annual contracts. I'll now discuss our outlook for the full year and the second quarter of 2019. Based on first quarter revenue and sales results, our full year 2019 revenue range of $1.37 billion to $1.38 billion remains unchanged. We continue to expect revenue growth for the year between 15% and 16%. We expect revenue for the second quarter of 2019 in the range of $333 million to $337 million, representing top-line growth of around 13% at the midpoint. The growth rate expected in the second quarter is negatively impacted by the discontinued ForRent revenues mentioned earlier and the lapping of the anniversary of that acquisition. On a pro forma basis, including ForRent for all of 2018 and excluding discontinued services, our revenue growth rate outlook for the second quarter would be approximately 16%. We expect adjusted EBITDA to be in the range of $495 million to $505 million for the full year of 2019, in line with our previous outlook. Year-over-year, we expect adjusted EBITDA growth of 20%, with adjusted EBITDA margin for the year of approximately 36% at the midpoint of the guided range. For the second quarter of 2019, we expect adjusted EBITDA in the range of $98 million to $102 million. As in prior years, we expect the second quarter to be the low point for adjusted EBITDA margins for the year as we increase our marketing spend for the start of the peak apartment rental season. Margins are expected to increase sequentially in the third and fourth quarters. In terms of earnings, our revised range of $9.90 to $10.10 for full-year non-GAAP net income per diluted share is an increase of approximately $0.10 at the midpoint compared to our previous outlook. In the second quarter of 2019, we expect non-GAAP net income per share in the range of $1.94 to $2.02 based on 36.7 million shares. So to wrap things up, a great start to the year. We're in a very strong position financially, and I certainly look forward to updating each and every one of you on our progress as we continue throughout the year.

That's definitely call plus.

Thank you. Let's open it up for some questions.

Hi, thanks, good afternoon. Your 2Q guidance implies about 120 basis points of year-over-year EBITDA margin expansion at the midpoint, which compares with 740 bps of margin expansion you just delivered and your full-year guidance suggests the rate of margin expansion will narrow relative to the first half. Can you discuss the factors that are driving a more conservative back-end margin outlook?

Yes. I think what you see, George, is certainly the timing of investment costs. The second quarter is primarily driven by all the marketing that we're spending, and we expect that to be our strongest quarter, but still up when comparing to the fourth quarter over the prior years. I think you also see a lot of benefit in the first quarter as we've passed the ForRent acquisition annualizing, and so all those benefits are now in the numbers as we lap the margin improvements we got last year from ForRent. So those are pretty much the biggest factors I would call out.

Good afternoon, everyone.

Welcome, Bill.

Welcome, Bill.

So, is it true that you're handing out free Teslas to all the sell-side analysts? Is that what I heard something about that?

It depends on the nature of the report.

That was a good question, Bill. Thanks.

All right. Now the real question. The -- so I was...

These are for top performers.

The -- I was hoping for an update on the LoopNet marketplace in two ways: One being the build-out of the LoopNet marketplace site and how that's going and second is maybe to talk about some changes in the sales force structure moving to a more national account coverage model that might help the sale of that product.

Sure. So definitely a lot of effort, a lot of work going on, on LoopNet 2.0. And actually it was -- I was about there for a week or so last year -- the development the last week. Two weeks ago, I was with the development team for the week out in California going over the product, a very productive meeting. And we hope to make strong releases in the third and fourth quarter around that product area. I picked up a customer service call this morning randomly, and the customer was complaining they wanted two major features in LoopNet that we have already put into the new design, so in the right top of the list, so stronger and easier searching for restaurants and being able to highlight things with broker comments. So I'm feeling good about that where that's going. We're also -- I spent last week with our photography team making sure they have the right to support the new elements of that product. And you can see the growth begin to click up, and we remain very excited about it. You also see it begin an effort going on in Spain and in the United Kingdom to match the effort that we're doing here. And so all in all, it remains on track, and we're excited about it. In terms of the major accounts or the national accounts, the sales force, we had last year quotas on what the sales force needed to sell of LoopNet in order to make the higher commission rates. We removed that this year so they could focus on general customer service and set their own allocations and priorities. The nice thing is the sales results have continued to come in for LoopNet naturally without the commission focuses. So we think that's been good. And we will be structuring the LoopNet major national accounts the same way we structure Apartments.com in the near future. So it's a lot of software work going on and a lot of operating work that needs to be done to position for it, but it's on track and it's a top priority.

Sure. Two questions on the impact of the ForRent product cancellation. One, do you have some sort of quantification for the impact on net bookings in the first quarter? And two, did I get my sort of the math right around your guidance for the second quarter that it's about $3 million of revenue that was canceled through the second quarter? Is that in the ballpark? Thank you.

No. We don't have a number on the bookings side, David. There was -- there's certainly effects running through last year, but we didn't talk about that on the booking side effect. But on the pro forma side, let's see the -- let me look for the Apartments pro forma for you. Just a second, I will get it. I know it's here somewhere. So, yeah, we had somewhere between $3 million and $6 million per quarter throughout the year that are going to affect us, and the biggest effect would have been in the second quarter for 2018. So hopefully that helps give you some idea of how big those discontinued revenues are.

Good afternoon. Thanks for the question. On the 40% bookings growth in multifamily, do you have any sense of what portion of that is coming from competitive takeaways versus just normal wins, new wins? And then my follow-up is with $1.2 billion going on $1.3 billion in cash on the balance sheet, what's your sense for deploying that capital as we look forward the next couple of quarters?

Good questions. So on the first one, I ran into our Head of Apartment Sales last week, Deb Richmond, and she couldn't wait to tell me about some huge competitive wins we just had. I think she was talking about some community with 135 properties moving over something or some organization 135 properties moving here. So my sense is that there is a lot of competitive shift going on. We are having some success with the Diamond Plus ads as well, but a lot of it is competitive shift, and the numbers are really quite impressive. Like when I look at the total accounts, I won't recall exactly what the number was the last time I looked, but they are very impressive competitive wins. For good reason, because the traffic numbers are so compelling, the lead advantages are so compelling in Apartments.com, and the benefit of having invested well over $1 billion in Apartments.com has resulted in a huge competitive distancing going on there. I also got an email today from the Apartments regional sales manager with someone moving a bunch of properties over, and they specifically cited the quality of our customer service. They said the fact that we were in their communities every month or every one and a half months, briefing them on what was happening in their local market, and the fact that they had not seen the competitor in four years was a major factor in shifting all their purchasing over to us. So on hard numbers, I've seen the last two months, I would say a major competitive shift. And anecdotally, in the last two weeks, I'd say a continuation and possible acceleration in competitive shift. In terms of our petty cash of $1.2 billion to $1.3 billion, we remain active in looking at a number of potential acquisitions, but we remain selective. And we devote a significant amount of effort to that ongoing. And those things will happen in time, but our track record over the last 20 years of acquiring 30-plus companies, it's sort of hard to imagine that won't continue. And so that -- we would expect that capital would be put to good use in transformative ways, and we look forward to that day.

Hey, guys.

Hi, Andrew.

Thank you for the update today. Andy, one of the areas that has come up over the years is international. And you just kind of mentioned big markets, but maybe not a whole lot of companies with critical mass or maybe different market structures. It sounds like maybe you're getting closer to monetizing that opportunity now. Can you kind of frame that up, and what might it mean over the next few years for your growth?

Sure. So we're -- I mean you're right. There are some acquisition opportunities over there that are midsized that could be interesting, but that -- really what we're focusing on is just organic growth in those markets. We have been ratcheting up our investment in the last 18 months in the United Kingdom. We're in Germany and Spain. We see some exciting -- some good opportunities in France, availability of lower-cost digital data, machine learning to harvest data on the Internet. So we're in an investing period. And we saw -- on a small scale, we saw huge growth in the first quarter in the United Kingdom in our bookings, but still modest by comparison to the United States. And we think that we had our expectation that that growth will pay off in the next couple of years. The nice thing is now we're getting a multi-country footprint, and we'll be -- I think it’ll be transformative when we can put three or four European countries into one consistent platform. So that's one of our big goals in the next three years or so, and I think that will move us up to parallel growth rates with the United States.

Hi, guys, good evening. On bookings, it seems like you're continuing to see broad-based momentum, but I wanted to ask how booking activity in the first quarter compared to your expectation. So just excluding the LoopNet runoff in the year-ago, $48 million this quarter was down some relative to the $54 million in the year-ago period and $50 million in the fourth quarter. I know there's some seasonality relative to the fourth quarter, but anything else that we should consider when making the sequential and the year-over-year bookings comparisons?

Not really. I think I was -- we were very happy with the bookings. I was upwardly surprised as the Apartments.com bookings were extremely strong and continue to be extremely strong. We are running the business looking nine months to a year out. So we're working a lot of things that are not month-to-month. And there is always volatility as you look at the numbers like what land might be doing one quarter, what farms might be doing one quarter. Things shift around they're all generally really strong, but there is -- since they're real returns and real sales results, there's volatility to them. If they were ever perfectly linear that would be a made-up situation that's not happening. And so they move around but they're strong. I think we got the payoff from last year's customer service and conversion efforts with ForRent when you see the surge in productivity there. The investment in additional face time with customers with CoStar will probably pay off in the next two quarters. So, all-in-all, great quarter, very happy with the results and phenomenal results.

Thank you. Andy or Scott, is there a way to think about revenue growth in terms of the pricing uplift you expect this year and over time and the contribution from new clients plus increased penetration from current clients? How should we think about the growth profile if you break it down that way? I do realize it's going to be difficult across different segments, but just maybe for the company overall.

I'll turn some rocks and you can do as well. So a lot of the pricing lift we're seeing is not driven by aggressive price increases against our core customers for the same price same products, with the exception being that on our marketplaces, demand is really strong. So at LoopNet, you're seeing super strong demand in markets like Southern California and Southern Florida, so you get some saturation on advertisers. So we're eliminating big, big steeply discounted contracts. So if someone was getting 60% price breaks or discounts, we're eliminating those consistently and bringing people more up to a standard pricing level that looks that gives you that 49% year-over-year price lift on PL. It's not so much we're taking all -- everybody up. We're eliminating low-end discounts. Then you're getting product transformation. So as we rebuild LoopNet to really effectively showcase mega properties, super high-end properties, those will be sold at dramatically higher price points, but to new customers for new product. So that will bring the ASP up dramatically, but not because we're doing across-the-board increases for the same product. They will be more incremental prices. This continues as we go into more analytic products for CoStar. You're selling to higher utility institutional clients. You get higher ASPs there as well. But delivering product to the one or two-person brokerage shop in Oklahoma City remains just as high a priority. We're not taking those prices up beyond roughly inflation. So it's a mix. Do you want to…?

Yeah. We track the price/volume mix equation into the big groups. And as you just said, the only place we really had price increase was in the LoopNet, getting rid of some of those discounts. And then as we moved people in the ForRent acquisition to the broader network then you saw this other effect of moving to a broader network contract, which would have higher revenues per property than what we had before. So it's not really a price increase. It's a broader package increasing. So it’s those types of things and the other one that Andy mentioned that are really driving what we call price, which really is accounting for a good half of what our revenue growth is in many quarters because of those effects.

This is actually Joe Goodwin on for Pat. Thank you for taking my question. Just curious, if you talk about the salesperson...

Securities?

Yeah, JMP Securities, a little mistake there. Yeah, as a former software salesperson myself as I was looking at the Net Promoter Score that you guys shared earlier, and they seemed really high. And from my experience, people don't always love speaking with software sales reps. I guess that would imply. So I guess just really curious how do you guys go about calculating those scores? And how and when do you collect that data?

Yeah. So what happens is there is an independent team that works in a different group from sales based out of Atlanta, Georgia. And each day they look at meetings that occurred four to 24 hours prior. And they randomly sample the people that those meetings were held with. They say based on your meeting yesterday and your overall impression of Apartments or CoStar, how likely will you recommend CoStar or Apartments.com to a friend or colleague? So it's the recommended question. And that gets us a 9.02 on CoStar, and gets us to 9.8 on Apartments.com. And there was one woman, sorry, I can't remember her name or where she was, who for the year last year star scored 9.98. So she is just a little bit of a stronger salesperson than you were. But I'd have to hand it to her like if you get a 9.98 -- and I'll try to get her name for the next earnings call. But I won't actually because I might sound as a recruiter. You're right that people don't want to talk to typically don't want to spend their day with software salespeople but we try to make sure that we're showing them some new benefit to them. We also talk to them about the general market. I also believe we delivered over one million tchotchkes last year.

...the cookies and the candies.

The cookies, candy, a charger cable, a cozy. We delivered so many little minor gifts. We do have all kinds of strategies for building those relationships, and that tends to work.

[Indiscernible]

Sterling, we're having a hard time hearing you.

Is that any better?

Better.

That's better.

Okay. I was saying that, in your prepared remarks, you had the commentary obviously on the strength of the multifamily, but also the deceleration in commercial real estate. Just from a high level, does that mean that you -- as you look throughout the rest of the year, that the focus of the investments will continue to be on the strength in multifamily housing? And just to this quarter, did you invest in the level you thought you would in the commercial real estate part of the business?

I would think that we did invest in the commercial real estate side the way, we'd expect to. And investing -- I think the question is reinvesting into the strength of multifamily. In the prepared remarks, I've noticed that and I thought, yes, there's a lot of upside in commercial real estate right now as for the whole economy. And yes, the statistics, the market indicators are the best I've seen in my career, for sure. I hate that I'd admit this. But I also -- we noted earlier $1.2 billion to $1.3 billion in cash. Downturns are good too because we bought some amazing companies in the downturn. And we are not terribly cyclical as a company. We typically are able to grow through downturns. And there is actually both a cyclical advantage to strengthen the apartment industry for us. As people are building a lot of new developments, they are ready to invest in getting faster lease up on those new buildings. Conversely, when the wheels come off and vacancy rates drop, what they spend on lead generation with Apartments.com is peanuts or any other call for term you want to use compared to the amount of money at risk in these communities. So when someone's spending $1,100, $1,200 a month on getting the majority of their leads to keep their $250 million property leased and solvent, they don't cut back on that $1,100 a month. So, I think that's one of the nice things about our business is we are pretty -- we benefit in the up cycle, and we're very resilient on the down cycle, but still today, no indicators showing a down cycle.

Well, with that, we're going to wrap up the call. Thanks everyone for joining us. And thank you, Scott, for a fantastic call plus. And thank you, Rich, for a really fascinating read on the risks and the definitions. And I look forward to hearing spending time with you guys again at the end of the second quarter.