Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 CoStar Group Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Ms. Sarah Spray. Please go ahead.

Thank you. Good evening and thank you all for joining us to discuss the third quarter 2020 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Scott Wheeler, our CFO, I would like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements, including expectations for the fourth quarter and full year 2020. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's press release issued earlier today and in our 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. CoStar assumes no obligation to update these statements whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call including EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at costargroup.com under Press Room. As a reminder, today's conference call is being webcast and the link is also available on our website under Investors. Please refer to today's press release on how to access a replay of this call. And with that, I would like to turn over to our Founder and CEO, Andy Florance.

Good evening and thank you for joining us today for CoStar Group's third quarter 2020 earnings call. Total third-quarter revenue was $426 million, up 21% year-over-year. For 20 years, CoStar has grown revenue by over 20% on a compound annual basis. Our performance this quarter is no different and shows clear evidence that in the midst of this pandemic, our business is strong, resilient and countercyclical. In the third quarter of 2020, all of our businesses performed well and continue to be solid, resilient and showcased the performance that we saw as we exited the second quarter. In the third quarter, we achieved $53 million in quarterly sales bookings, a 53% increase over Q2 sales bookings. This was one of our strongest sales quarters ever despite the continued high levels of economic, social and public health uncertainty. Our marketplace businesses displayed very strong countercyclical growth with Apartments.com revenue up 23% in the third quarter 2020 over the third quarter of 2019. Similarly, LoopNet revenue was up 19% year-over-year in the third quarter. Our earnings in the third quarter were very strong with net income of $58 million and adjusted EBITDA of $134 million. Our sales team at Apartments.com turned in one of their best performances ever in the third quarter with net new sales up a massive 59% versus the same quarter a year ago. Customers continue to invest in Apartments.com because of the strong and growing lead flow we deliver driven by growing site traffic and engagement. During the quarter, we set yet another record for site traffic. According to ComScore, for the third quarter, average unique visitors per month to the Apartments.com network of sites was over 25 million, up 20% from the same quarter a year ago. The growth in lead flow was even stronger as total leads generated for our clients from the Apartments.com network of sites in the quarter was up 43% over the prior year quarter being the previous record by 16%. Our increased investment in marketing is driving these gains and allowing us to further distance ourselves from our competition. According to ComScore, in the third quarter, Apartments.com had 2.3 times as many unique visitors as RentPath, nine times as many as Zumper, twelve times as many as Apartment List and 22% more than the Zillow rental network. Third quarter over second quarter of 2020, the Apartments.com network added 14.5 million visits sequentially while RentPath went down 5.3 million visits. We believe that customers take notice of and care about the huge traffic and lead advantage Apartments.com offers them. Our customers routinely tell us who they are marketing with, including where they're marketing with RentPath. Since the beginning of 2020, we estimate that we have added $36 million in annualized revenue to Apartments.com for properties that we're advertising on RentPath. We have added thousands of new properties as advertisers on Apartments.com this year. During the same time period, we do not believe that RentPath has grown their revenue. In fact, we can see from their advertised sales promotions, they are shifting their focus to reselling advertising solutions that compete with ApartmentGuide and Rent.com. RentPath offers services placing ads for apartment communities on Facebook, social media, Google SCM and the like. They may be doing this because their core sites are less and less attractive to advertisers. We believe that the shift in their business has moved to lower margin, less differentiated product. From when we entered into an agreement to acquire RentPath before we had ever heard of COVID, it seems the world has changed. While we continue to seek approval at the Federal Trade Commission to close on our acquisition of RentPath, right now we're very focused on laying the groundwork for a very strong 2021 for Apartments.com. We believe that the total addressable market for Apartments.com is huge and growing. In the U.S., 51% of the larger apartment communities of at least 100 units are advertising on Apartments.com. Our penetration of the multi-family market continues to grow as we added 879 more of these 100 unit plus communities this quarter alone with an overall average revenue per property of $1,060 per month. The opportunity to grow our client base and the properties with less than 100 units is much more exciting. Just 3% of the over 350,000 apartment communities with 5 to 100 units currently advertise with us. That customer segment is growing at twice the rate of the larger 100 unit plus community advertisers. In the previous quarter alone, 820 communities with 5 to 100 units began new advertising relationships with us for an overall average revenue per property per month of $536. The broadest opportunity of all is to provide marketing and leasing solutions to the 18 million properties with one to four units. So far this year, we've sold about 5,900 ads to the one to four unit properties, including almost 2,700 in the third quarter at an average price of $150 per month. We are successfully adding clients from large, medium, and small rental properties. This quarter, we surpassed the $600 million run rate in annualized revenue and yet we only sold advertising to less than 1% of the U.S. rental properties. We clearly have a huge opportunity here and intend to invest in growing our Apartments sales force into 2021 to capture more of this opportunity and the potential for high incremental margins. The Apartments.com brand is well positioned to capture this opportunity as I can argue Apartments.com is becoming a household name and part of the culture. A proof point is the wonderful free advertising received earlier this month from the writers at Saturday Night Live. In the VP Fly Debate cold open, Jim Carrey, playing Jeff Goldblum as the fly on Vice President Pence's head, delivers our slogan Apartments.com is the place to find a place, while the Apartments.com logo displays as tens of millions of viewers watched that awesome free placement. This quarter, LoopNet was also able to prove resilient and countercyclical, recording a new all-time high in net new sales and year-over-year revenue growth of 19%. In the third quarter, LoopNet's record high in average monthly unique visitors at 8.3 million supported that revenue growth. That higher traffic drove a 70% increase in email and fun leads to our LoopNet advertisers in Q3 versus Q1 2020. We have implemented a comprehensive retargeting program this year, which we believe is instrumental to achieving both this growth in traffic and leads. LoopNet's strong traffic is driving strong sales of Diamond ads, our most prominent level, which reached a price point of $11,000 per month, an average of $3,260 per month in the quarter. It's a bargain price point compared to the hundreds of millions of dollars of potential lease routes that these ads are marketing. At the same time, it's a huge number compared to the average price point of only $10 to $20 a month that LoopNet was getting when we purchased LoopNet a little more than eight years ago. I'm convinced that the LoopNet opportunity is just as big as Apartments.com. As we begin making plans for LoopNet in 2021, we intend to invest in growing both our sales force and our marketing with an eye to accelerating our revenue growth even faster. We are working with our advertising agency to build a powerful LoopNet marketing campaign for 2021 that will encourage both owners and brokers to unleash their digital potential by being in the know, by being in the loop. It's a bit of a retro campaign and that getting in the loop was one of the first campaigns for LoopNet back at its founding. But since we acquired LoopNet, the platform has certainly transformed from a slow-growing website offering cheap ads on lower-class B properties to the premier marketplace for world-class commercial real estate. We believe that now is the time to bring the LoopNet image and marketing up to the top level. You will know when we have achieved our goal when you hear the LoopNet slogan used in a future Saturday Night Live cold open, Pence, Harris presidential debate four years from now. As LoopNet grows, we're adjusting our organizational structure to continue to facilitate that growth. Going forward, LoopNet's organizational structure will more mirror the Apartments.com organization, which we believe will allow it to focus fully on developing the growth potential of LoopNet, where LoopNet in the past has shared leadership across product design, sales, customer service and marketing with CoStar; going forward, we'll have a dedicated management team within CoStar Group focused just on LoopNet growth. While the CoStar sales team will continue to sell CoStar for the foreseeable future, we have named James Moon, a veteran of the Apartments.com leadership team to Senior Vice President leading LoopNet's sales. Over the next 12 to 18 months, we plan to build out a dedicated LoopNet sales team with an incremental 100 to 200 sales professionals. We intend to announce a President of the LoopNet organization within the next month. We plan to place additional LoopNet leadership positions over the next few months. I want to highlight that all of our marketplaces are growing traffic. BizBuySell hit a new record in average monthly unique visitors this quarter. The LandsofAmerica network also set a record this quarter and is now growing so fast. It's approaching LoopNet's traffic level with 6.8 million monthly unique visitors. The lands network monthly unique visitor counts soared 80% year-over-year. We completed our acquisition of Ten-X at the end of the second quarter this year. After only three months with this business, I'm more excited than ever about its potential. One of the first steps we've taken is to put any property going to auction on Ten-X to the top of LoopNet and CoStar and present them as upgraded diamond placements with enhanced retargeting. This is dramatically increasing their exposure to potential bidders. The benefit was immediate and dramatic. On the auctions that took place following this upgraded exposure, we saw the number of qualified bidders coming to Ten-X jump by 47%. We also observed a 19 percentage point increase in the trade rate to 68% versus the prior year. The trade rate is the percentage of successful sales at auction divided by the total number of properties brought to that auction. This trade rate of 68% is groundbreaking. Based on CoStar and LoopNet data on sales transactions over the past three years or even longer, the trade rate on traditional offline commercial real estate sales transactions is only 36%; 64% do not sell on their first listing. The minority that did sell were on the market for an average of 500 days before they sold. Obviously, specific properties vary widely, but those are pretty depressing numbers. Properties selling in the traditional method took five times as long to sell on average compared to the 90 days it takes to sell a property in Ten-X. On Ten-X, both sellers and brokers have a higher probability of closing the sale at a much faster pace. Hypothetically, a broker utilizing Ten-X can sell twice as many properties in a quarter as an offline broker can sell in a year. We believe that is a major game changer. A potentially apt comparison of the traditional commercial real estate sales market is back to the days of the OTC Pink sheets, which is a slow, expensive, illiquid and not very transparent market. We believe that Ten-X could compare to the advent of NASDAQ in the '90s, which dramatically increased price transparency, volume and liquidity in the OTC markets. The upside potential for every player in the commercial real estate market is tremendous. We are prioritizing the integration of Ten-X technology with both CoStar and LoopNet to be ready for what could be a significant wave of distressed properties coming to the market in the next 12 to 24 months. We will soon have real-time information on properties coming to auction fed directly to CoStar and LoopNet, creating additional exposure and interest from our 150,000 plus CoStar users and 7.8 million monthly LoopNet visitors. The full merger of the two back ends is expected to be achieved during 2021. Ten-X is an exciting space to watch; even from an operational perspective, I think that once we get those real-time feeds going, everyone would be glued to their screens as the auctions take place. CoStar has continued to grow through the pandemic, despite the pandemic's negative impact on commercial real estate. CoStar revenue grew 6% in Q3 over the same quarter a year ago. Net sales bookings surged back from a soft second quarter, growing 146% third quarter over second quarter of 2020. Considering the scale of disruption to commercial real estate this year, I'm very impressed with our team's ability to maintain a strong renewal rate as we have. The vast majority of cancellations from the second quarter occurred among small one and two-agent broker shops. Over the past six months, only six firms with five or more brokers have canceled their contracts. This clearly demonstrates that the information analytics that CoStar provides are truly mission-critical. I'm very optimistic about CoStar's potential moving into 2021. Just one of our headline product enhancements in the pipeline for CoStar is the integration of robust CMBS data into CoStar. The CMBS data includes deep information on over a hundred thousand commercial estate loans with 90,000 tenant lease expiration dates, 40,000 detailed operating statements and details of thousands of distressed loans. CoStar customers will be able to search for properties based on loan maturity date and payment status. They'll have access to detailed operating statements on a property level and tenant lease expiration dates. We'll build income and expense models that customers can use to build their assumptions on acquisitions, valuations or developments. We will be able to use this data to inform our forecast models and analytics, and to enhance our overall research efforts. I'm also excited about the multitude of major enhancements we have in the works as we integrate hospitality information into CoStar. We are close to integrating all of STR's properties into the CoStar database. We are building a suite of hospitality analytic tools into CoStar that we believe will be best-in-class. We have designed the next phase of developments to migrate the STR benchmarking capabilities from emailed worksheets to a fully digitized end-to-end SaaS benchmarking solution for the hospitality industry, all integrated with CoStar. We aim to offer a broad range of functionalities, including a dashboard view of traditional benchmarks such as RevPAR and all the star reports, P&L metrics and forward booking data. The tool will have enhanced portfolio analytics. I believe this is a potential killer app in the hospitality segment. While the analytics and benchmarking we are building here are specific to hospitality, I think it's particularly exciting because it creates proof-of-concept for CoStar's ability to deliver robust benchmarking across other commercial real estate asset classes in the future. In addition, we have made excellent progress in our track to deliver a full-featured internationalized and polyglot version of CoStar in 2021. If you think STR analytics are cool, then you would love seeing our new capabilities to generate on-the-fly, real-time, aggregated comparative analytics from multiple countries, multiple languages and multiple currencies, all presented in the currency localization and language of the user's choice. So exciting. Given the progress on international CoStar, it's timely that we're announcing today the closing of our purchase of Emporis, a German-based international commercial real estate data provider. Acquiring Emporis allows us to integrate their 700,000 building records and over 600,000 images across 100 countries into CoStar, providing a jumpstart to our international data collection efforts. In 2021, we plan to integrate and enhance the international data we have from our existing operations in Spain and Germany into CoStar. Beyond this, we've identified an additional 50 international cities that we plan to add to CoStar with cost-efficient data collection efforts initiated over the course of the next 24 months. We believe that the market opportunity for us internationally is more than twice the market opportunity in North America. If you've noticed over the past six months, we've increased our cash reserves through a combination of equity and debt funding to almost $4 billion. I expect that the questions at the end of this call will be similar to every prior call and that someone will rightfully ask; where are you with mergers and acquisitions? Given that I cannot discuss specific targets or potential transactions, I thought it's helpful to clarify what we look for and the criteria we apply when we're evaluating acquisition opportunities. So let me answer the quick question in advance, but likely the question will be asked anyhow during Q&A just slightly differently, but nuance is fun. We're a disciplined acquirer. Our strong balance sheet and stated intention to deploy our cash for M&A has attracted attention from practically anybody considering selling their business in the proptech space. It's a big group. There are currently 7,000 proptech companies trying to create value by digitizing real estate. It's our practice to be open-minded and talk to everyone, consider carefully all potential acquisition opportunities; the vast majority of which we don't pursue. For the ones that we do not pursue, it could be because they're too far from what we do, overvalued, not strategically valuable, too small, throw red flags in due diligence, or have no clear path to accelerate growth among other reasons. One common theme for us has been to use acquisitions to enter a new closely related real estate segment. For example, we acquired National Retail Bureau to jumpstart our retail entry. We acquired Apartments.com to enter the apartment sector. We acquired STR to enter hospitality. We acquired LandsofAmerica as a rural land space. In these cases, 75% of the technology and processes are identical to what we already do, maybe more than 75%. Placing a point on the map, geo-query presenting acres and square feet, property photos and videos, property characteristics, marketplaces, aggregate analytics, and more are the same from one property type to another. Our expertise in one sector enables us to innovate quickly into a new segment. We believe that each time we add a new property segment, our solutions become more valuable to many of our clients because we offer them a more comprehensive solution to their needs. Banks almost always lend money across many property types. Appraisers often value more than just one property type. Brokers transact across multiple property types. Local government deals with all kinds of property types. Owners often own more than just one property type. Giving these clients consistent, convenient information solutions in one integrated offering is invaluable to them. Another theme for us is to target entering closer related solutions in the same property segment. For example, CoStar is and was a strong commercial real estate information solutions provider with a lot of data. By acquiring LoopNet, we added commercial real estate market expertise and revenue. The commercial real estate information resources we already had allowed us to quickly innovate the marketplace solutions LoopNet offered, making them more valuable to searchers. Once we integrate the data behind LoopNet and CoStar, each product essentially generates free data for the other as a by-product, making each more valuable. We sometimes acquire companies with complementary geographic footprints with similar segment coverage and solutions in order to accelerate our geographic expansion efforts. We built up much of our U.S. coverage 10 to 15 years ago this way, and some of the European coverage about 10 years ago, five years ago. We often prefer to buy companies that are slow-growing, where we believe we see strategies to accelerate their growth rate. We have a strong track record of buying slow-growing companies and accelerating their growth rates. Today, Apartments.com is six times the size it was when we acquired it. LoopNet is over four times larger. Real Estate Manager is almost six times as big, and COMPS.com is over eight times as big. Most of these companies were growing in the low single digits, if at all, when we acquired them and we then accelerated them to strong, consistent, double-digit growth. We jump when we see a chance to acquire a larger company that has a similar product with redundant cost structures. Our acquisition of ForRent is a good example of acquiring a company, eliminating most of the cost structure while maintaining most of the revenue. It's great when you can do a deal where you're converting revenue into EBITDA. We prefer to acquire larger companies to obtain scale results for relatively the same efforts; it's called the Frank Carchedi theory. Since acquiring a small or large company seemed to take about the same amount of effort to do right, it makes sense to acquire larger ones. We generally invest in smaller companies only to obtain strategic new product solutions or for the purpose of research and development. Each of the acquisitions we consider must have multiple opportunities to create significant growth and profit for the business. Otherwise, we typically pass on the deal. With this approach, it only takes one of multiple possible investment theses to pan out for these acquisitions to succeed. Historically, we've taken a balanced to conservative approach to financing acquisitions. Over the past 10 years, we've deployed approximately $6 billion for acquisitions and have leveraged operating cash, equity raises and short-term debt in roughly equal parts to fund these deals. We anticipate continuing this balanced funding approach in the future with one additional criterion as a result of our debt offering. Going forward, we're absolutely committed to protecting and maintaining our investment grade credit rating. Finally, I'm going to wrap up with some observations about the real estate economy, looking at the economy and the current state of commercial real estate. We see a labor market recovery that is noticeably slowing. Furloughed workers continue to be rehired as the economy reopens, but at a slower and slower pace each month. The hardest-hit sectors of the economy like restaurants, hospitality, and entertainment are struggling to try and reopen safely as the colder months of the year approach. And what appears to be a third wave of infections is beginning to ramp up. But an interesting thing is happening. Even if the possibility of new stimulus seems to be fading, measures of household and business confidence have been rising recently, and census data of new business formation shows that growth in new companies is up nearly 40% from a year ago, more than triple the growth rate at this time in 2019. This isn't what we normally see during recessions. New business formations fell 15% in 2008 and were zero in 2009. Commercial real estate weathered a tough second quarter and showed resilience in Q3 2020, even in the hardest-hit sectors of the market. Hotel occupancy continued to slow and ground higher, reaching 50% by quarter-end. Parts of the retail landscape clearly remain challenged by reduced traffic and social distancing mandates. But I should note that leasing volumes recovered strongly for retail assets in the third quarter. Retail properties leased to essential credit tenants had been a bright spot, as well as discounters and grocery-anchored properties. We've seen groceries taking over previously challenged spaces vacated by home good retailers and even booksellers. This is maybe a good time to note that Amazon opened its first physical grocery store during the third quarter called Amazon Fresh; there is still plenty of distress to work out in retail and hospitality. And we're continuing to see increased usage of our product from our clients in asset management credit and especially valuation departments. We've heard from clients that CoStar's services are more mission-critical now than ever before. I think that shows in CoStar's resilience. On the other hand, I hardly need to tell you that the industrial sectors enjoyed great tailwinds in the current e-commerce driven environment. CoStar data tells us that the third quarter 2020 was actually a new record for industrial leasing volume. Amazon obviously led the way, but a deep roster of firms are looking to expand their distribution footprints to catch up. Walmart and Target have been especially active this year along with third-party logistics firms home good retailers and a long list of others. The surge in leasing demand is coming at the perfect time as there's a record amount of space set to deliver in the near term, much of which remains available. The office market has been inundated with headlines for months now with competing stories of this company shifting towards permanent remote work, while another company is starting to move towards a return to the office. It seems inevitable there'll be increased adoption of flexible work schedules to some degree, but there will also be demand for more space for social distancing. It's interesting to note that one of the biggest office deals during the third quarter was Facebook's purchase of a brand new 400,000 square foot office campus in Bellevue, Washington with a price tag of over $350 million. That shows a lot of money is being spent on a lot of office space. They aren't the only big tech companies buying or leasing office space in the third quarter; the likes of Google, Apple, Amazon, Microsoft, and others have been very active acquiring office space. The Multifamily sector has been one of the most fascinating to track over the last seven months. There isn't a lot of high-frequency data in the commercial estate market, but Apartments.com provides us with millions of data points each day on rents and availabilities giving us real-time views of the market, a large supply wave of four and five-star properties in downtown CBD locations has continued to push those rents lower. After the second quarter produced the lowest net absorption in eight years, there were fears of a loss leasing season for 2020, but Q3 absorption rocketed back. It was the largest third quarter ever recorded at CoStar showing that apartment demand has simply been pent-up during the first few months of the quarantine. The 2020 leasing season has simply been delayed, and higher vacancies and expensive, newly delivered products are an expanded opportunity set for Apartments.com to help owners to fill those units. The real estate capital markets have begun to show some stabilization. Third-quarter deal volume was down 40% from last year, but a closer look shows that each month in the quarter got better. September deal volume was only $4 billion short of the average September in the last five years. A selling of the lending markets has certainly helped as CMBS spreads have come back down from their widest levels and new issuance has picked up. Looking at pricing, our same-store price indices indicate valuations have largely plateaued and are showing year-over-year declines or broadly higher cap rates. This flattening of prices around pre-COVID levels is consistent with what we are hearing from clients. There's still plenty of demand for good assets, and those that trade aren't going for meaningful discounts. More challenged assets are simply not trading if they don't have to. It seems that few are being forced to trade today as underwriting standards and leverage were more conservative going into this downturn than the last. We know from CMBS delinquency and special servicing rates that a wave of distressed assets and hospitality and retail is coming, and the Ten-X platform is expected to give us insight into investor demand for these properties. We believe the mountain of dry powder waiting on distressed properties is large, which will make for an interesting space as we look into 2021 and beyond. This quarter again demonstrated that our data and information are mission-critical to our customers, and our marketing businesses are counter-cyclical. We're extremely pleased with our strong third quarter results, and we're very excited about a strong finish to the year and a great 2021 around the quarter. So, to talk more about the growth, I'm going to ask our CFO, Scott Wheeler, to please wear a mask when he's shopping in our store, and then he can deliver his report for the quarter.

Thank you, Andy. I have now removed my mask for those wondering, while Andy coughs nearby. Actually, it's our first earnings call since February, actually together in the same room. All right, what was I talking about? That's right. The recovery; we experienced a great third quarter, improved off the second quarter and our momentum is building nicely, $53 million in net new bookings for the third quarter. We think that's an outstanding result, the second highest ever and it was in the midst of our global pandemic. With these strong sales, our third-quarter revenue of $426 million came in $6 million above the high end of our guidance range, resulting in 21% year-over-year growth in the third quarter, which was over 200 basis points above our forecast. That makes 14 quarters in a row with growth at or above 15%. We have now crossed a $1.7 billion revenue run rate for the business. We now expect consolidated revenue growth of approximately 18% for the full year of 2020. Looking at our revenue performance by services; CoStar Suite revenue growth was 6% year-over-year in the third quarter, slightly ahead of our forecast. As sales of CoStar Suite improved sequentially in the third quarter by over 2 times the level of CoStar Suite sales in the second quarter. Accordingly, we expect revenue growth for CoStar of approximately 7% for the year and approximately 4% in the fourth quarter of 2020 compared to the prior year. Revenue in information services grew 70% year-over-year in the third quarter of 2020 to $33 million as expected. The revenue growth expectation for the full year remains unchanged at approximately 45%, with revenue growth around 14% in the fourth quarter, as we begin to lap the acquisition at STR that occurred in late October 2019. Without STR, we expect information services revenue in the fourth quarter to be approximately the same as the fourth quarter of 2019. Multifamily revenue growth for the third quarter was outstanding, improving to 23% over the third quarter of 2019. The number of properties advertising with us increased around 10% while the average revenue per property increased by approximately 12%. We expect revenue growth of around 23% to continue in the fourth quarter, resulting in approximately 22% revenue growth for the full year of 2020. Multifamily is now at a run rate of over $600 million in revenue, and on an annual basis is adding approximately $120 million in revenue growth in a year's time. Clearly, our Apartments.com operating model is delivering fantastic results. And as Andy mentioned, we're looking forward to replicating that same model for similar results with LoopNet. Commercial property and land revenues grew 38% year-over-year in the third quarter of 2020, slightly ahead of our expectations. This sector now includes Ten-X for the first time in this quarter. LoopNet marketplace revenue grew 19% year-over-year in the third quarter of 2020, sequentially up a bit from 18% in the second quarter. LoopNet had the highest sales quarter ever in the third quarter as a result of all-time high traffic, improved marketing efforts and a strong effort by our combined CoStar LoopNet sales team. Including Ten-X, we expect full-year revenue growth for commercial property and land of approximately 25% to 28%. Organic revenue growth for commercial property and land is expected to be approximately 15%, with LoopNet growing 20% for the full year. Our gross margins came in at 82% in the third quarter of 2020, slightly increasing from the 81% gross margin we achieved in the second quarter. We expect overall gross margins of approximately 81% for the full year of 2020. Profitability was strong in our third quarter with net income, adjusted EBITDA and non-GAAP EPS results, all ahead of the guidance we issued in July of this year. Our third-quarter adjusted EBITDA of $134 million was approximately $9 million above the top end of our guidance range. Most of the improvement came from the higher revenue with some additional benefit from lower G&A costs than expected. The resulting adjusted EBITDA margin of 31% is 200 basis points above the midpoint of our guidance range. We increased marketing spend as planned in the third quarter compared to the second quarter, making the third quarter our highest marketing spend quarter of the year for the first time since we acquired Apartments.com. Cash and investment balances were approximately $3.9 billion as of September 30, 2020, up over $300 million since the last quarter. The cash increased reflects the closing of our investment grade bond offering in early July and repayment of our outstanding revolver balance. Our net cash balance at quarter-end was approximately $2.9 billion and our gross leverage ratio is 1.9X based on $1 billion in debt outstanding, and the midpoint of our guidance range for adjusted EBITDA for the year. We're pleased to see that our bonds have consistently traded at a premium to the initial offer price and remain strongly committed to our investment grade rating as we pursue our M&A objectives. Now, we'll look at some of our performance metrics for the quarter. At the end of the third quarter, our sales force totaled approximately 860 people in line with the last quarter, excluding the acquired sales teams from STR and Ten-X, which we included in our sales force numbers last quarter; our sales force declined about 6% in 2020 overall. We recently began hiring sales team members to support growth across all our businesses, which is a good sign. And we'll soon start building the LoopNet sales force that Andy mentioned. The renewal rate on annual contracts for the third quarter of 2010 was 89%, in line with the second quarter, slightly better than we expected. We're encouraged that the renewal rate has stabilized after only one quarter of downward pressure from this disruption in Q2. Renewal rate for the quarter for customers who've been subscribers for five years or longer remains strong and steady, in line with the 95% renewal rate from the second quarter of 2020. Again, the stability in the renewal rate is encouraging, reinforcing the value of our platforms to our customers, especially during periods of disruption in the market. Subscription revenue on annual contracts accounts for 79% of our revenue in the third quarter, which is down from the 82% this time last year and last quarter. The decline of 3% is a result of including Ten-X revenue in the calculation for the first time. Ten-X revenue is based on a percentage of the sales value for transactions completed using the Ten-X platform. In total, when we include all subscription contracts, regardless of contract length, approximately 94% of our revenue is subscription-based after including the Ten-X revenue in our calculation. I'll now discuss our outlook for the year and for the fourth quarter of 2020. We currently expect revenue for the full year in a range of $1.644 billion to $1.65 billion, which represents a growth rate of 18% of the midpoint of the range compared to 2019. This revenue outlook represents an increase of $12 million at the midpoint compared to our prior guidance. We expect revenue for the fourth quarter in the range of $429 million to $435 million, representing growth around 15% at the midpoint compared to the fourth quarter of 2019. We expect adjusted EBITDA for the full year 2020 to be in the range of $525 million to $530 million, which is an increase of approximately $8 million at the midpoint of the range from our prior full year guidance. With this increased forecast for adjusted EBITDA, we are now slightly above the midpoint of the full year EBITDA guidance that we provided for 2020 back in February before the pandemic. It certainly wasn't a straight line from there to here, but we're very pleased that our team was able to deliver the profit numbers that we guided to at the start of the year, despite all of the disruption and dislocation in the market. For the fourth quarter of 2020, we expect adjusted EBITDA in the range of $139 million to $144 million. With strong traffic growth and record sales levels for LoopNet in the third quarter, we increased marketing spend for LoopNet and Ten-X in the latter part of Q3. We expect to continue this marketing spend level in the fourth quarter of 2020 and beyond in support of expected growth in both of these businesses. This is why our adjusted EBITDA guidance increase is less than the increase in our revenue guidance. Our outlook for the year currently includes a year-over-year increase in our marketing spend of approximately $90 million. Apartments.com represents approximately $70 million to $75 million of the increase, with the rest attributable to LoopNet and recently the addition of Ten-X to our business. The success of our marketing campaign is evident in our outstanding traffic, sales and revenue results. We expect full year non-GAAP net income per share in the range of $9.39 to $9.49 per share based on 38.3 million weighted average shares. This is an increase of $0.12 per share from the midpoint of our prior guidance. For the fourth quarter of 2020, we expect non-GAAP net income per share in the range of $2.34 to $2.44 per share based on 39.5 million shares. I know some of you undoubtedly are curious about our outlook for 2021, and we're not planning to provide 2021 guidance until after the end of this year; we're currently working on our planning and budget process on the many great growth opportunities we have. We'd like to have the benefit of four more months of results under our belt before we finalize and communicate our plans for 2021. Overall, we remain committed to our long-term objectives of $3 billion in run rate revenue and 40% adjusted EBITDA margins in 2023. In summary, we've certainly had an impressive third quarter. Sales rebounded strongly from the early phase of the pandemic, and our momentum continues into the fourth quarter. We expect to exit the year with strong double-digit revenue growth, both in total and organic revenue growth, despite the continuing global pandemic and uncertain economic environment. Our balance sheet is rock solid and ready to support significant acquisition-driven expansion, while we remain committed to maintaining our brand new investment grade credit rating. Thank you for your time and your support. I look forward to updating you on this year's results and discussing our 2021 operating plans in February 2021. With that operator, we can now open up the call for questions.

Thank you. [Operator Instructions] Your first question will come from a line of Pete Christiansen of Citi. Please go ahead.

Good evening. Thanks for the question. Nice trends, gentlemen. I wanted to dig into the growth that you're seeing in Multifamily bookings a bit and there's this notion that you have a bifurcation in the market between metro and suburban areas. They can see as growing in metro areas, higher competition in suburban areas. Can you talk about what you're seeing from a sales perspective, where is the platform really winning today?

I don't think we have our sales results broken down by urban and suburban. But my sense of it is that we are going to be seeing strong sales in the CBDs because there are a lot of properties in the central business districts that are in lease-up. There's been a high supply there, and those folks would have well ahead of any disruption would have allocated significant investment for marketing for leasing. But at the same time we haven't heard anything to indicate that suburban properties aren't also accelerating their investment in Apartments.com. So it's across the board that we're seeing this. I think one of the more exciting things is when you look at that number for accelerated sales into one to four units, which has both suburban and CBD. You can see that, I mean, year-to-date, I think there was 5,700, 5,900 and half of the sales occurred in the last quarter. And that's that mid-market sales team and they're basically geographically independent. They're covering suburban, urban, rural, the whole nine yards; so good pacing on that across the board there.

Next question will come from the line of Mayank Tandon of Needham. Please go ahead.

Thank you. Andy, you mentioned the international opportunity to ex-domestic. Just want to get your thoughts on sort of how you go about building it out? Is it still market-by-market? I think you launched Madrid like several years ago and then you did that deal in the UK, Realla I believe. And then you got this deal announced today. Just want to get your thoughts on inorganic versus organic to take advantage of the opportunity internationally? Thank you.

Sure. So Sarah Spray is holding up her hand saying it's three times the – the global opportunity is three times U.S. opportunity. I, in editing the script, sandbagged it down to two times the opportunity. So we could debate the semantics of potential there, but we can all agree it's large. And the nice thing about it is it continues to differentiate us as a particularly valuable vendor to folks who are flowing capital across borders. So when you look at some of the bigger markets, London, New York, often more than half, as much as 70% of the capital going into investment-grade properties is crossing borders. So building a good international solution is particularly valuable to a lot of our best clients. I don't think we have the same opportunity to acquire in the traditional commercial real estate space internationally. Like we're just well ahead of any other solutions out there around the world, I mean, there are a couple of little players here and there, but not quite the same opportunity we have here in the United States. The new international CoStar really looks quite impressive when you see it; you'll think, okay, that's really nice. It's very elegant. And our thought is that our clients subscribed to national data in their countries will just be able to see properties around the world. And the addition of Emporis allows us to really crank up what they're going to see when we integrate that in. So as soon as we finish that, someone in New York would be able to see thousands of properties in San Paulo or in Buenos Aires or in Tokyo. And now we won't have the same level of detail that we have on CoStar properties in London or New York or Richmond, but it'll still be decent content. Our plan is to focus first on integrating in Germany and Spain, where we already have a wealth of content, get that in there. And then we've identified an insane number of parameters, but I won't go into a target set of countries and a pacing for those countries based on liquidity, transparency, availability of data, bunch of other things. And we're going to start with a light model. We might put a team of five or 10 folks into Portugal and focus on comparable sales news, market analytics, comparable cell research and then scraping a lot of the availability content, user data. And we're going to treat it a little bit like we treat the United States where we did flights of cities. We didn't do one at a time. We did five at a time, 10 at a time, so we'll flight cities and we'll just keep working at it until we've gotten through our initial hit list of about 50. We'll put one or two salespeople in each one of these markets. Again, these investments are not nearly as large as the investments we made when we went into the United Kingdom or beyond; we're relying more on scraping and user entry, which has become bigger and bigger for us; and then also digitally uploading user content. So it'd be – it's an odd time to do it when you can't cross an international border; by the time we've got everything ready to go, anticipate that you will be able to cross borders again.

Next question will come from the line of Ryan Tomasello with KBW. Please go ahead.

Good evening, everyone. Thanks for taking the questions. The for-sale housing market is clearly seeing an acceleration in demand, which I think has a lot of people wondering if this represents a secular shift in home ownership preferences. So my question is with that as a backdrop, is there any desire to expand CoStar's footprint in housing beyond the rental market? What types of areas of that sector could make more sense and be most complimentary for example, anything on the marketplace side, or perhaps on the construction data side, that would be an interesting area for CoStar?

Yes. So, I mean, there are a lot of different sub-sectors, just like there are a lot of different sectors in the commercial real estate information and marketplace area. There are a lot of sectors in the residential side. I think that it's good to note that CoStar Group actually began life as a residential information business. So when I first started, I was doing assessor recorder deeds and downloading MLS data. So actually, we started residential. We've focused on commercial, obviously. Looking at the similarities, we're talking about the construction data areas which are interesting, historically not terribly interesting for a number of different reasons. There are information services, there are lending services, there are marketplaces. I would note one of the things that stands out for me is that the United States is an oddly underdeveloped country when it comes to residential marketplaces. If I look at a mature residential market place provider like REA Group in Australia, and I take the relative size of the U.S. and Australia on a GDP basis, it would imply that you would create a market cap of about $200 billion in the U.S. on a residential marketplace. You could easily create $1 billion plus of EBITDA in that area and yet, no one's really doing a good job there. Same thing with Rightmove in the United Kingdom; if you just take their 50%-plus margins, I think they're 60% to 70% of margins, but they're huge. And you just scale them to the U.S. there's clearly a lot of opportunities in the U.S. that are underdeveloped while people are moving away from really pure digital models and getting into actually becoming players in brokerage and flipping and mortgages. So I think there are some big opportunities out there, nothing to talk about today, but very focused on it. And it's an area we feel very comfortable with because we've been working with that space for a while. You can see we're selling a lot of products that are essence or houses for Apartments.com recently. So it's interesting; we're keeping an eye on it and there's nothing remarkably different about the picture of a house, a dot on a map for a house, a dot on a map for a building, and an assessor parcel record for an industrial building or a house or a walkup, so all very similar. But again, the whole space of digital real estate is just massive and has an unlimited amount of opportunity.

Next question will come from the line of Mario Cortellacci from Jefferies. Please go ahead.

Hi. Thanks for the time. I'm just curious about Q3 new bookings. And I know that in Q2, a majority of it was in June, and I'm assuming that that pent-up demand carried over into Q3. So I just wanted to get a sense for what the cadence of the net new bookings was throughout the quarter. And then maybe you can even go a level deeper and maybe give us a sense for what the cadence was for CoStar Suite and LoopNet and Apartments.com. Just to get a sense for which was when it may have accelerated versus which may have just had that pent-up demand and had maybe the first month be the largest?

Sure. Let me take a shot at helping you with that one, Mario. The phenomenon we saw in the second quarter was clearly one of significant disruption early in the quarter, and then with a strong rebound particularly led by Apartments.com and the marketplaces. I think when I look at the pattern that we saw in the third quarter it was really pretty well distributed. There wasn't a slowing in the first month and then a big acceleration to the end. It was pretty evenly balanced. I think that pent-up demand that came out of April and possibly May, a lot of that came into June, and then it's sustained itself pretty strongly in the third quarter across all of the months. Typically, the third month of any quarter is our strongest from a sales perspective, and that's as much just with sales pacing and making the quarter closings of the sales force focus on. But I think if you look at each of the businesses, the marketplaces were very steady sequentially on the quarters, multifamily tends to come off in the third quarter versus the second quarter numbers that seasonally same thing this year, but it was still very strong versus last year as Andy mentioned. LoopNet performs strongly across all the months. Information services the same, with probably some slight growth as STR continues to just month-to-month do well with its customers and CoStar, I think, had a very solid pattern across the quarter as well with no major real cycles to point out. So I think it was pretty evenly balanced and more so than actually some other quarters. So it's encouraging that we've seen that and that hopefully, we'll see that same strength carry into the fourth quarter.

I think the standout was probably LoopNet really; the CoStar sales force felt pretty positive about the LoopNet product and the potential for that as the quarter went on.

Next question will come from the line of Sterling Auty of J.P. Morgan. Please go ahead.

Yes. Thanks. Hi guys.

Hey, Sterling.

I missed a few set of questions. Can you guys give us some more detail on the acquisition that you made? You gave some of the properties, but what is the price paid for an asset like that? And how much does that jumpstart your ability to really get kicked off in that region?

Yes. So I'll let Scott comment on the price. I think he'll say diminutive. I think it's in line with a coffee budget. And lately we haven't been using much coffee here, though I did buy my own milk for headquarters today. So the – yes, so it's a relatively small purchase price – a small revenue stream. It's a company I've known; I've known the founders and the principals for a number of years. It's recently been acquired a couple of years ago. I think I've known this company for 10 or I think I went over to visit them 15 years ago, or 12, 15 years ago. They have a network of photographers and researchers who are volunteers, sort of like Wiki around the world who go around to take pictures of buildings and collect data about who the architects are, the construction company, their focus intent. They initially focused intensely on skyscrapers. They gave an annual award for the best skyscraper in the world. But as time went on, they started focusing on smaller and smaller buildings and some cities where they've got good volunteers; out there they'll have great coverage, whether it be Sao Paulo or Buenos Aires or whether they’ll be in Tokyo. They don't have the current availability and comparable sale data we might have. They don't have the news, but it's a great – it's a great sort of grid for us to use to start to bring content to these markets. And it has tremendous branding benefits. So the first time next year, when a customer – a longtime customer in New York who actually has cross-border investments, turns on their CoStar terminal and can browse different cities, beautiful buildings in different cities around the world. I think people are going to waste a bunch of time looking at buildings all over the world from their CoStar terminal. And I think it's a great branding event. I don't – when I look at a London broker, they often sort of look at CoStar as a London company or a Chicago broker often looks at CoStar as a Chicago company. I think this sort of expands their – our brand and has them view us a little bit more like a Bloomberg, a global player really moving away from what started life as an outsourcing function for these brokerage firms or owners to becoming more of a unique, completely different animal, that's a vast global network of valuable commercial real estate data. So it's a teeny company, but it's a fun one. It's exciting. It's got some great field researchers. We can't wait until we can travel and we can host these photographers for a global conference, and we'll end up taking a number of these volunteers and hiring them and making them full-time photographer researchers in South Africa or in Kyoto or in Sydney or in Moscow or in Bogota, wherever they might be.

Your next question will come from Andrew Jeffrey of Truist Securities. Please go ahead.

Hey, good evening. Appreciate you taking the question. Andy, I liked the description of some of the customer characteristics – property characteristics in apartments. I wonder if you could talk a little bit about sort of how you'd frame up the, I don't know if there's an average or a template kind of customer, but when you talk about the average spend, especially on vigor customers, but also down market. Can you kind of frame up how much more you think you can take, and then what the average revenue per property might look like by segment at maturity. It's a wallet share question.

Sure. If I just take the – and I think that there's some noise in that one to four category, but it's a 100 unit plus category we're at around $1,000 per month per property. I think that as the value propositions of digital marketing continue to grow for these owners, I think that number can – there's room to grow there overall pretty significantly. I think that when you look at the five to 100, that the $500-some, that's an impressive amount initially. Those are often being sold by relatively junior new people to the sales world for us in our mid-market group. So as they gain experience and as people become familiar with the value proposition of Apartments.com, I think that people bid for more exposure and drive some of those price points up in particular in the middle. It might move up closer to the thousand mark. And then at the lower end, that number is really quite impressive to me. This is our first year really focusing on that area and to add a sales team of about 30 folks focusing on the mid-market and the smaller properties and come up with 5,700 properties at $150 per month. That number may be a little rough because they can extend; the time periods is a little flexible. Many of them usually lease their property up within the month but then go a little bit further than that. But roughly $150 per month. If you think about it, the per unit cost is higher and higher as you get smaller. So the folks over a hundred units are getting a real bargain at $1,000 and the folks, the thousands of people beginning to buy from us from single-family homes and condos and townhouses, they're willing to pay a real premium at that $150 price point. That's probably 10 times the price point or more that a Greystar is paying for a hundred unit plus community. So, I think, we'll get – we've had five years of continued appreciation in our average price point in all these areas. I think that trend will continue as we continue to build out a stronger and stronger product offering. And then the thing that I'm very focused on, I hope you're listening to me, Paige Forrest is we need to build a bigger boat because everyone wants to ride, so we need more salespeople, but we can do that. We can build that team out. It's a great ROI. It's real straightforward. And we have a great team to grow with.

Your next question will come from the line of George Tong of Goldman Sachs. Please go ahead.

All right, thanks. Good afternoon. You're building out a dedicated sales force for LoopNet with 100 to 200 sales professionals. Can you discuss the timing of when the sales team will be built out by? How you plan to transition the sales process away from CoStar Suite sales? And what the implications are for margins?

Sure. Yes, so LoopNet's separate sales force. I believe we've already hired the first 15 to 20 people. We have also reassigned maybe five or six people already, 15 to 20 folks in that group. For the foreseeable future, the Apartments – the CoStar sales team is doing a great job selling LoopNet. We'll continue to do so. They get the hang of it. They're doing a great job, but we just have so much opportunity on the LoopNet side and so much opportunity on the CoStar side. We really want to give folks the ability to focus on their core areas and make sure that all the good prospects are getting covered in any given year and that we are pursuing best practices on retaining and renewing those folks that do begin buying. So what we'll do is as we have both the CoStar team selling LoopNet and the new LoopNet team selling LoopNet, we will do cross-commissioning, which means that if I'm the primary lead on an account and I'm a CoStar rep, when a LoopNet rep comes in and sells that account, I will get some referral commission, and I get higher rates on my CoStar. So that everyone is on the same team. The more they're selling LoopNet in the market, both the CoStar and the LoopNet people will get escalated in their commission rates. We do it, so that it's still a very high margin. I think that the ramp-up period for CoStar has historically been six months. As we bring people in and if they focus on the more entry-level LoopNet buyers, that ramp-up period is typically two months. As they go to higher-end properties that might be six months. So I don't think there's a huge sag as we invest in bringing these people on board. I think they'll get productive pretty quickly. So ultimately, our fixed costs are really the research, the software and the margin as you add these salespeople; they are incredibly high margin incremental adds after the first six months of onboarding. I think it will just allow us to accelerate revenue growth, and I think it will enhance margin and allow us to invest more in the product while maintaining a high margin over time. And the one thing that's just obvious to me is that the market opportunity is just larger than our current sales force. And our current sales force is doing a great job on a one by one basis. These folks are productive; they're selling, but they're profitable, but we just need more resources and we'll be doing that over the next year or so. So one of the things I've done with all of our sales forces is I've asked them to give me a five-year plan and a one-year plan as to how many salespeople they think they need to base that on how many high-quality prospects we have, what's best practice for keeping contact with those high-quality prospects, and then the customers we have in each of these sales areas and what is best practice on onboarding and maintaining a relationship with those folks. So, it's just sort of a mechanical calculation. We'll have a one-year goal for staffing gains and a five-year goal for staffing gains. So that's where we are.

Your next question will come from the line of Stephen Sheldon of William Blair. Please go ahead.

Hi, thanks. On the multi-family side with solid levels of supply hitting the market recently, and over the next year, and with some forecasting vacancy rates to trend higher including I believe the forecast from your research group. What could that mean in terms of the ad sales environment for Apartments.com and any other multifamily marketplaces next year? Could it become an even more favorable environment than what you've seen this year as owners try to compete for tenants and to fill vacant units?

Yes. So historically, the conventional wisdom has been and then the empirical experience this year is that the higher the vacancy rate goes, the greater the demand for lead generation with an online marketplace like Apartments.com. So we'd heard when operating Apartments.com for the last five years prior to the pandemic that when the market goes south and the vacancy rates rise, demand goes up for these ads and then the pandemic hit. In fact, that's what we observed. If we do get a continued secular shift to housing and obviously, you know, new home construction now is through the roof, lumber prices are through the roof, numbers are huge. There could be more competition for renters and that would bode very well for Apartments.com. I was on the phone with a friend last night, who is looking at running out their New York City flat, and they're having a tough time. I sold my lifelong friend a $159 ad. That's how good a friend I am.

Always there to help.

Yes, always there to help. And I know you can't use my pickup truck to move. I'm sorry.

We have no further questions at this time. I'll now turn the call back over to presenters for closing remarks.

Thank you all for joining us for this third quarter earnings call, and we look forward to wrapping up the year and I guess a number of months from now, but we'll update you on our progress towards some of the goals we've talked about today. And I hope you all have a good evening, and stay safe. It's great for us to be back together in the same conference room for the earnings call. Thank you.

This concludes today’s conference call. You may now disconnect. Thank you.