CoStar Group, Inc. Q2 2010 Earnings Call Transcript

| About: CoStar Group, (CSGP)

CoStar Group, Inc. (NASDAQ:CSGP)

Q2 2010 Earnings Call

July 22, 2010 11:00 am ET


Tim Trainor - Communications Director

Andrew Florance - President and CEO

Brian Radecki - CFO


Chris Mammone - Deutsche Bank

Brett Huff - Stephens Inc.

Jon Maietta - Needham & Company

Brandon Dobell - William Blair

Ian Corydon - B. Riley & Company

Jim Wilson - JMP Securities



Ladies and gentlemen, thank you for standing by. Welcome to the CoStar Group's second quarter 2010 conference call. At this time all participants are in a listen-only mode, and we will conduct a question-and-answer session, instructions will be given at that time. (Operator Instructions) As a reminder, this conference is been recorded.

I would now like to turn the conference over to your first speaker, Mr. Tim Trainor. Please go ahead.

Tim Trainor

Thank you, operator, and good morning everyone. Welcome to CoStar Group's second quarter 2010 conference call. Before I turn the call over to CoStar's CEO, Andrew Florance, let me state that 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 CoStar's second quarter of 2010 press release issued yesterday and in CoStar's filings with the SEC, including CoStar's Form 10-K for the period ended December 31st, 2009 and CoStar's Form 10-Q for the quarter ended March 31st, 2010 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 obligation to update these statements. You can find a webcast of this conference call on our website at Thank you for joining us. I will now turn the call over to Andy Florence.

Andrew Florance

Thank you Tim, and welcome everyone to CoStar Group's second quarter 2010 conference call. This is the first quarterly conference call we are making from our new headquarters building at 1331 L Street in Downtown, Washington DC. I am very pleased to report that the continued signs of stabilization in the commercial real state economy, CoStar group can report accelerating revenue growth and climbing renewal rates.

Our sales bookings doubled quarter-over-quarter and our in-quarter renewal rate climbed to a very impressive annualized rate of approximately 92%. We posted another consecutive quarterly revenue record of $55.8 million, which is an increase of $5.7 million over second quarter 2009 revenues of $50.1 million. The company added $11.6 million in cash to the balance sheet during the second quarter. Our total cash, cash equivalents and investments on hand now totaled $230 million and the company continues to have no long term debt or mortgage debt because of 94% of CoStar revenues is subscription based and because we have historically higher renewal rates in the 90% plus range, we believe that CoStar group is not a highly cyclical business and it is generally a bit more defensive.

Despite that fact, history shows that CoStar's revenues have grown dramatically faster during a stronger commercial real estate market than in a declining one. For that reason I would like to begin today's conference call by sharing with you in more detail some important and positive indication we continue to see emerging in the commercial real estate economy.

Perhaps the most significant recent development is that office vacancies rates have stopped climbing and appeared now to have stabilized. After having experienced one of the most dramatic losses in US jobs since World War II. Job losses appear to have bottomed out and we are beginning to see consistent job growth.

In the last eight recessions, we have had since World War II the rate of job recovery has been roughly symmetrical to that of job losses. is forecasting strong job growth over the next several years. Of there were the case it would indicate the potential for a strong commercial real estate recovery over these next several years as well. The US had already experienced three consecutive quarters of office using job growth for a total gain of 200,000 jobs. I believe that the strong year-over-year overall growth in corporate profits we are seeing is a good leading indicator for continued job growth. Important leading indicators such as temporary employment and weekly hours worked are also showing a continued positive trend.

All economic lows in Greece are still threatening. I find it useful to keep in perspective that of the size of Greece is an economy of smaller [than so] obvious. The nature of job losses in this recession was somewhat unique. This time around the extensive job losses did not result in a very large amount of negative [vast] absorption. In the dot com bust, the job losses came from a smaller number of companies that eliminate most if not all of their staffs. Those sorts of job losses resulted in immediate and concentrated negative absorption of office space.

This time around the job, crests were spread more broadly across many companies. Many of which reduced their stats by 10% to 15% across the board. Companies that cut 10% of their staff typically do not immediately put excess office space back into the market, so this mitigates the scale of a negative absorption. And as rents have fallen over the past several years, many tenants may simply retain this less expensive excess office space. The bottom line is that less space has come flooding back into the markets than most experts expected.

We have seen solid leasing activity levels over the past four quarters and that trend continued in the second quarter of this year, as we recorded 6 million square feet of positive net absorption of US office space during the quarter. This is very good news for our core customers as leasing commissions are a major source of their revenue.

In 2009, 15 of the top 20 largest US cities suffered negative absorption of office space. But year-to-date in 2010, only 9 of top 20 say have measured any discernible negative absorption. Office leasing and absorption are recovering.

Commercial real estate constructions levels in the US are stunningly low right now. Due to falling rents, declining values and increasing the fall to an incredibly tight credit, new deliveries are at their lowest levels post World War II. In fact, we believe that the amount of commercial real estate being built is less than the physical deterioration rate of commercial buildings resulting in a net effective contraction of commercial inventory in the US.

Commercial credit markets remain very tight with stringent underwriting and large equity investment requirements in the part of borrowers. Most banks and traditional lenders have reduced their exposure to commercial real estate and CMBS mortgages continue to show increasing rates as default. With the current financing constraints, we are not likely to see an increase in commercial construction starts in the near future.

Taken together, positive net absorptions, the absence of new supply means that for the first time in year's office vacancy rates have stabilized and they are virtually flat. Last year, vacancy rates were climbing by as much as 50 basis points per quarter, but in the second quarter of this year they barely moved 3 basis points. In fact, fully half of the top 20 US markets saw vacancy rates decline during the second quarter.

I believe that we have now seen the bottom of supply-demand imbalance in the office market. The recent article in the Wall Street Journal reported that office vacancy rates were still climbing. This article relied on a source that has a tiny fraction of the research resource that CoStar has. We believe that the source has somewhere around 120th, the number of people conducting research that CoStar has and we don't believe they have a credible way of measuring actual absorption reliably. Therefore, they could only model it. I think the source guessed wrong in its assessment and particularly about job growth impacting negative absorption. And as a result the article provided a terribly misleading account of the state of the industry to Wall Street.

I believe it's a much more accurate and research backed assessments that commercial real estate industry is showing obvious signs of initial recovery. Rental rates are even beginning to stabilize. In fact if the job growth that projects materializes and the construction levels stay as low as we believe, we have every reason to expect this recovery to continue and in fact, we might see rapidly falling vacancy rates within the next three years in some markets. This in turn would be expected to lead the rapid recovery and rents in many office markets.

The nearly complete withdrawal of CMBS as a debt source for commercial real estate still has the capital markets nearly paralyzed, or the debt markets. Values remain down but they are no longer falling, and in fact they've began to move back up slightly. If vacancy rates do fall causing ramps and eventually and a rise to climb, then this refinancing landmine that many analysts have feared may never fully materialize. Since equity investors would likely be eager to take out the debt.

At the recent ICSC convention, it seemed that hundreds of perspective real estate buyers came by our booth, looking for ways to find distressed properties. There appears to be so much pent up investor interest targeting distressed property that any property labeled distressed that hits the market, attracts multiple bids and often ends up selling for a not so distressed price, especially in those primary markets currently favored by the investors. In fact, we are seeing prices for some recent Washington DC office sales hit the $800 per square foot mark again. I think the market is flooded with buyers, even distressed buyers, then perhaps sellers may have some reason to be optimistic.

The bottom line is that we are increasingly but guardedly optimistic that we maybe coming out of the worst of this commercial real estate downturn. We believe that this is great news for our revenue growth prospects over the next several years. In light of these indications of recovery, for the first time in years we have begun to reinstate modest price increases, just slightly above inflation.

With the benefit of an improving commercial real estate market and a larger more experienced sales force, our sales showed good results in the second quarter. In addition to generating very high customer renewal rates, quarterly bookings more than doubled company-wide as I've mentioned.

Annualized net new bookings were positive for the third consecutive quarter. The total for the second quarter was $3.7 million that more than doubled, the first quarter bookings totaled approximately $1.6 million. The biggest driver of our strengthening organic revenue growth this quarter was our US flagship CoStar Property Professional through information service. So our strengthening revenue growth is coming from our core product and that's somewhat equal across the regions of the country.

The in-quarter renewal rate for annual subscription based services jumped to approximately 92% during the second quarter from approximately 87% in the first quarter of 2010. The twelve month trailing renewal rate also increased during the second quarter to approximately 88% from approximately 86% in the first quarter of 2010.

As I've described in previous calls, we have made a concerted effort throughout the recession to retain the business of our customers with a particular focus on our new customers. We restructured the commission rates of our sales force to focus on driving early usage and accelerate adoption of our products at new customer sites. We believe this effort was very successful as the renewal rate for firms that have been clients for less than five years increased from approximately 74% in the second quarter of 2009 to approximately 88% in the second quarter of 2010.

Our renewal rate for clients that have been customers for five years or more climbed to approximately 97% in the second quarter, 97%. When you consider this renewal rate, figure does not exclude clients that cancel for bankruptcy or unfortunately even death. This number is phenomenal.

Clearly, sales conditions for our services are better than they were last year. With leasing activity up, commissions are up, that's the core revenue driver for our clients. We are seeing a big improvement in the financial health of our clients compared to last year. And more of them are adding users and subscribing to additional territories compared with last year. The total number of subscription clients increased to 16,200 or our subscription client's sites increased to 16,297 company-wide during the second quarter of 2010 from 15,995 in the first quarter. The total number of individual overall subscribers dipped slightly during the second quarter to a total of 86,317 from 86,590 in the first quarter.

The number of individual subscribers in the US however increased during the quarter by 446. But a drop in the UK subscribers offset this number. This drop in the UK occurred for several reasons; we renewed several of our major UK clients in the second quarter that during course of last several years have reduced their headcount.

In the United Kingdom, it's much more likely that the brokers or surveyors are salary-based unlike the US where they are commission-based. This puts more pressure on the surveyors or brokers in the United Kingdom to cut headcount during a downturn, and this doesn't happen the same way in the US.

So, when these firms are renewed, they did sell at lower subscriber numbers. Secondly, during the second quarter, the UK sales force devoted a very significant percentage of it's time and effort to launching our Showcase product in the UK. I believe their efforts have been very successful, but they predominantly targeted existing clients so as they sign these people up, these sales do not result in net new subscriber growth.

As I indicated last call, our first quarter average contract value reflected an unusually big sales quarter or high ticket sales quarter for PPR. Those sales of PPR were nearly double the typical quarterly average. So, the overall second quarter average contract value fell the $7,031 reflecting the return to more normalized sales for PPR during the quarter.

It also reflects a large number of sales made to new customers who tend to be small to mid-size firms. In fact the second quarter saw the highest total sales to new customers for the second quarter of 2007.

While these smaller to mid-size firms tend to sign contracts at lower price points, we believe they present excellent upsell opportunities. During the second quarter, we introduced a new bundling of our US products targeting small firms. Essentially, this packaging consists of elements of our popular flagship information products together with Showcase as being offered in certain secondary and tertiary markets.

Like Showcase, it is available on individual subscription basis and an affordable rate. Excluding these agreements, we signed the 570 new agreements during the second quarter with an averaged annualized contract buy of $8,141.

As we had previously mentioned on our calls, we had previously invested in growing our sales force ahead of the expected recovery. At the end of the second quarter we had a total of 194 sales reps, slightly less than 203 on staff at the end of the first quarter. This includes 126 US subscription sales reps, 7 US advertising sales reps, 38 in-house sales reps, 19 UK field sales reps and 4 sales reps for PPR and Resolve.

Overall, I'm very encouraged by the strengthening positive trends we've seen in our sales activity over the first half this year. We certainly realize and expect that we'll likely see up and down the sales months during a transition year, but we remain very optimistic, we will see continuing positive sales performance overall for the rest of 2010. Accordingly, we are revising our guidance upward for the year and Brian will explain that shortly.

I do want to take a moment to highlight a particular benchmark of success for our retail real estate product offerings. We have now signed up as clients, 9 of the 10 largest retail property owners in the US as ranked by Retail Traffic Magazine.

In addition, during the quarter we continue to sign up major retailers to the CoStar service, such as Denny's, Taco Bell, Dollar Tree and a very major coffee retailer we cannot disclose.

I believe that the tremendous growth of our retail database over the past five years allow us to offer dramatically better retail property information today. Thanks to our research team, CoStar now tracks more retail properties than any other information provider. Today we have nearly 600,000 for lease and for sale retail listings in our database, with approximately 1.4 million US retail properties.

With the increase in the size and value of our retail database, CoStar is becoming more of a household name in the retail industry and we expect to see many more sales from the retail sector which I believe offers tremendous growth potential for our services.

Our Showcase online marketing service reached an important milestone during the second quarter by exceeding 10,000 subscribers in just a little more than two years after our initial US launch. We definitely have to congratulate our sales force for that accomplishment. At the end of the second quarter there were approximately 10,110 total Showcase subscribers in the US and the service is generating approximately $6 million in annualized revenue.

Focusing on individual subscribers paying for internet theory advertising, we believe that we have succeeded in achieving a market share, nearly comparable with that of our major competitors in that space in a very, very short period of time. As I mentioned, we recently introduced Showcase to the United Kingdom. Since this is CoStar's first truly international software offering, this launch represents an important milestone for the company.

Just as we launched Showcase in the US, many of our first UK subscribers are on trial contracts. We expect to convert a large percentage of early clients in the UK who are now on these trial contracts just as we did in the US. At this early initial point, we already have nearly 1,000 individual Showcase subscribers in the UK, 372 of which are already paying subscribers, not on trials.

I would like to take a moment to also brief you on several initiatives in this past quarter. In two weeks, CoStar is releasing the industry's first comprehensive repeat sales index for commercial real estate. We believe that this is the first reliable repeat sales index for our industry. The index is expected to provide investors with the clearest and most rigorously accurate insight on price movement in commercial real estate assets.

Over the past two decades, repeat sale regression analysis has become the most accepted method for analyzing and understanding price movements within markets. In part, because of the popularity established in the housing market by the Standard & Poor/Case-Shiller repeat sales index. The CoStar commercial repeat sales index is made possible because of our unique database of 1.3 million sales comparables with nearly 85,000 usable repeat sales pairs.

We've presented the methodology and model for the repeat sales index at the American Real Estate Society earlier this year in a paper lead authored by Dr. Ruijue Peng of CoStar Group and assisted by Dr. Norm Miller of CoStar Group and Dr. [Ming Zong Hong] along with myself and Dr. Karl “Chip” Case. Chip is famous as the one of the founders of the Case-Shiller Residential Real Estate Value Index and I believe with Dr. Peng as his advisor.

Investors in other industries have come to value these industries providing greater transparency and insight into market dynamics. We expect to produce monthly updates on the first Thursday of each month to service timely indicators of the overall health of the commercial real estate industry. CoStar subscribers will have access to the full set of indexes which will include sub category by price level segment, property type and by region.

We announced during the second quarter that we plan to develop powerful discounted cash flow theory evaluation software and ultimately introduce specialized Automated Valuation Modeling, AVMs, for commercial real estate and asset and portfolios. To direct this ambitious effort, we recently hired Jeff Wells, who joined our Resolve Technology team in Boston as Vice President. Jeff has a long and distinguished career developing and refining much of the real estate valuation software in use today.

Over the course of his career he has worked with 100s of real estate clients to create software products that address a wide range of real estate investment applications. Discounted cash flow software is widely used by investors to evaluate real estate portfolios and analyze the expected future financial performance of potential real estate investments. However, the forecast and financial performance projections they make are only as accurate and useful as the daily use in their analysis and underlying assumptions.

Building an update in these models is an arduous and expensive task, but very, very important. We see an opportunity to take advantage of our unique extensive research based data, analytical expertise and software development resources resulting from the combination of CoStar, PPR and Resolve to provide automated, easier to use discounted cash flow forecasting and valuation capabilities.

Our primary goal is to produce tools that make our research and analytics even more viable to current and prospective clients.

PPR continued to see strong demand for its analytic and forecasting services during the quarter, both from its own client base and in cross-selling opportunities with CoStar's existing clients. We signed $0.5 million in cross-sale contracts during the second quarter of 2010. With its continued strong sales performance, PPR remains ahead of year-to-date plan. We also continue to benefit from the growing recognition in the market of the value of the combination of CoStar and PPR. Several new clients say their combinations as a determining factor in this selection of an information provider.

During the first two quarters of this year, CoStar's research team continued to expand our database adding more than 64,000 listings net and approximately 173,000 properties and approximately 865,000 new digital images. We now have more than 3.7 million properties in our database. We believe that our impressive database grip corresponds to long term potential revenue growth and creates increasingly high bearers to entry.

Let me close my remarks by saying that I am very pleased with our company's performance over the first half of this year. Increasing sales, higher renewal rates and solid revenue growth clearly demonstrate renewed strength in our business. Based on our outlook, we fully expect to continue to achieve high margin revenue growth as the economic recovery strengthens in the second half of this year and continuing into 2011. At this point, I will turn the call over to our Chief Financial Officer, Mr. Brian Radecki.

Brian Radecki

Great. Thank you, Andy. As Andy mentioned, we are very pleased with our second quarter 2010 results. We achieved directed revenues for the third consecutive quarter and saw positive momentum continue in many, many areas of the business. Today, I am going to focus principally on sequential results for the second quarter of 2010 compared to the first quarter 2010 and also on our outlook for the third quarter in full year. We believe sequential trends offer the most insight into the performance of our business as they continue to progress through the current economic and commercial real estate cycle.

Our second quarter revenues came in stronger than anticipated at $55.8 million, an increase of $700,000 over the first quarter and an increase of 5.7 million compared to revenues of $50.1 million in the second quarter of 2009. Our record revenue performance during the quarter was driven by strong organic company-wide net new subscription sales, and as Andy mentioned, based on the core CoStar suite. Subscription revenue for the second quarter accounted for 94.1% of total revenues. And on functional currency basis, international revenues was approximately 3.1 million pounds, essentially flat with compared to the first quarter of 2010.

International revenues were approximately 8.3% of the company's total revenues in the second quarter. As of June 30, 2010, our 12 month trailing renewal rate which is a measure of renewing subscription revenue was approximately 88%. We are thrilled to see our 12 month trailing renewal rate move back towards our historical average of approximately 90%, as our customer retention efforts and company-wide contract bookings continue to improve.

As I have publicly stated for at least two years now, we had expected our trailing 12 months renewal to decrease in the mid-80s during the downturn last year and then begin to recover in 2010. Currently at the midpoint of the year, I'm pleased to report that our renewal rates are turning ahead of expectations as demand for CoStar services has been strong and we expect to continue to see our renewal rates remain strong for the remainder of 2010.

Please note that the renewal rate which is total dollars renewing in the quarter will fluctuate from month-to-month or quarter-to-quarter for the trends an overall level on a 12 month basis are important. Just remember moving from the low 80s to the high 80s and eventually in the 90s all within a year is extremely positive news.

Now turning to gross margin. Gross margin was $35.5 million in Q2 of 2010. It was up approximately $1.6 million compared to Q1 of 2010. Gross margin percentage increased from 63.5 to 61.5 in Q1 of 2010 due to higher revenue and lower research costs which mainly resulted from timing differences between Q1 and Q2. Also, Q2's gross margin includes a full impact of PPR Resolve and investments in research when you compare the last year, as we have discussed on previous calls.

Moving down the income statement, total operating expenses in the second quarter of 2010 were $31 million, compared to $28.8 million for the first quarter of 2010, which mainly reflects the $2.8 million in one time accruals for illegal settlements. As stated in the press release last night, CoStar reached favorable preliminary settlements on two legal matters in the second quarter that will avoid potentially years of additional litigation. In connection with these anticipated settlements, the company accrued $2.8 million as one time cost in our second quarter general administrative expenses.

Specifically the company accrued $2 million in anticipation of resolving a dispute with its former landlord in the UK, Nokia, concerning the company's termination of a lease agreement for its former London office. The company's decision to terminate the agreement to lease with Nokia back in 2009, and subsequently sign a new lease for our London office located in the West end, was one of the series of moves made as a part of our overall strategy to consolidate our London offices and substantially reduce our long-term occupancy costs. We also accrued approximately $800,000 in anticipation of assailment of payments that will resolve a class action law suits filed in California alleging violation of wage in hour loss.

The company vigorously denies any wrongdoing and believes this settlement to be in the best interest of the shareholders. We can't go into much more detail than I just described on the settlement, but needless to say we are pleased to put it behind us.

Looking at profitability, net income for the second quarter of 2010 was $3.3 million or $0.16 per diluted share and our non-GAAP net income was $6.8 million or $0.33 per diluted share. These results reflect both the recognition of our one time discreet tax benefit and our clue of the legal settlements which mainly relate to our UK operations. If you “normalize” the second quarter by taking out both of these items, we came in well above our GAAP and non-GAAP guidance ranges. If you are evaluating the core operations of the business, it's important to adjust for both of these items since neither were factored in the analyst models and they belong together. If you only adjust for one or the other, they will come up with a strange result that does not really reflect how the business performed.

Quite simply we were very happy with the results on both the GAAP and a non-GAAP basis, basically due to stronger operating results. Non-GAAP EPS was slightly above our previous guidance range due to the higher than expected revenue in small shifts and some operating expenses that do not occur in Q2, that we expect to occur later in the year.

HQ transition costs added back to non-GAAP earnings of approximately $1 million came in slightly higher than expected largely due to timing between the quarters. We still expect those costs to be in the range of $3 million to $3.3 million for the year, which is slightly lower than we originally expected.

Adjusted EBITDA for the second quarter of 2010 was $13.3 million, an increase of $2.5 million to the adjusted EBITDA of $10.8 million in the first quarter of 2010. EBITDA of $7.8 million in the second quarter of 2010, compared to $8.8 million in the first quarter. As I described earlier, the second quarter included a $2.8 million accrual for the anticipated government and legal matters. Reconciliation of all our non-GAAP net income EBITDA and non-GAAP financial measures discussed on this call to the GAAP basis results are shown in detail along with definition of those terms in our press release issued yesterday which is available on our website at

Turning to the balance sheet, we ended the second quarter 2010 with approximately $230 million in cash, cash equivalent and investments; a $11.6 million increase from March 31, 2010, obviously driven by a strong cash flow from operations. The company has no long term debt. Our cash increase was positively impacted by improved accounts receivable collections, improved DSOs which also translate into lower bad debt expense on the income statement. Clearly, the health of our clients continues to strengthen quarter-over-quarter. As a result, our collection cycles continue to shorten, accounts receivable balance as of 12/30/2010 is at its lowest point since 2007.

Also, a couple other items to note on the balance sheet are that prepaid and other assets which increased by $2.5 million from the end of the 2009 to the first quarter of 2010 was due to the fact that we prepaid our corporate taxes and that has now declined by approximately $3 million which again mainly relates to our corporate tax payments. Contrary to any negative speculation, the company has not capitalized any software development or other costs and put them in prepaids.

If the company is required to capitalize software development costs at any point, it would properly classify them in intangibles and other assets and a specific detail would be listed in the notes of the financial statements in our 10-Q. If you would like to look at an example of how CoStar does this, pull out our reports any time from 2000-2004. We haven't done it in years. Thank you.

We will now speak to our outlook for the third quarter and full year 2010. Our guidance takes into account recent revenue growth rate trends and our results may be impacted by the economic conditions in commercial real estate or the global economy.

Our forward-looking guidance reflects our current expectations as of July 22nd, 2010. We expect revenue for the third quarter of 2010 in the range of $55.8 million to $56.5 million for the full, and for the full year we are raising the high end of our annual guidance range by $2 million to approximately $22.5 million to $224 million. Continued strong demand for services, demonstrates of our 12 month trailing renewal rate moving back towards our 90% historical average, combined with their consistent revenue growth on the first two quarters gives us a lot of confidence in our higher annual revenue outlook.

Our guidance on the impact for foreign exchange fluctuations on the top line results remains consistent. Do not attempt to predict foreign exchange rate fluctuations and our guidance assumes little to no volatility from the current rate. The average exchange rate in second quarter was up US$1.49 to 1 British pound and our 2010 guidance assumes a rate of 1.45 for the remainder of the year.

As discussed earlier, the company's income tax expense decreased in the second quarter due to recognition of a one-time discreet tax benefit related to the UK operations. We continue to expect the annual tax rate for 2010 to be up approximately 44%. Therefore our third and fourth quarter rate will be slightly higher at approximately 49%. That said, any acquisitions or large one-time gains or losses would affect the tax rate in any point. In terms of earnings, we expect our third quarter 2010 fully diluted net income per share of approximately $0.13 to $0.15 and non-GAAP net income per share of approximately $0.29 to $0.33.

Our third quarter outlook for GAAP net income per diluted share includes $1.3 million to $1.5 million of costs related to the transition to our new corporate headquarters in Washington DC. Approximately $1 million to $1.3 million for restructuring and consolidation of our three Boston offices, for CoStar, PPR and Resolve into one single location is approximately $1.8 million to $1.9 million in equity compensation charges.

For the full year 2010, we expect GAAP net income per diluted share of approximately $0.58 to $0.63 in non-GAAP net income per diluted share of approximately $1.17 to $1.25. We expect to achieve our earnings outlook even with the short term dilution to net income resulting from the legal settlements and ongoing efforts to reduce our long term facilities cost by moving our headquarters into a corporate-owned facility and by consolidating offices in Boston and the United Kingdom.

For our annual guidance range, we essentially adjusted the $2.8 million accrued for the settlements which was partially offset by the higher expected revenue we now have. On an annual basis, our expected tax rate is still approximately 44% which is what we have expected all year, therefore it only impacts the fluctuations between the quarters for the discreet item and has no effect on the annual guidance range.

In addition for the full year 2010, we expect approximately $3 million to $3.2 million of costs related to the transition to our new corporate facilities, approximately $1.1 million to $1.4 million in restructuring lease charges and $8.3 million to $8.5 million of equity compensation expenses. The costs in 2010 related to the acquisition and transition of our corporate headquarters in Washington DC are expected to primarily include overlapping occupancy costs to the end of the current lease term and carrying costs associated with new building.

The current headquarters office lease expired on October 15th, 2010. While we have already begun to move certain employees to the new building, we do not intend to complete the move to the headquarters until October. After this period, we expect to save approximately $2 million a year in occupancy costs for our headquarters beginning in 2011. Once we get passed these transition costs this year, which the majority are in the second and third quarter, we believe we have created significant long term value by reducing long term cost structures for the foreseeable future.

In closing, we are very pleased with our record second quarter revenue results and momentum we are seeing in the business. Our business model remains strong and the fact that we have 94% subscription-based business model with high renewal rates, the unique proprietary database, market leading position, strong balance sheet, no debt and very high operating cash flow. We expect to return to more normalized organic revenue growth rates and expanding margins as we've enjoyed over the past decade in the very near future and we are well on our way.

CoStar's management team believes there is significant opportunity for additional high margin revenue growth on the investments that we have made. We remain focused on our long term goal of growing CoStar's business towards $1 billion of revenue in high margin. We expect and continue to report that progress to you, and with that, I open up the call for questions. Thank you.

Question-and-Answer Session


Thank you ladies and gentlemen. (Operator Instructions) One moment for the first question. And we'll go to the line of Chris Mammone with Deutsche Bank. Please go ahead.

Chris Mammone - Deutsche Bank

I think you said that Showcase platform was, you are earning about $6 million in annualized revenues, could you just give us what the in-quarter contribution was from Showcase or I guess the second quarter and also the first quarter?

Andrew Florance

Through our revenue or contribution margin?

Chris Mammone - Deutsche Bank

Yeah. The quarterly revenue contribution from Showcase, you gave annualized numbers.

Brian Radecki

Yeah. We are not giving our quarterly numbers but annualized. It's approximately $6 million and obviously it's only been operating 18 months, so that's been growing each quarter.

Chris Mammone - Deutsche Bank

You think growing towards that shouldn't be, we shouldn't assume that it's sort of 1.5 per quarter?

Brian Radecki

Yeah, it would assume that you are obviously at 1.5 or higher right now. That's correct.

Chris Mammone - Deutsche Bank

Okay. And then similarly, I think you said that PPR was a bit ahead of plan. Is PPR the main source of the higher revenue guidance or is it a combination of things, could you maybe give us some more color there?

Brian Radecki

As we mentioned, the core acceleration is occurring in our traditional flagship products. So, close to our property professional. So it's basically reflecting economic recovery.

Chris Mammone - Deutsche Bank

I guess you would characterize your higher revenue guidance as coming from no combination of the core and acquired or is it sort of weighted more one towards the other?

Andrew Florance

I think Chris, if you look at it, again the suite of service property constant tenant that we sell was a major driver this quarter, with PPR also continuing to drive, but again PPR is 10% of the business and UK is 8% of the business. So, again the 80% of the growth is coming from the core platform which is very positive, all subscriptions annual subscription contracts so it's very good high quality revenue.

Chris Mammone - Deutsche Bank

Okay. And then, the in-quarter renewal rate looked pretty good. How high should we think that that number could get?

Andrew Florance

Wasn't it beautiful?

Chris Mammone - Deutsche Bank

92%. I mean I know that your trailing renewal rate I think has topped out of sort of the 93-94% level in the past. Yeah, give us a sense for like how high we think, we can think of the in-quarter and also maybe where you think the last whole month renewal rate is heading as well?

Andrew Florance

I think it's definitely an impressive testament to the utility of the nature of the products, but we are very stringent on how to calculate that number. So, we've got a lot of clients who are small partnerships and if a partner passes away and the business is dissolved, that counts as a non-renewal or if someone retires or of someone goes bankrupt. So, there is only so high you can go unless your clients have life expectancy of say several hundred years. So, I think it maxes out that sort of historical level of 93%, 94%, and that 97% number, the five plus, is really quite phenomenal.

Brian Radecki

And Chris, I talked about that, I mean renewal rates can't continue to go up every single quarter. I do think that when you look at where we were in the 2005, 2006, 2007 we were always over 90% each quarter in the maxing out of the 93%, 94%. So, I think that the trailing 12 month is going to go up and I've said this pretty openly into high 80s, the closing the year in the high 80s and I believe we can get up into the 90s on the trialing 12 months into next year, which means you would quarters obviously continuing to post a 90 plus, between the 90% and 94%. But it will fluctuate a little bit in between quarters.

Chris Mammone - Deutsche Bank

Okay. And is there way to get that rate, sort of what the renewal rate would be X to the Showcase platform?

Andrew Florance

The Showcase platform is spilt into two pieces, so one piece is subscription-based service for Showcase to firms and then there is the monthly individuals that go on and off each month. We do not count the monthly individuals. The renewal rate is on the 94% of the business as subscription-based services that would include those firms on a annual contract for Showcase. It's not the 6% of the business which we don't consider subscription based or somebody who would be on a monthly tenant, half of that is not.

Chris Mammone - Deutsche Bank

It's advertising type…

Brian Radecki

Correct. That's right. It's the renewal rate for subscription based services.

Chris Mammone - Deutsche Bank

Right. So it's only a portion of the Showcase platform?

Brian Radecki

That's correct.

Chris Mammone - Deutsche Bank

It is a portion that is subscription-based in the Showcase. Is that helping to bolster the overall subscription rate? I mean is that one of the success stories that you would say to why the renewal rates have improved?

Andrew Florance

The core driver of the strength of businesses are traditional CoStar properties, CoStar comps, CoStar tenant, these products are, you know just real solid utility staples in the industry and as our clients are seeing some release on some cash flow, we are enjoying that benefit. So it's really about the core of the business.

Chris Mammone - Deutsche Bank

Okay. I guess and my last question. In fact, first of my questions, I appreciate you taking them. Why did the sales headcount drop sequentially?

Andrew Florance

It's not material, what is a 2%, it's just a fluctuation, if someone went to graduate school, somebody got married. We moved offices, so we didn't have a training class, so it's not really a material. In general, Chris, we expect that sales number to be sort of in that range and it's not, it's at this quarter and in the first quarter, you know, for the foreseeable future. We are not anticipating on that number going up or down by 50, it's going to stay pretty much in sort of that range. It's a good healthy number.


You will go to the line of Brett Huff with Stephens. Please go ahead.

Brett Huff - Stephens Inc.

My first question, I want to make sure I am getting the EPS guidance right. I'll tell you what I think the math is, but then please correct me. You start out the original guidance, then you got to ding the number by what I am assuming is $2.8 million tax affected and divided by the share count and then you have to add back something in order to get to your new guidance, and I think that's about $0.06. Is that the right math to think about it?

Brian Radecki

Yeah, I mean for the quarter basically what you do is you essentially $2.8 million and you multiply it by the 44% tax rate versus the 30% and also to tell you, excluding those two items that we are well above the range for both GAAP and non-GAAP. And then for the year, the trick there is that the tax rate really will still essentially be the same for the year. So that $2.8 million is really what's sort of reducing the annual guidance range because the tax rate is really only a fluctuation between quarters.

And of course, if you put $2.8 million and a 44% tax rate, you get more than the $0.02 we move the range and you get a lot more than that. Obviously, we are projecting some little upside on the revenue from what we originally projected. So we are sort of offsetting some of that. So again, I think the quarterly numbers are great, and I think that up in their revenue and then even the guidance range coming in where we are going to decide to take that sort of $2.8 million charges is very positive.

Brett Huff - Stephens Inc.

And sort of a follow-up question of that is, clearly revenue is getting better, but profitability is also getting better. What is the driver of that? Is it tight costs or is it reduction of expense on Resolve or can you give us a sense of what the drivers are?

Brian Radecki

No, we haven't reduced any expenses and as I talked about in the annual guidance in the beginning of the year, we actually will be investing in Resolve and the DCF and some of the things that we have been talking about. There are fluctuations in between quarters, there is a lot of noise going on moving the building, so I talked little bit about some costs that are shifting from first quarter to second quarter, some from the second quarter to the third quarter, but in general if you take out all those one-time items, the cost structure is essentially sort of flat this year and now we are starting to grow revenues. So that's why you are seeing improved earnings. It's the simple business model that people are seeing from the company for years.

And it's important to remember, the investment activities here are pretty significant. So, we've invested into building that sales force ahead of that market turn. We are investing in several different software initiatives. We scaled the research team to make sure we maintain super high quality in the middle of this downturn. We did not get the research organization which would have been an easy thing to do. We grew the research organization which resulted in that 97% renewal rate. And then the other thing we are doing here which I'm sure someone will come with a creative writing exercise to make it like negative.

But what we are doing on the real estate side is, in the United Kingdom I believe we've saved ourselves somewhere around $10 billion in real estate occupancy costs over a five year period by our research to Glasgow, consolidating several different offices together in London, and then by consolidating some operations into our headquarters building in Washington, while we are taking a hit for it now, ultimately it will be much more cost effective.

In Boston, the consolidation of real estate is expensive these quarters, and it doesn't have a real big bang cost savings, but it's critical to operations as we bring together Resolve, CoStar and PPR in Boston. So, I think that we are over a 24 month period. We've got a number of good cost control initiatives that are playing out here. They certainly don't work in our favor this quarter.

Brett Huff - Stephens Inc.

That's helpful. And then on the CoStar, the new CoStar product that you mentioned targeted the secondary and tertiary markets. Can you remind us or give us a sense of; I am assuming it's the 50 or 60 expansion in markets primarily that have been three or four ago. Was that the right target to think of?

Andrew Florance

It's actually probably about 200 markets. And it's a decent size opportunity; it's tens of thousands of these very small firms across the country that we have not historically pursued as aggressively just because we've spent a lot of time flying field sales people out to Lubbock, Texas, and nothing against Lubbock, Texas. So, this is a way to do it, through telesales and keep our cost of sales low, and it's doing quite well. In the first month or so, you know, we sold well over a 100 units. This way I think we will be able to get some good traction here.

Brett Huff - Stephens Inc.

And last question related to that. Of those markets I do think probably a good number of them are, at least partial overlapped with the markets that you expanded into during your last investment phase. Can you characterize the revenue percentage of those “small markets” however you want to define it, both on a revenue and maybe a profitability point of the view. Can you give just even a qualitative sense?

Andrew Florance

Very challenging…

Brian Radecki

I'll try and address that. I think you know we obviously just expanded into those, so sales are actually, as everybody knows, we take about two years researching it before we even have a product. So, we really have only been starting to sell in those markets for short period of time, and as Andy said, in some of the very small markets like a Lubbock, Texas or a Syracuse, we weren't going to fly people in for the very small account, but those large accounts we would. I would say we are still very early on and I would say a low 5%, it's not huge numbers for CoStar, so as profitability goes, I think we are actually, not exact numbers but I think that we are probably approaching sort of a breakeven point in those and we will probably hit that over the next year or so.

So, I think that it's very positive and things are going well in those markets. As people can remember, going into some of these smaller markets. It's much easier to do the research; it's not complex as the larger markets. So the overall cost to do these markets on sort of a per building basis is a lot less than it would be sort of our large core markets. One of the things that strikes me, so remember, markets that are three or four years old are not exciting in profitability over a 20-year history. Markets that are seven, eight years old, nine years old are very exciting for profitability.

So you got an awful lot of markets in that young zone. What I would note is that as I look around all those different markets, I am pleasantly, I don't want to use the word surprised, but I will if I wanted a better word. I'm pleasantly surprised by the amount of revenue, little pockets of revenue coming from all these different markets that are again 300 some markets, and I am not shocked by any of them that you think there's nothing happening in here, like there is a lot happening in lot of these markets, but then rather remains for quite sometime that those 20 year old and 15 year old markets will be the big profit and revenue drivers in the business.

Andrew Florance

And just one final note on that is that when you go back sort of 2007 time period we are dropping revenue from the top line and the bottom line very consistently quarter-over-quarter. What I would always tell people was, remember that whether the markets are profitable or not, we've already put the investment and we already have cost structure baked in our cost of revenue for those markets. So, each dollar that you put on the top line, if I sell $1 or a $1,000 to Lubbock, Texas, I'm paying out some commissions and those types of things, but I'm dropping 70%, 80% of it to the bottom line. So, from here on out, it's very positive every sale on those markets that we get.

Brett Huff - Stephens Inc.

That's what I was trying to get at. I appreciate your time.


Thank you. We will go line of Jon Maietta from Needham & Company. Please go ahead.

Jon Maietta - Needham & Company

First question I had was if you could just remind me, you've done a great job of getting those customers who have been with you for less than five years, getting that renewal rate up to 88% today. What is the big hurdle rate? Is it mostly attrition typically having within a year or within the first six month, if you could just remind me?

Andrew Florance

It historically occurred in the first three years with a really tough time. So, you had historically, you probably saw the economy slip. I think you were seeing in first year 20% drop rates, up to something like that. It had some noise and it fluctuated but the real danger zone was the first three years.

What we did is we increased the commission structure, but we only paid it out based on pro-rata usage of the product in the first 12 months. So the sales people, if they couldn't get the people using the product in the first 12 months, they didn't get paid the full commission or much commission. As a result, the sales people really got in there and implemented the price right up front and that made the renewal rates climb and the sales drop, so it was a big success.

Jon Maietta - Needham & Company

They say compensation changes behavior.

Andrew Florance

Yes. You know, coin operated.

Jon Maietta - Needham & Company

And I guess the other question I had, Andy, around on the analytics front with regard to PPR in particular and as you'll productize that effort. Is there going to be a gestation period and then may be six to eight months from now we'll see a whole slew of modules coming out of PPR, or are you going to incrementally roll out services consistently overtime for the first two or three years.

Andrew Florance

Yes. I think there have been some minor new products that are not mega-revenue drivers. They are repeat sales index which will start being distributed through PPR as an example of something that only could happen with the merger of CoStar and PPR, our data and Ruijue Peng's mathematical skills. So, that will be a example of a small incremental sort of thing, but what we are doing is we are focusing on utilizing our sales and increasing marketing infrastructure you try to reach more of PPR's potential and hit the cross-selling opportunity.

But we will probably be looking at a gestation period of a year or so, after which there is a significant product upgrade that we think will drive revenue in both, the CoStar and regional sort of local markets, as well as the PPR more institutional markets. So, I think we are going to put our head down and build what we think is a pretty good product, combining the strengths of both the companies, and realistically that's going to take a little bit of time and effort. We are not going to try to whip it out real quick, then do it right.


Thank you. We'll go to the line of Brandon Dobell with William Blair. Please go ahead.

Brandon Dobell - William Blair

Andy, may be some color on what the receptivity is these days to cross-sell or up-sell pitches in the sales force and others? Those things take a while to get traction, but with the improving market, I would think you'd be seeing some sort of letting indicators that people are more receptive, asking for a second callback, that kind of thing. I'm just trying to get a feel for how do I think about the trajectory for the cross-sell opportunity, either it was in the core products or between core analytics or the opportunity was moving to maybe Showcase as the customer last year, up to a bigger number?

Andrew Florance

Yeah, I think that definitely happens. So, one of the things going into a recession, you have good clients who maybe buying 5 or 6 modules and they shave that down to 3 modules that they really, really need. I anticipate that as we get some recovery, people began adding back modules and people dint have multiple module start picking up modules, and we are in fact seeing anecdotal evidence of that. We are seeing people add additional seats, we are seeing people add additional geographies again.

Now, the reality of our business is that it tends to be usually half cross-sell, half new business and it moves up a couple of points, it moves down a couple of points. So, it might move up a couple of points. I am still very focused especially these analytic products on just completely net new customers. I think there is a huge potential for completely net new customers over the next three years in these analytic products. I think that will be a big story. So I hope cross-selling goes up, net new customer acquisition goes up and that 50-50 fight will continue to I guess the upper end.

And one other thing is, you mentioned that Showcase thing. You mentioned that Showcase thing, I think our sales team did a great job of ramping that up from zero to 10,000 in about two years. In the process, we probably didn't do a good job as we could have in recognizing those customers weren't just Showcase customers, they were property potential customers.

So, only one in seven of those individual Showcase customers are property information customers, leaving six out of seven as prospects for our broader information products. And so what I really want to try to focus the sales force on is going back and cross-selling that group on at the line. And that could double the revenue from that segment, and the head of our telesales group is really focusing on that now. So, I think you hit the nail on the head with that potential.

Brandon Dobell - William Blair

Okay. And then one quick one for Brian. Any change in terms of how customers are interacting with you guys from a cash flow DSO perspective, they are asking for better terms, longer terms, different terms or has stabilization in the market given the opportunity to come back and get better terms from them?

Brian Radecki

I mean I mentioned a little bit, but just everything overall is extremely positive and the health of the client base is just night and day compared to last year where clients are really looking to extend. They are making a payment every month, and of course as we go back to conference call scripts, you know, 80% plus of all the people we lost last year really just turned their lights out and shut the phones off into CoStar right before they left. So, really you know, and I sort of talked about that last year, I think once you serve, whoever was unhealthy in the client base was going to disappear and they pretty much did.

So I think I look at, you know, bad debt is down, DSOs continue to approve each quarter, our AR is below consensus 2007, we've added two companies and we've added a lot of revenue. So, much improved conditions obviously $11.5 million of cash flow, people are paying us again. They are not extending credit as much, it is very, very positive, and again that was just some other major change in the overall economy, you know it can go up forever like that, but I expect those numbers to basically continue at these types of levels, sort of moving forward which again is very positive for the business.


Thank you. We'll go to the line of Ian Corydon from B. Riley & Company. Please go ahead.

Ian Corydon - B. Riley & Company

The decline in the number of, sequentially that was caused by the UK. Is that expected to continue?

Andrew Florance

So the UK is relatively small part, I mean it's 10% of our business is, and their per unit pricing is lower over there. I think that I believe the big UK firms have now cycled renewals. So we've probably seen the reduction in headcount in subscriptions already and again the big difference in the UK and the US is the surveyors or brokers in the UK are on salaries. There is incentive for the firms to cut people. Here there are on commission.

There wasn't incentive for the firms to cut people. So I think that's happened. The other thing is that just sort of tactically or on a noise level, you've got two things going on, you get this sales force in UK all of a sudden going after Showcase, and the real story is they signed up a thousand for our first new international product, but that doesn't translate to net new subscribers. So, you know it's sort of a question of are you using the metrics to manage the business or are you matching the business to achieve the metrics, and metrics are a tool, they are not what we are trying to do here.

We are trying to grow the business. So I think this quarter with that I am glad they increased the, I am glad they launch the Showcase quite successfully over there. You know it didn't grow subscribers because they were cross-selling, and I understand tactically what our VP of Sales in the UK is doing, where he is trying to get the headcounts down as low as possible. So, as the UK firms begin to recover, he can charge them some incremental ads back again.

So, the metrics you want to report positive metrics across the board everyday, but this time around, you get sort of the noise factor and I'm comfortable with it, and just to add a couple of pieces of other information on that, Ian, so what would I expect is that in the UK as we said, a lot of these and we did the very similar thing in the US, we're sort of going after our current clients. So, even if they are signing up for Showcase and they start paying us dollars, when are adding new paying subs.

So, what I think over the next few quarters, the more important metric that I would be looking at. I would be looking at all of them as we always do, but I think the important one will be the number of firms that we sort of, new firms and firms that we sign up in our site numbers, I would not expect to see significant paying sub numbers over the next few quarters, because again, essentially the one that were selling might already on a CoStar or some other sub type of CoStar service. So again, we will keep looking at those numbers. There are obviously important numbers, along with all the other ones to report, but I think that the focus the next few quarters will be less on that paying sub-number and more on like firms and sites.

Ian Corydon - B. Riley & Company

Got it. Last question was just on the cost of goods. It came down by about 800,000 sequentially. What's the right number going forward?

Brian Radecki

I mentioned that a little bit, it's really more just a transfer of costs between quarters. It's when the research training classes go. It's where we send out our ACS postcards. So, I think again kind back to my original guidance, I think it will come back up to those more normalized levels. Because of the size of research having 900 or 1,000 people, that number can fluctuate in the quarter, 500,000, 600,000 from quarter-to-quarter, but overall for the year, again, we are not making any significant reductions there. It will just be shifting across between quarters and when things happen.


Okay. And we will go to the line of Jim Wilson with JMP Securities. Please go ahead.

Jim Wilson - JMP Securities

I guess, Andy, sort of answered my first question which was timing of when you think you complete and or roll out of the AVM product and your real estate valuation tools, but it sounds like sometime next year is most likely?

Andrew Florance

Yes. And I would probably give you better color on that over the next two quarters as we narrow down the specifications a little tighter. This is what I perceive to be one of our mutli-decadal timeframe. I think it is going to be one of our biggest flagship products. Well, the potential for what we can do here I think is tremendous. I am very optimistic about it. I think it will have a huge positive impact for our customers. And it is an ambitious construction project will take a lot of efforts. It's not something that's going to happen in around two or three quarters, it will be four, five quarters. But we will keep you updated on it as we get more information.

Jim Wilson - JMP Securities

I agree on the prospect given what I've heard from banks, et cetera and the need for something like this. The other question then is just, I was wondering a little bit because I'm not sure I've been able to figure that math out of what average new signed contract values look like in the quarter, either I guess in general or versus the ones that roll off. I know they've been smaller new contracts for a while and I was just wondering if that was changing or evolving as things have gotten a little better.

Andrew Florance

Jim, I think a lot of things happened this quarter that are going to challenge the analysts to get that. I'll let Brian try to answer that

Brian Radecki

Yeah, real quick, Jim, on the average contract value, it has been running in the $7,000 to $8,000, $9,000 range and it popped up. Last quarter we talked about the fact that the average contract value for PPR went up to just over 100,000. The prior two quarters we owned and it was around 50,000 in sort of this quarter. It went back down more to a normalized level. So, we just some couple of nice very positive good big contracts come in there.

We sold another $500,000 or so cross-sells that's still continuing to go well, but we are sort of back down to a more normalized level. The other thing that decreased just a little bit and I did talk about this on the last quarter. It's sort of like the renewal rates, you can't expect it to go up every quarter, a lot of it depends on the focus in the focus in that quarter of the sales force. As Andy mentioned, we sold over a hundred units of this new product which is a very low end product, and that we are starting to push and it is a subscription product on annual contracts.

So it is counted in that number. That probably reduced the average by about 1,000 or 1,500 in the quarter. So, these are numbers that are good numbers to keep tracking. There will be reasons why they go up and down each quarter, depending on the focus of the sales force. But you know all positive reasons why it's going up or going down.

Jim Wilson - JMP Securities

And you did you look forward in your guidance, maybe you would know if there was any big contracts on the horizon of PPR superbig, but is that sort of assuming 50,000 kind of normal rate for the rest the year on PPR contracts?

Andrew Florance

Yeah, I think we sort of always assume the normalized thing. Obviously, if you get something in that's large or big, you'd rather have that as sort of upside than sort of making assumptions for it and have it not come in. So, when you look at my guidance ranges, I mean obviously, people forget. It was literally only three quarters ago, revenue was dropping. So, I'm of course being cautious. So, I am assuming sort of average stuff and then if something comes in like that, its upside.

Andrew Florance

Well, with this we are going to go ahead and wrap up the second quarter earnings call and we appreciate you all joined us and we look forward to updating you on our progress next quarter and hope you join us and crossing your fingers that the economy continues to show strength. Thank you.


Thank you ladies and gentlemen. This conference will be available for replay after 1:45 pm today running through August 12th till midnight. You may access the AT&T replay system at anytime by dialing 1800-475-6701 or 1320-365-3844 and when prompted enter the access code of 163614. Those numbers again, 1800-475-6701 or 1320-365-3844, access code 163614. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: Thank you!