Ladies and gentlemen, thank you for standing by and welcome to the CoStar Full Year and Fourth Quarter 2020 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. I would now like to turn the call over to your speaker today, Mr. Bill Warmington. Please go ahead, sir. Thank you, Angela. Good evening and thank you all for joining us to discuss the fourth quarter and year-end 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 the company's outlook and expectations for the first quarter and full year 2021. 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's press release issued earlier today and in our filings with the SEC including our most recent annual report on Form 10-K and subsequent 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 the 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 the replay of this call. And with that, I would like to turn over to our Founder and CEO, Andy Florance.

Well done, Bill. You really did that preamble beautifully. I'm reflecting that in your career you've probably listened to easily 10,000 earnings calls, and now you're actually reading the preamble. So hang in there; this is a big day for you. Okay, well. Good evening and thank you for joining us today for CoStar Group's fourth quarter and full-year 2020 earnings call. I just assume all of you are as excited as I am to be here tonight, so welcome. Total revenues for the full year 2020 were $1.66 billion, which is a 19% year-over-year growth and $9 million ahead of the top end of our guidance range given in late October. Quarterly sales bookings were a solid $49 million, with second half bookings rebounding 24% versus the first half of 2020. Our profit performance was equally strong, delivering full-year 2020 adjusted EBITDA of $553 million, an increase of 9% year-over-year and $23 million above the high end of our guidance given in October. What I believe is even more impressive, despite the severe disruption of our customers and our teams caused by the pandemic in March, is that our financial results are either in line with or exceed the initial full-year guidance forecast we've provided in February of last year. CoStar Group is absolutely a resilient business. In addition to the strong financial performance of our businesses in 2020, over the course of the year, we've raised $1.7 billion in equity and launched our initial $1 billion bond offering with an investment-grade credit rating. Our marketplace businesses, particularly the Apartments.com network, hit record highs across all of our metrics. We've also closed three important acquisitions in 2020: Ten-X, Emporis, and Homesnap. Ten-X positions us with nearly perfectly counter-cyclical business and an opportunity to leverage digital marketplaces into greater commercial real estate liquidity. Emporis extends our reach with content on hundreds of thousands of properties around the world. With the addition of Homesnap in December, we expand our addressable market beyond commercial real estate into residential. Overall, 2020 was clearly a transformative year and as we look ahead to 2021, our strong balance sheet and acquisition track record position us to successfully pursue multiple large growth opportunities through organic investment and M&A. Before we get further into our results, I want to briefly address where we stand with our recently announced offer to acquire CoreLogic. One week ago today, we delivered a letter to the Board of Directors of CoreLogic setting forth the terms of a superior proposal to acquire CoreLogic. Under the terms of the proposal, CoreLogic shareholders would receive 0.1019 shares of CoStar Group common stock in exchange for each share of CoreLogic common stock, representing a value of approximately $95.76 per share based on CoStar Group's closing share price on February 12, 2021. As I describe the CoreLogic offer, I'll be using that closing share price and all the share prices relative to that day. The CoStar proposal implies pro forma diluted ownership of approximately 16.2% in the combined entity for current CoreLogic stockholders. CoStar Group offers are clearly superior to the offer for the CoreLogic shareholders in immediate value. Our all-stock merger with CoreLogic improves the value of their pending transaction with Stone Point by 20% based on the date of the offer. More importantly, we believe that with hundreds of millions of dollars of identified synergies which I'll discuss in a bit more detail. The implied ownership of our proposal provides substantial value upside which we believe would deliver value in excess of $105 per share to CoreLogic's stockholders over time. CoStar’s Group stock is a solid currency and has performed exceptionally well through the decades, driven by solid fundamentals such as our compound annual revenue growth of 21% over the past 20 years, similarly 21% over the last 10 years, and 19% over the last five years. With consistent growth and a huge addressable market, CoStar Group's share price has appreciated 496% in the past five years, 1,491% over the past 10 years, 3,640% over the past 20 years, and 10,342% since our IPO. CoStar stock has consistently proven equally as valuable as cash. In addition to our all-stock offer, we plan to invest approximately $2 billion to pay down CoreLogic's existing debt and another $500 million to $1 billion to unlock the value of the company's assets. We believe the combination will create long-term growth opportunities that will help support double-digit revenue growth for the combined company for many years to come. This combination would triple CoStar Group's total addressable market by combining the global leader in digitizing commercial property with a global leader in digitizing residential real estate. We estimate that globally commercial properties have an aggregate value of $66 trillion and residential properties have an aggregate value of $114 trillion. Combined, these companies will be very well positioned for growth, meeting the information analysis and marketing needs of the $180 trillion global real estate industry. The global value of real estate is twice the value of all public companies combined. We believe that we can significantly accelerate CoreLogic's organic growth rate. CoStar Group has a well-established track record of acquiring slow growth companies constrained with single-digit organic growth rates and have managed them to become fast growth companies with double-digit organic growth rates. In the three years prior to CoStar Group acquiring LoopNet, revenues on average were negative 2.3% a year. In the past two years, LoopNet has grown almost 20% a year and already we've grown LoopNet's revenue more than fourfold since acquisition. In the three years prior to acquiring Apartments.com, revenue grew at 7.7% a year on average. In the past three years, Apartments.com has grown almost 30% a year on average. Already we've grown Apartments.com's revenue by more than 6.5 times. We believe that with product enhancements, new products, more direct selling, cross selling, selling to new audiences and segments, and integrated product offerings, there is a similar opportunity to increase significantly CoreLogic's organic growth rate. CoStar Group is the perfect strategic partner for CoreLogic and together we can drive transformative innovation. CoStar Group provides commercial real estate solutions and CoreLogic provides distinct residential real estate solutions to brokerage firms and real estate agents, banks, lenders, local, state, and federal agencies, property owners, developers, investors, appraisers, and firms selling solutions to the people and companies that use real estate. A very large percentage of these organizations have an interest in both residential and commercial, but today have to purchase different solutions from CoStar Group and CoreLogic to meet their complete real estate needs. Using disparate point solutions is inconvenient and reduces the value of the respective offerings. This is a strategic acquisition that will provide our combined clients with integrated solutions across all the relevant real estate sectors. The combined company expects to eliminate the artificial difference between commercial and residential real estate digital solutions. We believe that these integrated solutions will create massive cross-selling opportunities, significantly increasing product uptake, sales, and hundreds of millions in revenue synergies. CoreLogic has approximately 150 professionals in its sales organization, and CoStar Group has 1,060. In combination, the companies have the resources necessary to realize the potential cross-selling opportunity. We believe that many of the solutions CoStar Group so successfully offers today, which are only delivered to commercial real estate, can be extended into residential real estate. Marketplaces like Apartments.com and LoopNet are just two examples of these opportunities. Conversely, many of the products CoreLogic only offers to residential audiences today could also be offered to commercial real estate audiences. Property Tax Solutions, Appraisal Management, Symbility, Flood Data Solutions, and Building Cost Data are just a few examples of these sorts of opportunities. We believe that by leveraging existing technology assets into new segments of real estate, the combined company can create additional significant new cross-selling revenue synergies. Further, we believe that we can achieve all of these synergies while significantly reducing the volatility of CoreLogic's revenue, which has historically experienced exposure to market cycles.

Thank you for that introduction, Andy. 2020 was a great year for CoStar both strategically and financially, and personally I find it much easier to sleep at night with $3.8 billion in the bank, a negative leverage, and a shiny new investment grade debt rating sitting on my nightstand. Now we certainly staged a great comeback rally after the pandemic scrambled our plans this past year and we managed to beat the original 2020 profit guidance that we gave way back in February. I think it's a great compliment to the strength of our business model, the value of our product and the execution focus of our leaders and all of our teams. As Andy mentioned in his comments, we're excited for potential opportunities to add CoreLogic to our business. But I won't be providing any financial comments nor will I take any questions on this topic during the Q&A session. So onto some color on the results. So revenue here, Andy talked about was nicely in the fourth quarter margins were also improved in the fourth quarter. Our adjusted EBITDA grew over the year and from the third quarter and we ended up outperforming the high end of our guidance by $23 million, which is a fantastic outcome even as we continue to invest to support our future growth which involves the marketing investments we've made this year for Apartments.com and increased marketing that will begin later in the year for LoopNet. Before I go through our sector results, you noticed that our EBITDA and our net income results for the fourth quarter and the full year of 2020 include one-time costs related to the terminated RentPath purchase agreement. The proposed transaction was terminated in the fourth quarter and we recorded a $59.5 million charge as part of G&A expenses. This charge includes settlement of the termination fee for $52 million as well as the cost for extension payments that we made earlier in the year. A total $59.5 million charge is removed from our adjusted EBITDA calculation as non-recurring acquisition-related expenses. The approximate income our net income for the year is $44 million or $1.15 per diluted share. So onto our revenue by services, CoStar Suite grew 5% in the fourth quarter and 8% for the year, which is a little bit ahead of what we projected back in October. We've seen stronger than expected sequential performance in CoStar Suite in both sales and renewal rates, and we expect quarterly growth in revenue will continue. We expect CoStar Suite growth in the 5% to 6% range for the year 2021, with the first quarter representing the low point of growth at around 3% to 4% with the most significant difficult comparables to get passed for the next year. The CoStar Suite revenue growth is expected to increase sequentially throughout the year. We've not assumed any contract renewal rate increases in our outlook, although we anticipate that this could occur if the economic environment strengthens in the latter part of 2021. Information services revenue grew 16% in the fourth quarter and 47% for the full year and includes the impact of STR acquisition which we closed in mid-fourth quarter of 2019. Excluding STR revenue, information services in 2020 was probably in line with revenue in 2019 for both the full year and the fourth quarter. As we move past finally, the high levels of one-time implementations revenues that we're in our 2019 results for the real estate manager business. Subscription revenue growth remains in real estate manager up 11% in the fourth quarter and increasing 13% for the full year of 2020. STR results in 2020 were very encouraging as we work to integrate STR data and products into CoStar. As we all know, the hospitality sector sort of took it on the chin in 2020. The hotel revenue per available room down as much as 50% in the U.S. and up to 90% in some European markets. Nevertheless, STR proved vital to the operations of our hotel customers and our revenues grew in the fourth quarter sequentially up 5% to 6% over the third quarter of the year. Retention rates on STR subscriptions remain over 95% and STR subscription revenues increased in both the third and fourth quarters of this year. A strong and positive sign as we work towards launching the new STR products in CoStar that Andy talked about in 2021. Overall we expect double-digit revenue growth in the 10% to 12% range for the information services sector in 2021 starting in approximately 7% revenue growth in the first quarter of 2021 and improving as we continue throughout the year. We had another great year in the Apartments business with 23% growth in the fourth quarter and 22% revenue growth for the year, all of which is organic growth. The number of properties advertising with us increased around 10% in the fourth quarter while the average revenue per property increased by approximately 11%. Revenue per property increased as a result of customers continuing to trade up to high value ad packages as we did not raise pricing on our rate cards at all during the year. For 2021, we expect to see continued strong performance in sales and revenues for Apartments with revenue growth of approximately 20% in the first quarter and 19% to 20% for the full year. The commercial property and land sector grew 51% in the fourth quarter and 31% for the full year including the impact of the Ten-X acquisition. Organic growth was 15% for both the fourth quarter and the full year respectively. For 2021, we expect total revenue growth for commercial property and land in a range of 45% to 50% for both the first quarter and for the full year. LoopNet revenue growth was stronger than ever, 20% for the full year of 2020 and 20% in the fourth quarter. The signature ad revenue grew 50% on a full year basis. We expect LoopNet revenue growth to continue at around 20% in 2021 with growth of around 15% to 16% in the first quarter against tougher year-over-year revenue comparisons. Revenue on our land and small business marketplaces were essentially flat in the fourth quarter and grew at single digits rates for the year. The small business marketplace in particular was sharply impacted by the pandemic in 2020. We expect growth rates to recover in both land and business for sale marketplaces in 2021, both revenue increases in the 8% to 10% range. Ten-X delivered a strong finish to the year with $19 million of revenue in the fourth quarter and $32 million in revenue in 2020 exceeding our initial revenue estimates and delivering positive pro forma growth year-over-year since the acquisition. Now each of the years in the three years prior to acquisition of Ten-X revenue had declined by approximately $10 million per year. First one positive data point is not yet a trend but the metric is promising for Ten-X as Andy talked about. Due to the transactional nature of the revenue in Ten-X, we expect to see revenue fluctuate from quarter-to-quarter depending on economic conditions, historical seasonality, as well as our own investment and integration initiatives. Historical seasonality for Ten-X indicates lower transaction volumes typically in the first quarter and stronger volumes in the fourth quarter. Our 2021 forecast assumes around $50 million to $55 million in revenue for Ten-X with approximately 20% of net revenue in the first quarter. We've built our revised pricing rate card for Ten-X into our outlook but have not assumed material volume lift from distressed property sales or from our marketing investments in 2021, making this what I consider a relatively cautious forecast until we see how the year starts to turn out for the business. Homesnap is our latest addition to the commercial property and land family having completed the acquisition in late December of 2020. We did not include any Homesnap result for the handful of days that we owned the company in 2020. Homesnap revenues are comprised of both advertising and subscription revenue, with advertising making up approximately two-thirds of the revenue. Our 2021 forecast assumes around $50 million for Homesnap with approximately $10 million of that revenue in the first quarter. Pro forma growth rate of the business is a little over 20% year-over-year in 2021. Profit contribution of Homesnap in 2021 is expected to be around negative $5 million as we continue to invest for growth. We absorb both the acquisition deferred revenue adjustments which are typical in acquisitions of this type and the cost of moving the approximate 165 Homesnap employees to our CoStar compensation and benefit plan. Our gross margin was 82% in the fourth quarter and 81% for the year up two-fold percentage points from last year and four-fold percentage points from 2019. This is a great reflection of the strong leverage inherent in our subscription business model. We believe we can continue to deliver revenue growth over our underlying platforms and produce margin improvements over time. We expect gross margin of approximately 81% for 2021 with margins early in the year around 80% as we add Homesnap to our results and improving to around 82% by the end of 2021. Net income was $36 million in the fourth quarter and $227 million for the full year which as I mentioned includes the tax-affected impact of $59.5 million of one-time charges relating to RentPath. Our effective tax rate was 23% for the fourth quarter and 16% for the full year. Fourth quarter adjusted EBITDA was $167 million, up 18% from the fourth quarter of last year and came in approximately $23 million above the high end of our guidance range. The improved adjusted EBITDA was a result of outperformance of $9 million in revenue, lower spending on personnel marketing and improvements in our bad debt level from earlier in the year which is certainly a welcome sign. The resulting adjusted EBITDA margin of 38% in the fourth quarter was a full five percentage points above the midpoint of our guidance range. Cash and investment balances were approximately $3.8 billion as of December 31, 2020, and we generated almost $500 million in operating cash flow in 2020, $486 million to be exact and deploying approximately $440 million of that positive cash to buy Ten-X and Homesnap. In addition, if you've been following news in Richmond, Virginia lately, you'll have noticed we purchased a parcel of land adjacent to our current Richmond location in the third quarter of 2020 and we recently purchased the Richmond Building that we've occupied under sublease for $130 million in the first quarter of 2021. Both of these purchases provide a variety of expansion options for our teams in Richmond or perhaps we should become a digital commercial property flipper. I hear it's a trending new business model that is emerging these days. I'll leave that for future earnings calls. Onto the performance metrics, which won't include anything for Homesnap until future quarters. We achieved $49 million of net new sales in the fourth quarter, rounding out a great second half recovery in sales following the pandemic disruption in the first half of the year. We saw continued solid sequential improvement in CoStar bookings and another very strong quarter in Apartments. The strength of our sales efforts along with planned investments in both sales and marketing in the coming year are expected to keep us on track for strong double-digit organic growth in our subscription businesses in 2021. Our salesforce totaled approximately 900 people at the end of the fourth quarter of 2020, an increase of around 40 people from the third quarter and that's over 50 people from the fourth quarter of 2019. We continue to build out our dedicated LoopNet sales team as we discussed last quarter which accounted for most of the growth in our sales team in the fourth quarter. So for perspective at the end of 2020, our largest sales organizations are CoStar with 340 salespeople, Apartments with around 320 salespeople and LoopNet with 115 salespeople. The renewal rate on annual contracts for the fourth quarter of 2020 was 90%, slightly better than the 89% in Q3. It's great to see our renewal moving back up. If you recall earlier this year there were concerns of a deeper more sustained drop in renewal rate similar to what we saw in the last recession, but it looks as though those concerns can be put to rest at least for now. In fact, the fourth quarter 2020 renewal rate is essentially in line with the fourth quarter of 2019. The renewal rate in the fourth quarter for customers who have been subscribers for five years or longer was 95%, in line with the renewal rate of 95% in the third quarter of 2020. Subscription revenue on annual contracts accounts for 78% of our revenue in the fourth quarter, down approximately five percentage points compared to last year. The decline is entirely due to the addition of Ten-X into the portfolio this year. If we include subscriptions on shorter duration contracts such as three, six or nine months, approximately 92% of our revenue is subscription based. I'll now discuss our outlook for 2021 in the first quarter. We expect full-year revenue in the range of $1.925 billion to $1.945 billion in 2021 which implies an annual growth rate of 17% in the midpoint for the year. As I mentioned previously, our outlook includes approximately $50 million for the Homesnap which we acquired at the end of 2020. On an organic basis excluding the full-year impact of Homesnap and Ten-X which we acquired in mid-2020, we expect growth of approximately 12% to 13% for the full year of 2021. We anticipate organic growth rates will be lower in the first quarter in the 11% to 12% range as this is expected to be the low quarter for CoStar Suite. Throughout the year we expect organic growth rate to improve sequentially and finish the year around 14%. For the first quarter of 2021, we expect revenue in the range of $450 million to $455 million, representing revenue growth of 15% year-over-year at the midpoint of the range. For the full year 2021, we expect adjusted EBITDA in the range of $640 million to $650 million, which implies an adjusted EBITDA margin of a little over 33% at the midpoint of this range. Excluding both the revenue and the adjusted EBITDA of Homesnap, our adjusted EBITDA margins are expected to improve by approximately 120 basis points in 2021 to 34.5% compared to the adjusted EBITDA margins of a little over 33% than we achieved in 2020. So overall our underlying margins are improving over 100 basis points year-over-year in 2021 to a little over 34% prior to the acquisition of Homesnap. We plan to increase our investment in marketing in 2021 to support the significant growth opportunities we have in both LoopNet as well as the Ten-X business. We expect total marketing costs of approximately $345 million in 2021, an increase of around $70 million of our marketing costs in 2020. The Homesnap acquisition brings along a little over $20 million of the increased marketing spend with the remaining net increase focused on LoopNet and Ten-X as Andy talked about. When you think about it, just a few years ago increased investments of this scale like the ones we expect in 2021 would have had a significant negative drag on our profitability. It is increasingly obvious that with the increasing scale of the company, we're now able to invest much more aggressively for future growth while at the same time improving our profit margins. For example, in 2021, our expense growth without accounting for the recent acquisitions year-over-year is probably around $120 million, which happens to be about the same amount of marketing investments that was made back in 2015 when we launched Apartments.com. You may recall at that time, the $120 million marketing investment wiped out all of CoStar Group's profit. By contrast in 2021, we can make that same size investment and not only will it not decrease our profit levels, but we will generate close to $100 million more adjusted EBITDA in 2021 than we did in 2020. This is a significant growth advantage as we continue to enter new market sectors. We expect adjusted EBITDA of approximately $140 million to $145 million in the first quarter of 2021 for an adjusted EBITDA margin of between 31% and 32% and approximately $20 million compared to the first quarter of last year. In terms of the timing of adjusted EBITDA across remaining quarters of the year, we expect second quarter adjusted EBITDA slightly lower than the first quarter as our marketing expense typically increases in the second quarter. In the third quarter, adjusted EBITDA is expected to move back up above the first quarter level with fourth quarter increasingly significantly as the marketing spend is expected to tail off near the end of the year. In terms of earnings, we expect full-year non-GAAP net income diluted share of $10.83 to $11.03 based on 39.7 million shares. For the first quarter of 2021, we expect non-GAAP net income per diluted share in the range of $2.33 to $2.43 based on 39.5 million shares. Now, with 2020 in the rear-view mirror, I believe we're firmly on track to achieve our long-term objectives of $3 billion in run-rate revenue and 40% adjusted EBITDA margins in 2023. 2020 was certainly an amazing year for our company for CoStar Group. We ended the year with strong double-digit revenue growth both in total and organic revenue growth and despite the continuing global pandemic and uncertain economic environment. We generated over $500 million of profit and nearly the same in operating cash flow while strengthening our balance sheet with both equity and investment grade debt. The acquisitions we completed represent significant, strategic and financial growth opportunities for the company and the acquisitions we're pursuing can truly transform the business.

Thank you for supporting CoStar this year in so many ways and I look forward to updating you on our results as we navigate the year 2021. Bill, let's turn the call now back over to you, so you can issue the ground rules for today's fun and exciting question-and-answer session. Thank you, Scott. Two items before we start the Q&A this evening. First, one question per participant, so make it an exceptionally insightful or probing one. And second, a reminder that we will not be taking any questions about our bid to acquire CoreLogic. Angela, would you please assemble the questions for the queue.

Our first question is from the line of Sterling Auty with J.P. Morgan. Please go ahead.

So in terms of the marketing investment that you're making across the business, what gives you the comfort that now is the right time that you can actually lift the gas pedal on spending for Apartments for the multi-family segment?

I would say that we got the pedal down pretty firmly. We're well over $200 million there on that. We're not increasing it, we're easing it off a little bit. But we're still there at a very aggressive pace. So with a little bit of net new investment into Ten-X and LoopNet. But we think we need to balance those investments across the whole portfolio and we think the ROI in LoopNet and Ten-X will be more impactful over the next two to three years in a similar investment Apartments.com. That's not to say anything negative about Apartments.com but we've had the pedal down pretty hard there for a while.

Your next question is from the line of Pete Christiansen with Citi. Please go ahead.

Andy, obviously outside of CoreLogic how are you feeling about the M&A environment? Are there other potential assets out there that are of interest and how are you feeling about the valuations for potential acquisitions?

Sure. So other than that $6.9 billion or $7 billion deal up here, there actually are other things out there that we are engaged with and developing. We have definitely - and so that is not the only thing occurring - there are things occurring. They all have a similar theme right now for us. They're all going - supporting the kinds of directions you're already familiar with, they're just strategic building blocks on the same theme. The valuations I would say that I have certainly seen a couple of deals going by at valuations that left me very, very comfortable not to participate. I took my hat off to this and said, wow, good work that's a heck of valuation. But there are a couple of things recently and usually my skepticism on some of the valuations I've seen in some places recently are around the total addressable market relative to the valuation. So maybe performing well in their context or in their field. But their field is relatively small; it doesn't have long-term growth. There's some frothiness out there, but there are also some real value places out there that we're focused on.

Your next question is from the line of Ryan Tomasello with KBW. Please go ahead.

Andy, I was hoping you could dive a bit deeper into your strategy for entering the residential portal space. There's obviously a lot to talk about there. But I think one key question, is how you intend to cost-effectively build consumer traffic considering the existing well-branded competition in that space? What traffic synergies do you think the existing Apartments.com audience can provide? And is there any competitive advantage that Homesnap's strong user base of agents can bring to help you build that consumer traffic on the residential side?

Yes, so we're not - but we've obviously been thinking about this and building that strategy and we believe there is a pathway to build organic traffic very cost effectively. We're not in a position to share our thinking on some of that right now for competitive reasons. I think that building traffic does not happen overnight. I mean these things you build this up through time. We obviously know how to build up traffic through time, we've done that. Anytime we enter into a new space and try to build traffic there's generally skepticism that you can build traffic in that space through time and we've proven we can do that. And in particular, we entered the apartment space seven years after Zillow had made a significant priority and we ultimately were clearly more successful in doing that. I think one of the important considerations as you build a marketplace or build a traffic on a marketplace is what if your revenue model and how strong is that revenue model and will that revenue model fund investments to continue growing traffic or is your revenue model actually a drag on your ability to grow traffic? And I think we see those conditions existing in the home sell market. Definitely Homesnap is a useful component in this and there's one or two other useful components that we're looking at. There's no guarantees on any of these things, but we're pretty excited to get working on it and we have a pretty clear view as to where we think we can take it and how we can get it. And I'm sorry, I can't give you more detail and stuff. But I want to have success in telling you about it. We'll make it less likely.

Your next question is from the line of George Tong with Goldman Sachs. Please go ahead.

Commercial property and land saw a step up in organic revenue growth this quarter as you continue to sell higher-tier ads in LoopNet, and you’re guiding further acceleration in 2021. How much of your client base do you believe you penetrated with higher tier ads in LoopNet and how sustainable is 15% to 20% plus organic growth in commercial property and lands?

I really appreciate that question. I really do. So we have just I mean it is really early, early days on these higher tier ads. So we've been very successful with that standard ad placement; in fact, in some markets, we have too much penetration. In Southern Florida, we might be 87% penetrated which I think is too high. But I think we're less than 1% penetrated in these higher tier ads and that's because we've just begun to really focus on bringing them out, as you remember. We acquired LoopNet. We separate out the information site from LoopNet, upselling to CoStar and then began developing more fully potentially LoopNet marketplace. We began aggressively bringing the Apartments.com style tiered advertising levels into LoopNet, last year was the first time we began doing this. So this is really the first year of doing that properly and aggressively and you have, I think there's - if we have 1,000 or 75,000 we're keeping an eye on. But you have two components moving. One is, penetration into which properties want to move up that prominence level of LoopNet and the other is, what people are willing to pay for that top position and both those items are moving. So it's sustainable for a decade or more, I feel comfortably that we could sustain this for a long, long time.

Your next question is from the line of Jeff Meuler with Baird. Please go ahead.

On the opportunity to upsell existing comps and tenant module clients into suites and that's where the innovation is going. Can you just help size up how big of an opportunity that is, like how much of the revenue base for that line item is still for comp or tenant module clients? How much uplift do you typically see when they transition over to Suite, etc.? Thanks.

Sure. So I'm going to be giving you, these are not precise numbers. I'm just going to give you numbers that are an educated guesstimate in order to give you a feel. I believe probably 15%, 20% of that customer base is not on the full Suite. And I think that typically it is a doubling as they go into the full Suite. And anytime you do something later, that's when it's time for us to do this and I think it's an opportunity that on reflection maybe we should have done it last year. But now as we bring in the CMBS and the international and the STR and we think we have another three or four innovations coming into and they're equally powerful. As we keep doing this, we need to - it's time to leave behind these partial solutions. This just doesn't represent our brand well - it actually saves us money to stop supporting these lesser modules. So I think it's in the tens of millions of potential revenues comfortably. And I think, more importantly, I think when it's done, I think the customer is happier. I think they appreciate a much more powerful product and they just - don't know what they don’t have.

Your next question comes from the line of Brett Huff with Stephens. Please go ahead.

My one question is, Scott you mentioned the TTM retention rate. I think you said it was 90 this quarter versus 89 last quarter. That's a question that we've gotten a lot and we obviously paid a lot of attention to that. Could you unpack that a little more? Is that small brokers not maybe going out of business as much as we thought? It is large brokers spending more? Is there a lever in there that could give us more comfort in the resilience of that in the face of what could be a pretty tough CRE market? Thank you.

Yes, sure Brett. The concerns as we went through the first to second quarter downturn was where would these renewal rates bottom out and if you recall, they went from 90% down into the low 80s in the last recession and so we watched closely really by customer type and customer size. Large customers all stayed with us. There was really increase at all in drop off rates from anyone that was five or six brokers or more or in the owner categories. It was the small brokers that dropped out over the summertime which also led to a little bit of increase in our bad debt. We saw in the later part of the year that certainly has trickled off and stabilized. We're seeing all property - all customer types as well as customer sizes now are back in the renewal rates that we were seeing in the beginning in the year at the end of last year. So it feels like, those that were going to drop out have dropped out and the rest are operating in a stable way and our sales are picking up. So momentum is good. Direct of travel is good and we think that will continue into 2021.

Your next question is from line of Mario Cortellacci with Jefferies. Please go ahead.

Maybe even with sort of continue with that thought on retention and actually maybe can you talk more about your sales cycle, during Q2 last year that was more or less frozen, the decision making based on. And I just wanted to see, do you think some of the success in the back half of the year was just some of that Q2 being pushed to the right or is it more less sustainable going into 2021 and even maybe with a ramping GDP in economic activity in 2021? Is there a lot of room for you guys to beat your guide based on that?

When we saw the response in mid-2021 especially in the marketplaces with the online traffic going to record levels and then the sales accelerating. We assumed one, there's clearly pandemic effect in there and then there's I think a continued longer-term adoption that will stick from that in that experience both from a customer perspective and our sales effectiveness perspective. So certainly there's more online eyeballs, there's more effectiveness to the online advertising and the effectiveness of our media that our customers can use to tour properties. Clearly are big hit in the year. On the other side, our sale effectiveness in our Apartments.com salesforce able to effectively and professionally connect with our customers and prospects through Zoom and remote working. They actually produce thousands of more effective customer meetings and maintain their same high NPS scores throughout the year. Allowing them to generate more sales per person than they have before. So we don't see either of those trends backing down either as we come out at the end of this year or going into next year. And with the momentum we have building our midmarket salesforce which we will increase, the growth we're starting to see in the IO property space and then the translation of those same effects into LoopNet as we build our separate salesforce in the LoopNet marketplace.

Your final question comes from line of Stephen Sheldon with William Blair. Please go ahead.

On Ten-X, you talked about not investing heavily yet on the supply side. Have you seen any momentum on the supply side I guess in the second half of 2020 with momentum you had bringing in more bidders? And then related to Ten-X, any update on what you see in terms of distress property sales and have you assumed any pickup in distressed activity in the 2021 or would that be potential upside?

Okay, so starting with the second question first. We have not assumed any pickup and distressed, that may be possible that will happen. Especially as a return to normalcy some folks will at that point calculate, it just doesn't work anymore - their property income sheet doesn't work anymore, their LTV doesn't work anymore. So I think there could be but it's not in our forecast. We actually are - so we closed that in June. So it hasn't been long. So we really jumped into this with both feet and we're really just on the demand side because that's the first component you got to build. And it's really a bit early to really expect any movement on the supply side because we're just now beginning to turn in results. I was wandering through my neighbor the other day I saw two guys drinking a lot of beers and chipping golf balls in their front lawn. I stopped and said hello to them. We chatted a little bit. One had just bought four multi-family properties to Ten-X that he didn't expect to sell and he was really kind of blown away, they sold with the number of bidders. I love the fact that a neighbor was surprised with how many bidders we had. I think actually he was visiting a neighbor. So that story gets around. He's going to tell people. He's with a big brokerage firm that will get around. But some of the - that's slower. That's what we're making in marketing in 2021 will absolutely drive the supply side. So the broad media campaigns about the value, don't auction it. Ten-X it. That will reach a lot of the supply side. Our performance numbers that we can use as sales demonstrations are fantastic and those will be very compelling. Also the gamification of the product, where we hope to bring in hundreds of thousands of players on the supply side and educate them in the platform while they're having fun and winning some prizes. I think that will drive the supply side. We're educating a massive team in Richmond, Virginia to educate the people they talk to all the time when they first bring a property to market and they're going to educate them about the opportunities on Ten-X. That should drive the supply side and then as we grow the number of salespeople, that will grow the supply side. So I hope that by the end of 2021, we can report really good progress on both the number of bidders showing up to each property and the number of total properties going to market and the trade rate, and if those things are all coming together, there is the potential for a very significant network effect. Because the results you get from aggregating a huge community of buyers on an online marketplace is in almost all cases vastly superior to an offline anecdotal email blast kind of non-scale marketplace. So I like where it's going. I hope we can share real progress on the supply side and demand side next year and that's what we're working towards. But I'm really pleased with what we've done since just the July close. So and I think the Head of Ten-X is on his way over here after the call to work on some more stuff with us.

That is correct. And so I think we can wrap up the call, and we certainly, Scott, Bill, and I certainly appreciate you joining us for this fourth quarter year-end earnings call and we look forward to updating you on more interesting developments in earnings calls in the near future.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines.