CoStar Group's (CSGP) CEO Andrew Florance on Q1 2016 Results - Earnings Call Transcript

| About: CoStar Group, (CSGP)

CoStar Group, Inc. (NASDAQ:CSGP)

Q1 2016 Earnings Conference Call

April 28, 2016 11:00 AM ET

Executives

Richard Simonelli - Vice President, Investor Relations

Andrew Florance - Founder, Director, President and Chief Executive Officer

Scott Wheeler - Chief Financial Officer

Analysts

Sara Gubins - Bank of America Merrill Lynch

Brett Huff - Stephens Inc.

Andre Benjamin - Goldman Sachs

Bill Warmington - Wells Fargo Securities

Sterling Auty - JPMorgan

Brandon Dobell - William Blair & Company

Andrew Jeffrey - SunTrust Robinson Humphrey

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CoStar Realty Information Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Rich Simonelli. Please go ahead.

Richard Simonelli

Thank you, operator, and good morning, everyone. Welcome to CoStar Group’s first quarter 2016 conference call. Thank you all for joining us. Before I turn the call over to Andy Florance, I have some important facts to discuss with you.

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 could cause actual results to differ include, but are not limited to, those stated in our April 27, 2016 press release on first quarter earnings results, and in CoStar’s filings with the SEC, including our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, under the heading Risk Factors.

All forward-looking statements are based on information available to CoStar on the date of this call, and CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise. Reconciliation of non-GAAP net income, EBITDA, adjusted EBITDA, and all of the non-GAAP financial measures discussed on this call to their GAAP basis results are shown in detail, along with definitions for these terms, in our press release issued yesterday which is available on our site, costargroup.com.

As a reminder, today’s conference call is being broadcast live and in color over the Internet at costargroup.com, where you can also find CoStar’s Investor Relations page. A replay will be available approximately one-half hour after the call, and will be available for approximately 30 days. To listen to the replay, please call 1-800-475-6701 within the U.S. or Canada, or 320-365-3844 outside the U.S. The access code is 391087. A replay of the call will be available right after the call concludes.

I’ll now turn the call over to Andy Florance. Andy?

Andrew Florance

Thank you, Rich, for a fantastic warm-up act.

Richard Simonelli

You’re welcome.

Andrew Florance

Good morning and thank you all for joining us for CoStar Realty’s first quarter 2016 financial results call. We had an excellent first quarter, as we continue to grow revenue while we are focusing on reducing costs and driving margin expansion. We generated excellent top line growth of 26% year-over-year, reaching $200 million in revenue for the first quarter of 2016, annualized that would be an $800 million rate.

We generated net bookings of $30 million in the first quarter of 2016 with solid performances from both CoStar and our Apartments network. CoStar Suite, which represents 50% of our total revenue, grew 12.5% from the first quarter of 2015 to the first quarter of 2016, and 4.4% sequential quarterly, quarter-over-quarter. For each of the past four quarters, we have been averaging over $30 million in quarterly bookings, which is double our 2014 quarterly bookings, which were approximately $15 million per quarter.

We increased net new sales on annual subscriptions 53% year-over-year to $25 million in the quarter, and achieved our highest quarter ever of net new sales for CoStar Information Services. With these strong sales and a consistent focus on cost control, we increased EBITDA 234% year-over-year from $14 million in the first quarter of 2015 to $48 million in the first quarter of 2016.

In that period, our EBITDA margin rose from 9% to 24%. With a $41 million increase in revenue over the same time period, this indicates 82% of our revenue flowing through to EBITDA. This dramatic EBITDA expansion is all the more impressive, given that it was achieved in the same quarter we invested aggressively in our first Super Bowl commercial.

We are moving swiftly to rationalize down the headcount required to effectively run the newly integrated operations of CoStar and the Apartment network. We have 450 fewer employees today than we did in June of 2015. We will reallocate a portion of those headcount savings into other important positions, where we need to invest for growth. In total, we saved approximately $20 million just in annual printing costs by shutting down the Apartment Finder print guides and finder social.

I believe we have significant additional opportunities to find even more cost savings over the year to come. We expect our 2016 focus on the integration of LoopNet and CoStar databases will give us another good opportunity to drive higher revenue, while simultaneously reducing costs.

CoStar Market Analytics, which we launched in March of 2016, now has delivered over $25 million in sales. This is an enhanced version of CoStar Suite and it’s been extremely popular with apartment property managers and lenders. We are looking to expand the offering of CoStar Market Analytics over the course of the year with new enhancements for the Office, Industrial and Retail segments.

I’m happy to report that we have successfully completed converting clients of our acquired legacy Focus Products in the United Kingdom to CoStar Suite. After 20-plus years in the role of the primary commercial real estate information product for the UK, Focus is no more. As of March, Suite revenues in the UK were 76% higher than those achieved by Focus at its peak. This reflects the fact that, we achieved both significant price appreciation and increased share during that migration. This is our third country on a fully integrated commercial real estate data model in a unified CoStar product.

We expect to see another incremental sales driver when we complete the back-end integration of the LoopNet database and to begin to move users to the higher-value CoStar Information Services. The technology integration is going well, and I believe that you will see strong revenue lift in the migration in 2017 and 2018. I believe the migration of LoopNet Premium Searcher comps and facts users to higher-value CoStar services will take less time and result in higher up-sells based on our success and learning in the United Kingdom.

Revenue for our online apartment marketplaces in Q1 grew 100% year-over-year, with pro forma organic revenue growth of 24% year-over-year. Sales have been very strong, and we are now moving into the prime rental season. In the first quarter 2016, we continued to expand Apartments.com’s lead in unique visitors and consumer engagement versus other apartment rental Internet listing sites.

Apartments.com achieved the number one position among other apartment rental websites in unique visitors, monthly visits, total page views, total time on site, average time on site, consumer engagement, lowest bounce rate, unaided awareness, search engine marketing, and number of apartment buildings offered. The Apartments.com site had 7.7 million unique visitors in March, 27% higher than our nearest direct competitor. Similar, total views of Apartments.com were 60% higher than the nearest direct competitor site in March.

We have already built significant momentum and started 2016 off strongly with our successful Apartments.com Super Bowl ad. With the return of peak rental seasons in the middle of March, we resumed an intensive advertising campaign for our Apartments.com network. The television campaign component includes television ads in prime time, on cable, in syndication, and during supports and select finals like The Walking Dead and The Voice. Once again, our TV commercials featured Jeff Goldblum as Brad Bellflower. The new ads were directed by Bob Odenkirk, who you may know for his work with Breaking Bad and Better Call Saul.

There are a number of brand commercials that highlight the benefits of Apartments.com. They emphasize the breadth of our inventory, ease of use, loads of information, all to help consumers find the perfect apartment. The ads also feature our mobile app prominently. In the first quarter 2016, 57% of traffic to Apartments.com originated from a mobile device or app.

A second set of spots celebrate the joys of renting an apartment over the crippling debt and maintenance torture associated with homeownership. With more Americans every day making the wise choice to rent, there are now 110 million U.S. renters, and we believe that the ads will resonate with these renters and have a positive brand halo effect with our apartment manager/owner clients. The brands are really fun, I mean, these spots are really fun. They point out the benefits of renting versus owning in a humorous way.

The third set of spots targets the millions of property managers, realtors, and small owners with just one or a few rental listings and encourages them to market their rentals to the millions of renters searching on Apartments.com. Renters have told us clearly that they would love a site with full selection of rentals from apartment buildings, houses, condos and town homes. We believe that if we build more content, we will get more renters searching on our site, and that means, more communities advertising on our site.

You will recall in 2015, we announced our exclusive agreement with Move, Inc. to power listings and apartment buildings with 50 or more units on Move’s network of websites, which includes Realtor.com, Move.com and Doorsteps.com. We now promote our advertisers’ communities across six major apartment and real estate rental websites with a single point of contact at prices we believe are on average well-below the prices our largest competitors in the apartments listing space charge.

This was the first quarter of our partnership with the Move network of sites. In the first quarter of 2016, we used Move.com to deliver an incremental additional 117 million page views for our advertisers. Our industry-leading Apartment network coupled with more exposure on the Move network creates the best place on the Internet for property managers to reach the most consumers.

According to, again, comScore, our Apartment network combined with the Move network generated nearly 12 million unique visitors in March, which is number one among apartment listing sites or networks. Unique visitors are an important traffic metric, but we want consumers to keep coming back to our site. In March, we had over 34 million total visits to our combined network with Move.com, which is nearly 50% more than the biggest competitor, the RentPath network. The average time for visits to a site in our network is nearly 15 minutes per visitor, which is over 30% more time per visitor than RentPath.

Our network had over 50% more page views than the RentPath network in March. Overall, that is an amazing 8.5 million hours renters spent searching Apartments.com – searching for apartments on our sites in March. I think our deal with Move has delivered very strong results and much more.

As you may have heard, Move has sued Zillow for $1.7 billion in a theft of trade secrets lawsuit. Thanks to our friends at Move and National Association of Realtors, you can watch live streaming video of Zillow’s top executives’ truly zany defenses against allegations that they intentionally destroyed evidence in the case. I think it’s nothing short of the best entertainment Rupert Murdoch’s Media Empire has ever delivered.

You can – you really should watch the testimony, or at least read the transcripts at Inman.com. You heard it here first. We have added over $100 million of revenue and thousands of new clients to our Apartments network over the past year. We wanted to be careful not to get too far out over our skis and make sure that we are still delivering excellent customer service, and not just great leads for our customers.

And in that effort, we have communicated clearly to our apartment sales force a major emphasis on visiting with clients – existing clients and ensuring that they are receiving excellent service and communication. There is a short-term trade-off in new sales. But we believe that refocusing on great service will drive stronger overall results across this year.

In the interest of winning business away from competitors, we have de-emphasized annual contracts for apartment advertising a bit. As we bring on an unprecedented numbers of new advertisers, almost none of them have ever committed to annual contracts before on alternative advertising sites. I think it’s more important to win them over to our site than to insist on annual contracts when they first sign up.

In order to do this, we are raising the price for a three-month contracts and offering discounts for committing to annual contracts. We believe it will accomplish the same goal over the intermediate term. LoopNet remains the number one destination on the Internet for brokers and owners to advertise commercial real estate properties for sale and lease. It’s a great way for brokers to generate leads and for owners to have their properties move more quickly with five million unique visitors coming to the site per month.

In order to improve the user experience and create even more speed and efficiency in generating more transactions, we have updated the LoopNet website and introduced tiered pricing similar to Apartments.com. We’re seeing some good results from our upgraded LoopNet site, including increased search activity. Total searches and total searches per unique visitor are up over 60%. Profile views are up 18%, and leads have increased 20%. We believe searchers are getting more utility from LoopNet than ever before.

I believe that our LoopNet product can achieve significantly higher growth rates if we invest into – more into sales resources for the LoopNet product. Over the past year or so, CoStar and Apartments.com have drawn sales resources away from the LoopNet product. We are now focusing to increase the number of salespeople dedicated to the LoopNet product. With subscription sales, you always have some churn and have to devote some percentage of our sales force to replacing business lost to churn each month.

As you increase sales resources, you do not necessarily increase churn in the short run. New sales resources just increase gross sales. The benefit is that, it’s possible to increase sales resources by X percent and possibly increase net revenue growth by three times X percent. We plan to focus many of these new sales resources on the commercial real estate owner marketing opportunity.

LoopNet has traditionally been sold to brokers. A broker in a typical transaction might earn $6,000 from which they must pay for the LoopNet ad. The owner in the very same transaction could receive $376,000, and would be in a better position to pay more for enhanced exposure to get the deal done faster and realize the economic value. When we will sell a property – when we see a property ad to an owner rather than a broker, we typically achieve per-property ad prices 20 times higher.

Looking ahead, as I mentioned on our call in February, our single-highest priority in 2016 is to complete the integration of back ends of CoStar and LoopNet. Our software development teams are working hard to accomplish this mission, which we believe will lead to better data quality, lower costs at CoStar, service integration, and up-selling beginning in 2017.

In preparation for a major conversion of LoopNet clients over to the CoStar platform over the next 24 months, we have dramatically increased our investment in field customer relationship managers. We have added approximately 50 relationship managers during the first quarter. I believe that this team will have a big impact on driving more usage of our products, improving customer service, increasing renewal rates, and facilitating more up-selling and cross-selling activity. This new team visited 1,150 clients’ offices this past week to conduct product trainings. That increases the number of client trainings we are conducting in a typical week by approximately 400%. It is an investment that I think will pay off in the future.

CoStar is committed to working aggressively to protect our intellectual property from theft. Two or three earnings calls ago, I mentioned that we had caught a competitor red-handed stealing our content. In March, we resolved our lawsuit against RealMassive with them agreeing to pay CoStar $1 million.

In addition, the federal court entered a sweeping injunction requiring a dramatic change in their business model. Under the court order, RealMassive now has to pre-filter content submitted to their platform for infringement of CoStar IP, before anything can be posted to their site. And they will have to pay additional damages if infringing content is discovered on their site in the future. In the litigation, we have uncovered what we believe to be a very damning evidence of just how systematic the theft of our content actually was.

So rather than engage in a long drawn-out suit, we decided to take their $1 million offer to settle the issue and move on to the next item on our list. We are all for fair competition, but theft is not competition. The nation’s real estate markets continued to achieve favorable results in the first quarter 2016. Occupancy rates are now at a business-cycle high for industrial and retail. And they are actually very close to those highs for the apartment and office sectors. Strong demand for space continues to drive rent growth to well-above inflation and ranges from over 6% for industrial properties to near 3% for retail.

Geographically, the vast majority of U.S. metros reported improving fundamentals. Within the office market, more than half of the submarkets recorded quarter-over quarter improvement in occupancy, that’s really important. And also, more than half of the 54 major metros now have occupancy rates above the 2006/2007 peak. There is also strength in the construction industry now more than doubled what it was just four years ago, which is a trend that significantly benefits our clients.

Investment sales did decline about 17% in the first quarter from one year earlier. But since 2015 was an all-time record year for real estate sales, the first quarter sales pace is still 80% over the long-term average. As we reported last quarter, the apartment market is increasingly competitive due to high levels of supply.

In fact, new units underway today represent a very large 4% increase on an annualized basis, and represent a level of construction which is nearly double that of the other property types. This has caused rent growth to slow to 5.1%, as we move into the strong peak season here over the 7%, oh, I’m sorry, over 7% along with a 20% – 20-basis point rise in vacancy from the business cycle low with further increases in vacancy expected. But because apartment advertising demand is highly correlated to weaker apartment markets, a more competitive apartment market is likely to benefit apartment ad sales.

For office, real estate fundamentals remained strong with rent growth and occupancy within 10 basis points of the market peak in Q4 2015. The story of strong demand, high occupancy and well-above-average investment sales volumes is repeated in other real estate sectors, including retail, logistics, light industrial, hospitality and specialty. The broad-based strength in real estate activity has helped attract increased demand for CoStar products and services.

I’m very pleased with our strong results in the first quarter 2016. I believe that the strong first quarter sales hitting $800 million annualized for the first time, along with increasing cost savings puts us on solid trajectory to reach a margin approaching the mid-30s in the fourth quarter. We believe these results show that we are clearly on our way to achieving our stated goal of $1 billion in revenue and 40% adjusted EBITDA margin exiting 2018.

I will now turn the call over to our Chief Financial Officer, Scott Wheeler.

Scott Wheeler

Great. Thank you, Andy. So as Andy mentioned, we are pleased with our performance in the first quarter 2016. We were able to deliver both solid top line growth and year-over-year margin improvement, while at the same time continuing to fund the important growth investments in sales, marketing, and new services.

In the first quarter of 2016, we delivered a 26% increase in revenue compared to the first quarter of 2015. On a pro forma basis, our year-over-year revenue growth was 14% for the first quarter. Now, because this is the first time that we are presenting our revenue by services, it’s important to take a few minutes to explain this new information in a little more detail. You can find the new Revenue by Services schedule in both our press release, as well as our soon-to-be filed SEC Form 10-Q.

Now, a number of you asked for additional revenue information following our year-end results. So we prepared the data, along with five quarters of trended information to help you understand our business, as well as the direction of travel. Our new revenue disclosures are built around the two main categories that we’ve discussed in the past, the first being information and analytics, and the second being our online marketplaces. Within each of these categories, we’ve further broken down the revenues to provide insight to our primary service offerings.

First off, in information and the analytics category, is our flagship commercial real estate service CoStar Suite, which represents approximately 50% of our Q1 revenues. CoStar Suite is comprised of both the North America and the UK, including CoStar Property, CoStar COMPS, CoStar Tenant, CoStar Portfolio Strategy, and the CoStar Market Analytics.

Essentially all the revenue in this category is on 12-month subscription and has a very high renewal rate. Our strategy is to continue investing in our information and analytics services within the CoStar Suite, like the CoStar Market Analytics services for office and industrial and retail that Andy mentioned. We expect the continued growth of this sector in the 11% to 13% range.

Next also in the information and analytics category are our Information Services lines. These represent approximately 10% of our Q1 revenue. Information Services includes LoopNet Premium Searcher, Facts and Comps, CoStar Real Estate Manager, CoStar Risk Analytics COMPASS, and a number of other information service capabilities, which we either acquired directly or as parts of other acquisitions. There are a variety of revenue models at play here, most of which are subscription revenue with terms ranging from one to 12 months, along with consulting services and software.

We have strategies in place to grow a number of these services, for example, the LoopNet search integration and migration that we’ve talked about previously, while some other services might not play a prominent role in our strategy going forward. Accordingly, we expect the revenue from Information Services to provide flat to low single-digits growth for the remainder of 2016.

Now, let’s switch over to our online marketplaces category. Our Multifamily marketplaces include revenue from advertisers that list with us across our complete network of apartment sites, including Apartments.com, ApartmentFinder, ApartmentHomeLiving, Realtor.com, Move.com, and Doorsteps.com full networks. Our Multifamily marketplace revenue was approximately 20% – 25% of total revenues in Q1, and it grew 100% compared to Q1 of last year. On a pro forma basis, as Andy mentioned, our year-over-year Multifamily revenue growth was approximately 24% in the first quarter.

This came in at the upper end of the 20% to 25% range that we’ve provided in the February earnings call. Revenue in this category is almost all subscription-based with contract terms ranging from one to 12 months. And we’ll continue to move more of our clients to annual agreements over time. As you are aware, our strategy is to continue to aggressively invest and grow our Multifamily marketplace capabilities in the years ahead.

Finally, also in the online marketplaces category are Commercial Property and Land marketplaces, which grew 10.5% year-over-year in the first quarter. Commercial Property and Land marketplaces are comprised mainly of our commercial property-related marketing sites, LoopNet Premium Lister, Showcase and CityFeet. These sites represent approximately 80% of the revenue in this category. The remaining revenue is made up of LandsofAmerica, LandAndFarm, BizBuySell, and BizQuest online marketing sites.

Revenue in this category is almost all subscription-based, and is sold to our direct and indirect sales channels, as well as through our online e-commerce tools. Our strategy is to continue investing in our Commercial Property and Land marketplaces, which in the current year involves integrating LoopNet with our CoStar database and tool sets. Growth in this area is expected in the low double-digits for the remainder of the year.

And we hope these further revenue details will be useful in understanding the business, and we’ll intend to continue providing Revenue by Services each quarter going forward. Regarding our profit performance this quarter, we continued to manage our cost structure, so that incremental revenue drops through to profit at a very high rate. In Q1, over 80% of our incremental year-over-year revenue was converted to profit.

There is three important components of our cost performance here to highlight. First, our gross margin reached an all-time high of 79% of revenue, an increase from the 71% gross margin reported last year in the first quarter, and a sequential 200 basis point increase over the fourth quarter of 2015. Most notably, our revenue increased by over $40 million year-over-year, while our costs of revenue decreased by over 5%. This inverse revenue-cost relationship is clearly very effective in delivering profit improvements.

Secondly, resourcing levels have come down by approximately 450 employees since last June, as Andy mentioned, the result of efficiencies from our integration of acquisitions and other cost-control activities.

And third, the success of these cost management activities allows us to sustain a high level of advertising and other investments and still grow our margins. For prospective, our ad investments in the first quarter of 2016 were at the same level as our investment in advertising last year, when we launched the new Apartments.com website. It’s very important we continue to reduce costs through productivity and shift these savings to investments.

EBITDA was $48 million for the first quarter of 2016, increase of $34 million, or the 234% versus $14 million in the first quarter last year. Adjusted EBITDA also increased $34 million from $24 million in first quarter of 2015 to $58 million for the first quarter of 2016. Our adjusted EBITDA margin increased to 29%, up from 15% in the first quarter last year.

Our adjusted EBITDA results are favorable to the Q1 guidance range we provided in February by $14 million at the midpoint. The majority of the favorability is the result of the effective headcount management and successfully reducing non-critical spending. The rest of the earnings favorability approximately $6 million, or $0.12 per share on a non-GAAP basis was due in equal parts to a shift in timing of marketing expenditures to later in the year, as well as one-time expense reductions in the quarter.

Non-GAAP net income in the first quarter was $31 million, or $0.95 per diluted share. Net income in the first quarter of 2016 was $17 million, an increase of $23 million versus a net loss of $6 million reported in the first quarter of 2015.

Turning now to a few operating metric highlights, revenue from subscription services on annual contracts was $149 million for the first quarter of 2016, or 74% of total revenue, which is up from 70% in the prior quarter.

For the trailing 12 months ended March 31, 2016, subscription revenue from annual contracts totaled $517 million, up 28% from the $405 million for the 12-month period ended March 31, 2015. This reflects our continued success in growing annual subscriptions primarily within our CoStar Suite and our Multifamily marketplace clients. The renewal rates for our annual subscriptions revenue remained stable. The 12-month trailing renewal rate for subscription-based revenue is at 90.1%, and the 12-month trailing renewal rate for customers who have been with us for five years or longer was 96.2%.

At the end of March, we had approximately 510 salespeople, a decline of around 25 people from last year, as we continued the integration of our Multifamily sales force. We recently increased our hiring of new salespeople to cover new sales territories and have our single-largest sales training class underway here in Washington as we speak. As we grow our sales force throughout the year, we’ll also be opening 25 to 30 new sales offices in select markets throughout the country to build local market presence and stay close to our clients.

I’ll now discuss our outlook for the second quarter and the full-year of 2016. For the full-year of 2016, we expect revenue of approximately $834 million to $840 million, or 17% to 18% growth over the 2015 results. On a pro forma basis, revenue is expected to grow 13% to 14% for the year. Based on our strong first quarter sales and revenues, we are raising the full-year revenue guidance by $2 million at the midpoint of the range. This outlook assumes continued strong growth in the CoStar Suite in the 11% to 13% range, and a pro forma growth in the range of 20% to 25% for the online Multifamily marketplaces.

For the second quarter of 2016, we expect revenue of approximately $204 million to $206 million, representing total growth of around 20%. We’re also raising our earnings guidance for the year, given our exceptional profit results in Q1. We now expect non-GAAP net income per diluted share in a range of $4 to $4.10 for the year 2016, an increase of $0.38 at the midpoint from the prior outlook we provided in our February call. Based on this new and improved guidance, the midpoint of our 2016 non-GAAP net income range is approximately double the 2015 results.

For the second quarter of 2016, we expect non-GAAP net income per diluted share in a range of approximately $0.80 to $0.84. This includes a $6 million to $7 million increase in our total marketing spend from the Q1 levels, as we enter the peak apartment rental season. This equates to approximately $0.11 to $0.13 of non-GAAP net income per share.

Marketing expenses are expected to decline sequentially in both the third and the fourth quarter, as was the case last year. As a result, we’ll see a step-up in earnings in Q3, and then again in Q4, exiting the year with margins in the mid-30% range.

So in summary, I’m pleased with our financial results in the first quarter. I look forward to reporting continued progress throughout the year. We believe our sales trends and sustained focus on expense management has us well-positioned to achieve our stated financial goal of $1 billion in revenue in 2018, and exiting that year with 40% adjusted EBITDA margins.

Having said all of that, we will now open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We’ll first go to the line of Sara Gubins with Bank of America.

Sara Gubins

Hi, thank you. I was hoping to get some more color on the strategy that you mentioned within Multifamily to have yourself people make sure that they’re spending some more time with existing clients. Did you see changes in retention trends? Were they worse than you expected? I’m wondering what drove you to decide to do that. And I know that you reiterated the 20% to 25% growth forecast. But I’m wondering, if there is any additional resources that you need to put in order to get that, or if you see any risk, given the increased focus on retention? Thanks.

Andrew Florance

Yes. So the increased focus on retention is just common – for me, it’s just common sense from a lot of experience selling subscription-oriented products over the decades. And we try to stay very close to our customers in the industry. And we do a lot of market research, we do a lot of focus group work. And it’s just clear that we had a great year here. We’ve done a lot.

We’ve rapidly integrated Finder into the fold, done the Move deal, we’ve just been very busy. And it’s just very important that we build it – the apartment industry is a little bit more of a relationship-oriented industry. It’s just important that our salespeople know their customers well and aren’t always focusing 90% of their time on trying to find another piece of revenue. And so I think it’s just a lifecycle in the flow of the business here. We need to make sure we establish those relationships.

Now, we did move to a much more efficient territory system at the turn of the year, where we went from alphabetical assignment of accounts in major cities to geography-based accounts, which means that a lot of people have new account representatives from Apartments.com and have not met them before, just because of these shifts in territories. So it is important that we take some time and really get out there and make sure that they’re meeting all of these people, and it is a referral-oriented business.

The good news is, what we are hearing in these focus groups is that hands-down, we have the best lead flow that they are – we have the best name recognition by far. But that needs to be coupled with good customer service. And it can’t always be, did I get the most amount of money today out of that client relationship? It’s got to be, did I get the most amount of that money out of that client relationship over five years, and still remain good friends?

So and then on the – in terms of investing to get more out of it, we might incrementally increase the size of the sales force slightly. But not because we’re trying – not because we think that’s the necessary thing to get to the goal we’ve stated. It’s just because we may have more good prospects to address than the number of salespeople we have can possibly reach. So we continuously evaluate that. And if we think there is more opportunity there like we really believe there is with LoopNet, we’ll invest and we’ll keep you up-to-date on that.

But, again, the – as we pull down that headcount dramatically, I mean, so that down 450 year-over-year year, or from June to this quarter includes the increase of 50. That’s a net number after the increase of 50 for the account management people we put out in the CoStar side. And so we have the ability to reduce where we have redundancy or technology has eliminated function or we’re not doing print anymore. For them, we want to deploy it into client sales-oriented type stuff.

Also, Scott mentioned that the – Scott, and I noticed that, Scott, we had a slightly different organic growth rate for Apartments.com, and I’m definitely going with yours. And the – but the – he mentioned that the headcount in sales is down slightly year-over-year. That is – that’s only if you exclude those customer relationship management people we pushed out. So with those people, we’re up 25 net-net. And you might see a little more of that kind of reallocating as we pull all of these things together to get the best mix. Is that more than you were looking for?

Operator

Thank you. We’ll move on to the line of Brett Huff with Stephens.

Andrew Florance

Good morning, Brett.

Brett Huff

Good morning, Andy, Scott and Rich.

Andrew Florance

Good morning.

Scott Wheeler

Hello.

Brett Huff

Thanks for the new segment detail, very helpful. So first want to say that.

Andrew Florance

You’re welcome.

Brett Huff

One detailed question, one big-picture question. The detail question is, you mentioned that you are having more people out doing training, I think is what you called them to kind of training folks, as you think about merging the Loop and CoStar databases. Can you just tell us again, is the worry that, is the user interface going to change, and you want to make sure that goes smoothly, or is it more a function of, hey, we want to show people what they could get and help them up – and help the up-sell process? I’m just confused about what that comment was directed at.

Andrew Florance

Sure. What? Me, worry? The – that’s not what we worry about. So what it really is, it’s just sort of, again, I just think that in these high subscription base businesses, it’s important that you maintain close client contact across – as you approach $1 billion in revenue, you just want to make sure that you have good, solid relationships. And it’s not a reaction to any one particular thing, it’s just good business.

And partially, as your sales increase, as you keep adding more customers faster and your salespeople can achieve really good production numbers on new sales, you’ve just got to make sure that you’re continuing to have a relationship with that bulk of hundreds of millions of dollars of revenue that have been in place for quite sometime. So that’s a big part of it.

The other thing is, there are a number of really good clients who are using the LoopNet platform, either for information or information marketing, who are not using the CoStar property platform. There are tens of thousands of them. And these are good firms, and these are firms that we want to develop our relationship with them. When we acquired LoopNet, they had a mission statement which said: we never talk to customers after we sell them. And I mean literally, that was the mission statement. And that doesn’t really resonate with us. You should communicate with your customers. You should have a priority on customer service and relationship.

So one of the things we’re trying to do is make sure that we are out there, and that we are supporting the LoopNet customers just in whatever they’re buying from us today. So that as we transition to much greater buying opportunities with our company, they will have good feelings with us, and that it will be easier to move through that process.

So it’s a – some of these folks that this customer relationship management team are spending time on might be spending a couple of thousand bucks with us right now to get apartments CRM. But some might be spending a couple hundred dollars with us across a hundred brokers to use LoopNet Premium Searcher. Well, they are a client one way or another and that small client with a lot of potential might be spending $5,000, $10,000 a month more with us next year and we want to begin that process now, not at the time that we have a financial transaction in front of them. But again, it’s not a worry or weakness thing. It’s actually a strength thing.

Like if you feel you’re in a great position, you want to bring your customers along and deliver all the value. And we’ve got that ability to do that, and that’s what we’re focused on. And I would say that the number of meetings we are having with customers right now on a daily or weekly basis is probably four times the number of meetings we were having the same time a quarter ago. So – and for any business, a lot of customer contact is a good thing.

Brett Huff

Okay, thank you. And my follow-up was the big-picture one. You articulated kind of the addressable market that you see over the next, whatever three to five years for the ILS business, the apartments business. Can you – any update to that? Can you remind us of how you see that, maybe how you see your share in that, and kind of the long-term margin profile of that part of your business?

Andrew Florance

Sure. And the very – so first of all, on the margin basis, remember that, we expect to be profitable in this space in the fourth quarter this year. And you can see that margin expansion. You can see that we’re able to show that margin expansion even with the Super Bowl ads and other ads running during the quarter. So we do believe that the margins are – the potential is excellent over the next three to five years, and that they are in line with the 40% ranges.

We’ve talked a number of times about different size of markets in the $2 billion range. You have direct competitors, or fairly direct competitors in the billion-plus range right now. We believe that we can – we believe we are just about to cross one of our direct competitors and go from the second most revenue in the space to the most revenue in this space. And we think we can hold a significant share advantage in the multifamily space similar to the share advantage we hold in the ops industrial retail space.

So and then, there is – so there is the very straightforward business we are talking about, which is the billions, $2 billion-plus business of driving renters into the leasing offices of these buildings. And that, we understand well, and we are making good progress on it. There’s a whole series of other ancillary businesses that we think are pretty exciting that are growth areas down the road. But the core is clear, addressable, and that’s what we’re really focused on, is harvesting that opportunity.

Brett Huff

Great. Thanks for the detail.

Andrew Florance

Yep.

Operator

Thank you. We’ll go to the line of Andre Benjamin with Goldman Sachs.

Andre Benjamin

Thank. Good morning.

Andrew Florance

Good morning, Andre. How are you doing?

Scott Wheeler

Hello?

Andre Benjamin

I’m good, thanks. So I want to dig a little bit more into the cost performance, given you beat revenue guidance at the midpoint by about $3 million, but EBITDA by $15 million. I guess, how did you end up being that far ahead of your cost expectations, given the guidance was given pretty late into February, and how much of that was in Apartments versus the core Suite and other parts of the business?

And then last piece is just, given that how do we think about upside versus downside risk to the implied cost guidance for the rest of the year?

Scott Wheeler

So let me just make a few comments to that, Andre. The components of the better cost performance were really two broad areas. Obviously, we are all about marketing spend as a big category, and then all of the personnel-related costs. And there’s a number of other costs in the business, but they are not as big as those ones. When you first – I mentioned the marketing spend, we had about $3 million or so that didn’t get spent in the quarter and they’ll move off into later in the year. And those just were better performance in some of the things we did, and some things that will be timed better later on. We also had some really good cost performance late in the quarter that we don’t see recurring again.

I mentioned those combined were about $6 million, that will shift out and not help us later. But then when you saw the ability to manage the headcount effectively and find more synergies in the business and the hiring plans that we had didn’t need to be as aggressive as we thought they would be when we went into the quarter. So those things helped us both lift the gross margin side of things and keep the personnel costs well down. And those really are the major components that gave us that.

When you look going forward, we’ve obviously improved the cost picture that we expect in Q2 and the guidance that we gave. And then we left the second-half with some investments that we need to continue to make. As Andy mentioned, as we find productivity, we need to put some of that money back in over the second-half of the year, which we’ve provided for now.

So we continue to find more opportunities. We continue to integrate. We’ll continue to use those and shift them around. So we feel good about the balance of where we are with the costs and we’ll always shoot to outperform those as we go forward.

Andrew Florance

Yes, the big picture, it’s also just – it’s the season of cost control. So, we came through a – two major acquisitions, major conversions of products, pulling together of hundreds and hundreds of people from new companies into one combined team. We went through a major reorganization of our management structures and the way our departments are organized in the end of the fourth quarter.

Our departments that have hundreds and hundreds of people, all have new leaders right now. And those leaders were given a mandate to understand why they had staffing that they had in different areas, and was it really necessary, or was it just an artifact and momentum of an old business model that no longer applied to the reality of the combined companies. And so, there was – it’s never pleasant, but there was a lot of focus on just rationalizing why do we have what we have here? And there were areas that – as the dust settled with all of these integrations and new product launches and efforts to move from number five to number one in the major new space, you would find something where you had a 4:1 manager-to-staff ratio, and you don’t need that. You can easily operate in 1:8. So just a lot of focus on that kind of stuff.

And we don’t like to – the divisions, the segment presidents, or the product area presidents, we delegate and push responsibility to them to find these cost savings that didn’t hurt the business. And we have to see them produce them in yield though, before we really talk to shareholders about them. So it’s just been the management team with a little bit of shift in their bonus structure more towards EBITDA have delivered on more cost savings than we thought we could deliver on.

Andre Benjamin

Thank you.

Andrew Florance

You’re welcome.

Operator

Thank you. We’ll go to the line of Bill Warmington with Wells Fargo.

Bill Warmington

Good morning, everyone.

Andrew Florance

Good morning, Bill.

Scott Wheeler

Hi, Bill.

Bill Warmington

So congratulations on an – on the impressive profitability this quarter.

Andrew Florance

Thank you very much.

Bill Warmington

So for my first question, I was going to ask about the difference between the net sales – net new sales and annual subscriptions at $25 million, and the net bookings of $30 million? It would be helpful, I think, if you could talk a little bit about the dynamic between those two, and how we should think about those two metrics going forward.

Andrew Florance

Yes, a lot of that is and I’ll answer and then I’ll let our CFO, Scott Wheeler, answer as well. So a lot of that is just – we’re very focused right now. We have a better value proposition for people trying to market their apartments on the Internet we – than our competitors do. And so we are trying to move a lot of long-established relationships into our apartment network.

And as you do that, you go meet with these folks. They have never seen a one-year contract for apartment advertising. And I do think that once they are into a relationship with you, you can get the one-year contracts. But I do not want to give up share-shift opportunity for the optics of an earnings call of saying that the difference between our bookings and our subscription growth are close. I would rather have the revenue and the business and worry about the optics in an earnings call later.

So it’s just a policy shift of saying, bring these folks on into a business relationship on whatever contract term. If we deliver for them, which I believe, we are doing for the overwhelming majority of the people we’re bringing onboard, then you can give them annual contracts on renewal that give them better pricing. So it’s more of a short-term tactic thing.

Bill Warmington

So the subscription version of that would be captured in the annual subscription piece, the $25 million, and the non-subscription contracts on the apartment side are going to be captured under the net bookings?

Andrew Florance

Correct.

Scott Wheeler

Yes, that’s correct.

Scott can give you the correct answer.

Bill Warmington

Anything there going on with cancellations on the Loop side, or anything there?

Andrew Florance

No.

Scott Wheeler

No, nothing really significantly moving around on the Loop side.

Bill Warmington

Okay.

Scott Wheeler

The changes from quarter to quarter on our annualized net sales versus our total net bookings numbers, they’ve both been in the sort of 25 to 30ish range over the last four quarters for each. And the noises in the apartments things that Andy mentioned, the CoStar Suite pieces continue to be strong and advance, as they have for many years.

So I think once we get – once we start getting past the annualization of the apartments businesses being combined, the sales forces having their focus on customer retention, as well as growth, and you start to see these stabilize more, you’ll see less of these sort of $4 million to $5 million up and down swings sequential quarters. And you’ll see them start to stabilize more. But that $30 million overall net new number is a great number. We expect to continue to see that going ahead.

Bill Warmington

Okay. And as a follow-up, Andy, in your comments you mentioned the Apartments.com offering being a better value. And so my question is, have you been able to quantify for advertisers that your leads are higher-quality or better value than the competition?

Andrew Florance

Well, the advertisers and our clients have to do that for us, because they are the ones ultimately capturing and managing those leads. And so we see that in our conversations with them, and in these focus groups and through our share gains. So I’m getting a clear message from them that it’s a dramatic difference.

And I mentioned that in a conversation not too long ago with a senior executive of the biggest apartment operator in the world. They said that they have been tracking it, and that the lead flow and closed rates of our leads continued to widen dramatically over any other source. And I forgot what the number was. We were calling 62% of all Internet traffic on the search results, on the apartment listing site.

So we are just getting a really good share. And then, again, we’re not playing the games that a lot of folks have fallen into on lead-gen, where they were shotgunning leads or serving up apartments that didn’t meet the customer’s requirement. Hoping the customer wouldn’t – the renter wouldn’t notice before they communicate with the leasing office, sort of a lead-at-all-costs mentality.

I think that our strategy of just giving them really straight-forward connections, it’s what the renter is looking for, your apartment works for it, and then making sure we have the most traffic by far. We are getting a much higher time on-site, which to me indicates that they are actually working to find their apartment on our site.

And then I think probably the most important metric for me, which you can’t quantify, I don’t have a comp score number for, I don’t have a Google analytics for is, two years ago when we acquired the Apartments.com website, one of our young staffers, maybe 24 years old came up to me after a presentation I had given to the – all the employees. And he said, honestly he said, quite honestly, Apartments.com sucks, I would never use it to find an apartment. And I said, okay, I appreciate that position, but we’re going to work on it and see how we do.

And now early in the first quarter 2016, I’m running into all sorts of very young Millennials who are telling me they found their apartment on Apartments.com, as I do it. And that’s probably the best indicator of lead flow to our clients, and effectively working. So that’s not really a comp score number. Does that answer your question, Bill? Are you now gone?

Operator

He has gone. We’ll move on to Sterling Auty with JPMorgan.

Scott Wheeler

He left.

Andrew Florance

Poor Bill.

Sterling Auty

Hey, thanks. Hi, guys.

Andrew Florance

Hi, Sterling.

Sterling Auty

I was wondering, when you look at the net bookings number, first of all, can you give us the number for the fourth quarter? I don’t know if it was actually given in the call. And then when you look across the customers, can you give us a little bit of qualitative color around what’s driving that number? In other words, what’s the type of customer within like the core CoStar Suite that’s buying? Is it investors, who might it be? That would be helpful. Thanks.

Scott Wheeler

Yes, let me cover the numbers real quick just to reiterate the net new bookings was $30 million in the quarter. And the net new on annual subscriptions was $25 million.

Sterling Auty

And the prior quarter, what was it?

Scott Wheeler

The prior quarter was $29 million on the net new annual subscriptions.

Andrew Florance

Yes. Okay. So the prior quarter…

Sterling Auty

What was it – hold on. But what was it prior quarter net booking? So the equivalent of $30 million, that’s what was the [Multiple Speakers]

Scott Wheeler

Yes, that was $25 million.

Sterling Auty

Okay.

Andrew Florance

So the bookings went up.

Scott Wheeler

Yes. The bookings went up sequential quarter, and the annual bookings went down.

Andrew Florance

Down, right. And that’s going to be…

Scott Wheeler

By about the same amount.

Andrew Florance

Right. By about the same amount.

Scott Wheeler

Yes. And we looked at quarters before, the net bookings were back up to the $30 million. So, again, you get this shifting noises between, as the apartments pieces settle out, and that’s what’s causing some of that volatility.

Sterling Auty

And maybe just – can you guys just take a quick second just walk through the net bookings? I think the net new subscription services on annual contracts-only is pretty self-explanatory. But can you remind us, because I believe the net bookings is inclusive of churn. But can you just walk us through how you are calculating that, and how we should interpret that metric?

Scott Wheeler

Yes. So the net new bookings has all of the new contracts obviously that we bring in during any given period, and then it takes the churn of clients that we lose or things that go away out of it. So you get this net number that we first look at on a quarterly basis, and then we do the annualization to get to those numbers in total. And then we look at it obviously by the different business sectors we have and watch how those numbers progress through the quarters. And those also advise our decisions on what’s happening in the market, where we deploy our sales forces and our different resources to go after the – both the opportunities and the impacts they’re having.

Keep in mind that we – as we started to move things when you get back to the annual contract ones, you start to move things to annual contracts. We’ll start to lap the full year when we started doing that for the apartments. So you’ll start to see clients, for the first time, renewing annual contracts coming up here in the next quarter or so. So there’s still going to be noise in these as we go for a couple quarters on this.

Operator

Thank you. We’ll move on to the line of Brandon Dobell with William Blair.

Brandon Dobell

Thanks. Guys, given the discussions around the net new numbers and the sales force changes, how should we think about expectations exiting this year for organic growth in the old core business, as well as apartments? It seems like there is more opportunity for accelerating that growth rate than not, given how the changes are going to work through the system. But I want to understand how you guys are setting expectations, both internally and with the street?

Andrew Florance

Yes. So internally, the way we look at it is, I’m very optimistic as to where we are right now across all three major segments that we look at. So on the CoStar side, we are moving a lot of resources that had been diverted into apartments sales back into the core CoStar business. The core CoStar business is doing really well, real strong performance there. And that is before we do two of the most important things we could possibly do to capture a lot of revenue, which is integrate LoopNet and CoStar, and expand the successful CMA product that came on the apartment side into all the market segments.

So I see a lot of upside over the next two years on the core CoStar Suite. I feel really good about that. I see where that is, and I feel good about that. On the apartment side, we’ve gone through that challenging period where half your sales force was just trying to move people from print to electronic with no revenue gain. We have done the – made the hard decisions to shift the way territories are aligned, so that people are much more efficient in their day. And separated out the sales structure, so that you have a cleaner focus on apartments, and a little bit of growth in that apartments group.

So I would expect acceleration in their sales over the next two years at a consistent and incremental basis with a little bit of investment occurring on customer relationship in the early part of the year, and then just getting to meet everybody. There’s thousands of – about tens of thousands of customers they have to meet. And then huge opportunity on the LoopNet side, just because that one frankly got short-shift in all the excitement of the last year, so in apartments and in CoStar core.

And so that sales force has drifted down to a number that we’re not crazy about, mainly because the CoStar salespeople just were focusing on apartments, not LoopNet. So we are bringing more of a stronger, independent LoopNet sales force up to speed and with a very good return on investment, because it’s the old subscription model of – you take – you are going to have, no matter, if you take three steps forward, or 10 steps forward, you have two steps back, we’re sort of in the three steps forward, two steps backward on churn with LoopNet, adding one more salesperson, adding 25% increase in salespeople can, in theory, increase revenue growth by 50%.

So lot of things going on here that we’re really investing on Q4, Q3, Q1 of next year. We’re doing a lot of things just to ensure consistent strong growth over the next three to four years.

Operator

Thank you.

Scott Wheeler

To cover the – sorry, to cover the guidance part of that question in the CoStar Suite sector a 11% to 13% is the growth rate we expect going forward. In the first quarter, we were at 12.5%, as we mentioned, so pressing the upper end of that. We expect that to continue to press the upper end, as Andy mentioned, going forward for the rest of the year. On the Apartment side, we said 20% to 25% pro forma growth. For the outlook for the year, we get 24% in the first quarter. We expect to say solidly within that middle part of that range for the rest of the quarters of this year. So that’s really where the guidance is, and it’s all very strong and positive.

Brandon Dobell

Okay.

Operator

Thank you. And we’ll move to the line of Andrew Jeffrey with SunTrust.

Andrew Jeffrey

Hey, guys. Thanks for taking the question and all the color. And I just – I’m trying to understand a little bit mechanically, and I know a lot of questions have sort of gone in this direction. But when I look at the growth in net new on annual subscriptions, which has accelerated, it did accelerate in the fourth quarter on a trailing four quarter basis.

And then I consider the total percent – the percent of your total revenue that’s on annual contracts, why wouldn’t there be an acceleration in reported revenue, as we go through the year, even if we saw a decel in net new on annual in the second quarter? Why shouldn’t the business just sort of mechanically accelerate as 2016 progresses in more of a pronounced fashion than what your guidance implies?

Scott Wheeler

Well, I think, we’re – well, I think as we continue to watch the net news come in and we watch the annual subscriptions each quarter, they are strong, they continue to grow. We want to see them accelerate for the rest of the year. We’re going to watch that progress. We think there’s a good chance that we continue to progress and move forward. But at this stage in the year, we want to just keep our forecast in a modest, but optimistic range, and move forward and see how they go.

Andrew Florance

Keep our powder dry.

Scott Wheeler

That’s a good way to say.

Andrew Florance

On this rainy day in Washington.

Scott Wheeler

Keep our powder dry.

Andrew Florance

Did you have a follow-up to that question?

Operator

One moment, please.

Andrew Florance

Okay.

Operator

Okay, Mr. Jeffrey, your line is open.

Andrew Jeffrey

Okay, thanks. If there is a follow-up, it would be around the sort of explicit sales of data into the apartment communities. Can you talk a little bit about the ramp in data sales, and whether or not sort of qualitatively data are pulling along share gains? And just sort of how to think about that dynamic?

Andrew Florance

Yes, specifically, you are talking about the information products around Multifamily and how they are doing, and how we’re getting share gains?

Andrew Jeffrey

Exactly, right.

Andrew Florance

Yes, well, we’ve gotten terrific share gains in that space without a doubt. And I don’t have – I do not have actual competitor numbers, but I have an idea. And my belief is, is that, we have sold maybe twice some of the traditional competitors’ entire revenues this year in the space. So I would call that a really good share gain, if you can sell their whole revenues once or twice in the year, and it’s really just the beginning.

So the product is real. It works. We have – we’ll continue to evolve it, refine it. It’s on version 1.1, or 1.12 maybe. We’ll continue to push it. We’re doing – I was very happy with where it’s going overall. And our sales force is very excited about it. Our sales force is finding good traction with it. So we’re really in the very early stages on that. And I think we just have a big fundamental advantage in the fact that we are – the most heavily traffic website for people shopping for apartments.

So that collects a lot of information in search behavior, that’s very valuable to our customers. For example, some cool stuff we’re doing with the product right now, that no one else can do is, people traditionally try to understand who their apartment building competes with by looking at similar-rated buildings within two miles of their apartment building. And that would be a very simplistic way to look at it. We have nearly -- we have a billion searches – a billion property views on our system in 2015. We know exactly who your competitor is, like no one else knows.

So when someone looks at a one bedroom in your community, we know exactly what other one bedrooms they tend to look at when they consider your community. And it’s not similarly rated communities within one mile, it’s actually it could be someone eight miles down the highway that you’re competing against, and you don’t know it. And only we can really tell you that in CoStar Market Analytics. So we have a very unique product, and we’ll continue to surface these kinds of advantages in the product. And I think we will do incredibly well.

So, we have to keep evolving it, because you’re – it’s a complicated business. And we’re getting more nuanced and we’re tweaking it. But all good. And what part of the question? I forget, because I was having fun there.

Andrew Jeffrey

I think you’ve hit all the high points. Thanks, Andy.

Andrew Florance

Okay. And we just published a paper in American Real Estate Society about our correlated filter peering of competitors. And I hope we do – we win an award for it. We’ll see.

Operator

Thank you. [Operator Instructions] We’ll go back to the line of Andre Benjamin with Goldman Sachs.

Andre Benjamin

Thanks. Just one follow-up here. Given the amount of attention that we hear on the core suite and concerns about the growth there, with the backtrack in the CRE market, could you talk a little bit about how much of the sales growth came from brokers versus some of the other initiatives, like pushing to institutional lenders, apartment managers, et cetera? And have you seen any slowdown in the growth rate of selling to brokers in this quarter versus the last few?

Andrew Florance

I wouldn’t address this – I would not say there is a concern with growth rate. We’re at the upper end of the range on big numbers. So we’re – there’s LoopNet like, it’s actually really strong with upside potential – significant upside potential, as we just showed in the UK, as we integrate the LoopNet and CoStar families together. I think I’m very optimistic about what that means. So we are hitting it on all cylinders, and the brokerage business is strong, as well as the owner and the institutional component. Our sales force always likes to go to the institutional and owner, because they are typically bigger-dollar contracts up front.

If I were to look at a crystal ball over the next 18 to 24 months, I think just because of the conversion with LoopNet, I think there will be a surge of brokerage sales over the next 18 to 24 months, which is why I invested in putting the 50 more customer relationship people to prepare the field for that surge. And we’ll probably grow that group maybe to 80 people over the course of the year. So it’s good. It’s good, it’s good, and it’s good, and it’s all good, and it’s all good. So, there’s nothing I’m aware of that is bad. It’s good.

So, okay, but I think with that, I think we’re all set here. We’ll wrap up, and we’ll get the call done before we get to 12:15. Thank you all very much for joining us, and we look forward to speaking to you next quarter. Bye-bye.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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