Good afternoon and thank you for attending today's CoStar Group Second Quarter Earnings Call. My name is Austin and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host Cyndi Eakin with CoStar. Cyndi, please proceed.

Thank you, Austin. Good evening and thank you all for joining us to discuss the second quarter 2022 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 third quarter and full year 2022 based on current beliefs and assumptions. 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 subsequent quarterly reports on Form 10-Q, under the heading Risk Factors. All forward-looking statements are based on the 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 of non-GAAP financial measures discussed on this call, including EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP net income per diluted share and forward-looking non-GAAP guidance are also shown in detail in our press release issued today, along with the 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 the replay of this call. And with that, I would like to turn the call over to our Founder and CEO, Andy Florance.

Thank you, Cyndi. Good evening everyone and thank you for joining us for CoStar Group's second quarter 2022 earnings call. Cyndi and Scott are in our Washington, D.C. office tonight, and I'm joining you from our London office, a little bit later in the evening. We delivered outstanding results in the second quarter, setting our third quarterly sales record in a row. Annualized net new sales bookings were $84 million in the second quarter, a 66% increase over the same quarter in 2021. Our three main products, CoStar, Apartments.com and LoopNet, all have exceptional sales quarters, growing a combined 81% on a year-over-year basis. Total revenue for the second quarter of 2022 was $536 million, growing 12% year-over-year, and coming in above the high end of our guidance range of consensus estimates. Our subscription revenue in the quarter grew to $428 million and clients subscribing for five years or more renewed at 97.8%. As we ramp up our investment in our residential product strategies, we continue to deliver strong profit results with adjusted EBITDA of $159 million in the second quarter, well above the high end of our guidance range and consensus. As a result, we will raise our full year 2022 revenue, adjusted EBITDA and adjusted EPS guidance. Revenue for our CoStar product was $207 million in the second quarter, representing a 17% increase over the same quarter a year ago. CoStar net new sales bookings increased by 60% in the second quarter, making the last four quarters the highest sales quarters on record. The trailing 12-month sales level as of June 30th is 145% greater than the same period 12 months prior. Our consistent strong revenue and sales performance for CoStar is the result of a steady stream of product innovations that deliver expanded capabilities and increased customer value. Over the past few years, we've added hospitality data, integrated CMBS data and analytics, launched a new lender product and opened up full multinational reach for our CoStar customers. We continue to grow our subscriber base and now have 177,000 CoStar professional users. This quarter, we crossed over 40,000 subscribing sites. CoStar's ASP continues to climb as we transition more and more of our customers to our global solutions. Overall, I'm very confident in our ability to sustain our current levels of strong double-digit revenue growth for CoStar Group. I think I've been saying that for 30 years. Apartments.com turned in an outstanding performance in the second quarter with net new sales bookings up 138% compared to the second quarter of last year. This is the second highest quarterly sales ever for Apartments.com. Sequential growth in sales was 35% in the second quarter of this year, which makes this the third quarter in a row of improving sales results. Apartment vacancy rates have increased at a rapid pace throughout the first half of 2022, climbing quickly from the all-time low vacancy rates for the third quarter of 2021 that were suppressing demand for apartment advertising. Vacancy rates for three, four and five star properties were up 60 basis points to 5.7% in the second quarter from that all-time low of 5.1% in the third quarter of 2021. We're now only 80 basis points below the historic pre-pandemic vacancy rate average for that class of properties. We believe we'll be back to the historic average vacancy rates in the next several quarters. One of the drivers there is demand for apartments stalled in the second quarter of 2022 with absorption of only 67,000 units. That is a dramatic 74% drop from the 260,000 unit absorption level in the second quarter of 2021. New apartment construction deliveries are expected to reach record levels this year, with forecasted 415,000 unit deliveries on par with the highest levels recorded since the mid-80s. Tampa and Phoenix, for example, will add over 25,000 units, while absorption in these markets is projected to be a third of new supply. The need to fill these newly constructed apartments clearly increases demand for apartments.com. With rising vacancy rates, the number of properties advertising on apartments.com increased sequentially in the second quarter of 2022, continuing the positive trend that began in March this year. In addition, cancellation rates have improved by approximately 20 basis points since the end of last year. Our apartments.com sales force delivered outstanding results in the second quarter. Sales productivity per person increased 64% year-over-year and is at an all-time high. With post-pandemic restrictions behind us, we’re once again focused on in-person meetings with our customers and our prospects. In the second quarter of 2022, our field sales team conducted an impressive 55,000 in-person meetings with our clients. And that's up 35% from the first quarter of this year. This has always been a relationship-based industry and our in-person meetings are the most effective way to build customer satisfaction and demonstrate the value of our products. Traffic to our apartments.com network improved sequentially as we ramped up our advertising campaign, starting Jeff Goldblum as Brad Bellflower, which delivered over four billion impressions in the second quarter alone. I am very happy with the outstanding results our apartments.com team is delivering, and I'm increasingly confident that our positive sales momentum will result in double-digit revenue growth in the second half of this year. Turning to CoStar Real Estate Manager, the product line continues to grow the Fortune 2000 and global customer base of CoStar, adding 23 major new customers in Q2. Subscription revenue grew 15% in the first half of 2022, over the same period in 2021. We're on a path to have the Real Estate Manager product integrated into CoStar by 2023, which will significantly increase revenue opportunity for CoStar by connecting the Fortune 2000 tenant organic customer base, a real estate manager with the power of the CoStar network. Lands of America are rural land marketplaces focusing on three key growth initiatives. These initiatives include growing the field sales team, introducing signature ads and launching land.com. We've grown our salesforce at Lands by 16% year-to-date. Last year, Lands of America began offering signature ads similar to the differentiated signature ads that Apartments.com and LoopNet offer. This quarter, Lands launched platinum signature ads. Our standard ads cost $22.75 per month on average; our gold ads average much higher at $359 per month, and the platinum ads average $599 per month. Since the recent launch, we've sold 932 signature ads. Growing the sales force and introducing premium exposure listings help drive 23.4% year-over-year revenue growth this quarter in the Lands of America business. Later this quarter, we will redirect landsofamerica.com to our URL land.com to harness the power of the simple, memorable and valuable domain. Lands.com will then join category definers like apartments.com and homes.com. Lunet had the strongest sales quarter in years with net new sales booking growing 43% in the same quarter last year. Second quarter revenue was $56 million, up 10% over the prior year. I'm encouraged to see our efforts to build a Lunet sales force progressing well. Year-to-date, we've grown a dedicated Lunet sales team by 95%. We've built a strong infrastructure with a regional sales management team and a training program. Our training and onboarding process is much more effective now that we're able to train in person. As a result, our new sales team is delivering 100% more sales in their six months in production compared to the Lunet sales team we onboarded remotely during the pandemic. Traffic to our Lunet network of sites remained strong in the second quarter, averaging approximately 12 million unique visitors per month. We have an order of magnitude more traffic than our closest competitor. That gap between Lunet and our next closest traffic competitor widened by one million unique visitors during the second quarter. So we're pulling away even further. This demonstrates the effectiveness of our SEO, the quality of our content, the strength of our brand, the quality of site design, and the performance of the site, as well as the impact of our Space for Dreams advertising campaign, which generated 253 million impressions in the second quarter. We believe that LoopNet will deliver significantly more value to customers, users, and shareholders as an international platform. Trillions of dollars across many borders are being invested in commercial real estate; thus, an international platform has significant scale advantages in software development, both in functionality and cost per user efficiency. We recently invested to relaunch LoopNet in Canada under LoopNet.ca; the number of monthly unique visitors on the Canadian LoopNet network has surged 45% year-over-year. That investment has significantly widened our competitive lead in Canada against the next closest CRE site, Spacelist.ca. According to SEMrush, in June of 2021, the LoopNet network had 48% more traffic than Spacelist.ca. This June, the LoopNet network has pulled away and has 233% more traffic than Spacelist.ca, a four to five times advantage. We're now investing significant energy into launching LoopNet in the UK, France, Spain, and Germany, and the rest of Europe in that order. In fact, I believe our President of LoopNet just saw him on the video screen in France just now. We currently own leading Siri marketplaces across the UK and Europe with Realla in the UK and BureauxLocaux in France and Belbex in Spain. When we compete, we will have one code base for LoopNet globally and redirect when we're complete with integration, we'll have one code base for LoopNet globally, and we'll redirect traffic from our family of European platforms into LoopNet. Users will be able to use LoopNet to search for investments or properties to lease from Madrid to Paris, from London to New York or San Francisco, or Vancouver and beyond. A property owner with an industrial facility at Heathrow will be able to appropriately market to robust audiences that may need that warehouse from around the world with just one placement on LoopNet.com. Conventional wisdom is that real estate marketplaces are local products and lack cross-border values or synergy. I believe this couldn't be further from the truth; it's just assumed because few have made the effort to try and do it. When we released CoStar in the UK in 2012 and rolled out our predecessor offering, CoStar, our revenues in the UK doubled in the years that followed. About half of CoStar users today have global subscriptions that can easily access data across borders. 15,800 U.S. users accessed data on Canadian properties this year; 1,200 Canadian users are accessing data on U.S. properties. 7,600 U.S. users are accessing information on UK properties, and 2,300 UK users are accessing data on U.S. properties. In total, just under 20% of all users have accessed tens of millions of property views across borders with CoStar. We intend to release international LoopNet in the UK in the fourth quarter. I'm grateful to be a small part of such an exciting and challenging product with a great team executing this work. Our CoStar Risk Analytics business continued to gain momentum with strong growth driven by the recently released CoStar for Lenders solution. Since its release in February, we assigned 66 clients, of which 42 were added in Q2. We believe this growth rate will continue to accelerate with investment in our dedicated sales team, the next phase of product innovation, and marketing. The strategy behind CoStar for Lenders is to offer a highly scalable, fully integrated solution that is essential to market participants by supporting their risk management, regulatory requirements, loan production, and strategic decision-making. The CoStar lender value proposition meets the requirements of our initial client base, which are diverse, including banks, credit unions, DUS lenders, private lenders, and life insurance companies with CRE portfolios ranging from as small as $10 million, up to huge $50 billion portfolios. BizBuySell, our leading business for sale marketplace, is having a great year. Our revenue grew 27% year-over-year with investments in sales and marketing driving strong increases in listing supply and buyer demand. We are realizing tremendous synergy between LoopNet and BizBuySell. Business to BizBuySell subscriber listings displayed on LoopNet increased 54% in the first half of the year; reported sold business comps increased 19% in the first half to 44,754 business comps. Thousands of business owners leverage these comps every month to get an estimate of their business's value. BizBuySell accounts for the largest franchise brands among its customers, including 7-Eleven, Mike's Muffler, The UPS Store, Jiffy Lube, Checkers, Jackson Hewitt, and many more, opening the door to deeper relationships across other CoStar real estate products. SDR continues to grow revenue and add new hotels contributing data while the hotel industry recovers from the global pandemic. SDR now has an all-time high of almost 75,000 hotels contributing data on a monthly basis. There are still 1,500 hotels that previously participated and are currently closed due to COVID. Half of those are in Asia. SDR revenues year-to-date are up 10% year-over-year. When CoStar acquired SDR at the end of 2019, subscription revenue was 60% of total revenues; now, with focused effort, subscription revenue year-to-date is 77% of total revenues. STR is currently migrating its benchmarking product into the CoStar platform. Customer migration will begin at the start of 2023. At the conclusion of the product rollout, the expectation is to be in a position to double STR revenue through sales of benchmarking to new customers and upgrade existing customers. STR will also be better positioned to introduce CoStar to new hospitality customers once the benchmarking product is in the CoStar platform. That introduction has already begun with STR selling CoStar to hospitality companies such as Sonder, Hopper, Visit Indianapolis, Atrium Hospitality, and Highgate Hotels. Ten-X continues to perform with a high volume of assets being brought to the platform, which exceeded $2 billion in the first half of 2022, a 33% increase over the first half of 2021, and the highest level of activity since 2015. As mentioned last quarter, we launched our Ten-X marketing program for 2022 called Battle of the Bids, which gamifies the Ten-X bidding process, in which people can guess the price at which a real estate property will be sold on Ten-X and have a chance to win millions of dollars in cash prizes. Nearly 13,000 brokers and owners have played the game, adding approximately 12,000 new Ten-X accounts. The bidding power on Ten-X is reaching record levels. When a potential bidder registers to bid on Ten-X, we check to ensure that they have sufficient funds to buy the properties they bid on. The amount we prove for them is their proof of funds. In the second quarter of 2022, total proof of funds reached $11.7 billion, up 144% from $4.8 billion in the second quarter of 2020 when we acquired Ten-X. Our residential business continues to perform very well. Second quarter revenue in residential was $20 million, an increase of 40% on an organic basis compared to the second quarter of 2021. Our Homesnap business continues to focus on expanding age engagement and sales of our Pro+ products while we develop our Homes.com marketplace. Registered agents for our Homesnap Pro product totaled 880,000 at the end of the second quarter, an increase of 17% over the same quarter last year. Revenue from our Pro+ products grew an impressive 46% year-over-year, while our Concierge Pro+ product grew 175% versus the second quarter of last year. Agents continue to spend more and more on our residential products, with average agent spend increasing 42% on a year-over-year basis. It’s important that we continue to grow our sales force to reach more agents and prepare for the launch of our Homes.com product next year. We’ve successfully established our direct sales force to support the Pro+ product, and I’m encouraged by the initial sales productivity of that team. We have plans to expand this team to over 100 dedicated sales representatives by the end of 2022. In the second quarter, we grew that team by almost 50%, including adding field-based sales agents who are having real success. Our research efforts are off to a good start as we build proprietary content for Homes.com around playgrounds, neighborhoods, schools, and other features that are important to consumers. From a standing start, we have successfully engaged over 1,000 photographers, writers, editors, voice talent, and video editors across the country. So far, we have produced content on over 70% of the largest residential markets in the U.S. We expect our rich original data and media content will produce significant organic search results that will be a product differentiator from our competitors. We successfully launched Citysnap in June in coordination with our partners at the Real Estate Board of New York. For the first time, New York renters, buyers, and brokers now have a single real-time source for all available Real Estate Board of New York listings. Better yet, all of an agent’s listings appear for free on Citysnap. The launch of Citysnap was well received by the agent community in New York City and in only a few short weeks, over 37% of the Real Estate Board of New York agents have registered to use Citysnap. Citysnap reached the number one spot on the top new category in Google Play and is off to a strong start. As with any new product launch, this is only the beginning, version 1.0; we’re planning a regular pace of product releases focusing on optimizing the user experience and adding more valuable content, which we feel is the key differentiator for CoStar Group. Yesterday marked the formal launch of our Citysnap consumer marketing campaign. Our marketing campaigns are designed to deliver hundreds of millions of media impressions across streaming video, audio, digital, social, and out-of-home media. Just before this call began, I got word that we reached our first million users of Citysnap. To realize our many growth initiatives, it’s imperative that we continue to attract and retain the best talent for CoStar Group. We’ve had tremendous headcount growth; we’re surpassing 5,400 team members for the first time in our company history. Our strategic goals of building our residential platform, international expansion, and growing our sales teams have been extremely successful. Over the first half of the year, we’ve welcomed more than 1,000 new team members across multiple areas and around the globe. A big contributor to our increased headcount is the creation of hundreds of new jobs in our residential business; thousands of skilled photographers, drone pilots, and content writers have applied to CoStar Group with hopes of being able to participate in documenting their cities, parks, schools, and neighborhoods as we prepare our Homes.com relaunch later this year. Our new team members have listed a variety of reasons that they decided to come to CoStar Group, including our positioning as an innovative industry leader, our high-performing and fast-paced work environment, the opportunity to build new businesses and products and services for our customers. However, the top reason most new hires mentioned when joining CoStar is the people they get to work with and learn from here. While CoStar offers flexibility to our colleagues, we predominantly work on our mission together in the office, and we thrive in that environment. We believe that working together rather than on a remote screen is becoming a competitive edge. For example, a very talented and valuable new colleague, Leslie Hall, joined CoStar Group in May to grow our HR business partner function after a successful 26-year career at another very well-known and respected Washington area company that is still all remote despite maintaining millions of square feet of empty premium office space. She said, I’ve built a career in HR because I love partnering with people to solve business problems. She goes on to say, after 2.5 years of remote working on Zoom, I missed the in-person collaboration and connection with business leaders and employees. You simply cannot maintain meaningful and sustainable relationships virtually over the long term. She was impressed with the caliber of people she met during the interview process and their commitment and enthusiasm for CoStar. We are thrilled to welcome Leslie and 1,000 other new colleagues to CoStar this year. When we first returned to the office last year, that was difficult for some of our colleagues, and initially, our retention rate dropped. But surprisingly, now that we’re back together in the office, our retention rates are climbing to some of the highest levels we’ve ever seen. According to Castle Security, while many workers in the U.S. have returned to working together in the office, most have not. Many think that workers and companies that do not work with their colleagues in person do not form meaningful connections to their companies. According to the Bureau of Labor Statistics, this pandemic-induced great resignation has resulted in overall private industry attrition trends remaining very elevated at 3.1%. Real estate attrition is slightly lower at 2.8%. I’m pleased to report that we are experiencing the opposite. Our attrition rates continue to improve and are now the best they’ve been in years. In fact, our attrition rate is now less than half of the private sector’s turnover rate. In the most recent 60-day trending, employee retention rate is an impressive 98.5%. We are retaining the best talent at CoStar Group; the average tenure for technology companies is three years. CoStar Group is a clear leader with an average tenure well above both tech or real estate or the private sector and is approaching an impressive five years, which is compared to the tech average of three years. We’re retaining employees 60% longer than the average company. We’ve been deliberate in our execution of employee retention initiatives, including leadership development programs, management training, career mobility, and promotions. In addition, we’ve enhanced our already strong suite of employee benefit offerings to adapt to the needs of our people in the current environment. Our approach is proving particularly successful in regard to our sales force as we are simultaneously growing five different sales teams, all of which have the potential to add significant growth capability to the company. For the first half, we’ve grown our sales team by a net 150 sellers. That’s the fastest we’ve ever grown, an increase of 18% since the end of 2021 or the beginning of 2022. This is the largest half-year organic growth in sales resources we’ve ever achieved. I’m carefully watching the growing productivity of these new salespeople we’re onboarding. We have invested carefully in our training programs with talented and committed trainers. I’m pleased to report that while it does take time to ramp up these new salespeople to full productivity, we’re exceeding our historic ramp-up success rate. Our commitment to in-person collaboration coupled with our investments in our people have us well positioned to continue to grow the business as well as execute our strategic objectives. The commercial real estate markets are entering a period of potential disruption as the U.S. economy adjusts to these higher levels of inflation, raising interest rates, and lingering pandemic effects. With office vacancy rates climbing to 14%, we’re now observing the highest nationwide vacancy rates in 30 years. The gap between future availability rates and current vacancy is growing, suggesting a bit more pain ahead in vacancy. Office leasing continues to lag pre-crisis levels; central business districts are particularly challenged as more office space is being returned, contributing to slower recoveries. According to Kastle Systems, the percentage of people returned to the office has remained around 40% with only modest increases in recent months. This persistent softness in the office market is where CoStar continues to outperform; our LoopNet and Ten-X products are countercyclical should the office market deteriorate further. Industrial properties are experiencing the opposite of office properties. Industrial properties are maintaining record occupancy, double-digit rent growth, and booming construction. Retail leasing is helping steady near post-pandemic highs in the second quarter, while new development remains sparse. The retail market is now reporting tighter conditions than prior to the pandemic as the amount of retail space available for lease held to the lowest level in over a decade. Store openings are remaining on pace to significantly eclipse store closures this year. Transaction volumes for commercial real estate properties continue to reach new highs, with over $216 billion traded during the second quarter, leading to a second-quarter record and a record-breaking first half for the year. Price depreciation continues across all asset classes, with industrial and multi-family leading while retail and office lag. So far this year, distress commercial property sales remain low, encompassing only 1,300 assets representing less than 1.5% of all sales. CMBS delinquencies at 30, 60, and 90 days continue to decline in the second quarter. We anticipate that the rise in interest rates will create difficulties with loan maturities and refinancing in the months and years ahead. According to a leading CMBS mortgage servicer, requests for loan extensions increased 38%, and requests for loan restructuring increased 21% in the second quarter. An increase in delinquencies could represent a significant revenue opportunity for Ten-X. Well, after those brief remarks, I’m going to turn the call over to our Chief Financial Officer, Scott Wheeler.

Thank you, Andy. I love those brief remarks. I’m happy to report given on the call that I’m still retained with CoStar even after that script, and I’m awake and listening. Part of the statistics interesting that five-year retention on customers is 98%. And we have a retention rate of our employees 98% with an average tenure of five years. Is that art imitating life in CoStar? Is that what you would say? I know that’s fascinating anyway. All right. Let’s talk about our revenue by our services and Andy reported CoStar is growing 17% in the second quarter, with price and new sales volumes each contributing roughly half of that revenue growth. So we expect revenue growth in the 16% to 17% range in the third and fourth quarters. The lower end of the range is really a result of some negative currency movements as the dollar strengthened around 10% to 15% over the past year against the pound. So on an organic currency-adjusted basis, we’re going to keep that 17% going in the second half. Our second quarter multi-family revenue grew 6% in alignment with the guidance, and that most definitely represents the turning point for Apartments.com revenue growth, which will increase going forward. The sales levels have continued to improve in each quarter since the third quarter of 2021, and the total number of properties advertising on our network increased sequentially in the second quarter compared to the first quarter this year. We expect third quarter revenue growth of 11% and fourth quarter growth of 14%. This improved our prior full-year revenue estimate; we now expect full-year revenue growth of 9% in multi-family. LoopNet revenue grew 10% in the second quarter, also in line with our expectations. The net new bookings increased 43% year-over-year as we’ve increased our LoopNet and CoStar sales, both of which sell LoopNet very effectively. We expect this trend to continue through the remainder of the year, increasing our third quarter revenue growth to 13%. This results in an increase in our full-year revenue growth estimate to a range of 11% to 12%. Information services revenue grew 10% in the second quarter, a little ahead of our guidance. Real estate management continues to post solid double-digit growth, and STR is now back to double-digit revenue on a constant currency basis, which is really great recovery news for STR even before global hotels have all recovered from the pandemic. In addition, we added Business Immo to our info services revenue, which we acquired at the beginning of the second quarter. For the third quarter, we expect revenue growth of 11%, and we’re increasing our full-year expectation for information services revenue growth to 10%. Residential revenue increased 11% over the second quarter last year, and organically, excluding the effect of the wind down of the revenue from Homes.com, revenue grew around 40% in the second quarter on a like-for-like basis as Andy mentioned. We now expect full-year 2022 revenue of $73 million in residential, which is above our prior guidance of $70 million. Revenue growth for the second half of the year will be down 20% to 25% again as a result of the Homes.com revenue in the second half of 2021 that wound down and no longer exists in the second half of 2022. Holding that aside, the year-over-year growth in our Pro Plus subscription product is expected to be around 35% in the second half of the year, which is where we remain our focus in growing our sales force. The other market revenue for the second quarter 2022 is expected with lands and business for sale marketplaces posting growth rates of 25% or more. Ten-X performed well in the quarter against our strategic objectives, increasing the volume of assets as well as the bidding power on the demand side of the marketplace. We expect the other marketplace to grow around 18% for the full year of 2022. Adjusted EBITDA for the second quarter was $31 million above the high end of second quarter guidance range. Our adjusted EBITDA margin was 30% compared to 31% in the second quarter of 2021. Approximately 10% of the favorable adjusted EBITDA is from revenue outperformance, while 90% was from comparability, primarily all of which relates to the timing of our investments in content development for our residential product. We’re off to a good start mobilizing our content teams across the country, and they’re going to produce tens of thousands of pieces of proprietary content. Our initial second quarter spending forecast on this effort contemplated a very steep spending ramp in the second quarter, which in hindsight, I must say was too aggressive. Accordingly, we’ve shifted around million of our second quarter cost favorability to the second half of the year; the ramp-up in content development will continue. Also, our existing field research team is doing a great job contributing more residential content than we had anticipated. This makes for a much more efficient outcome and it lowers our incremental costs. If this trend continues, we could even see additional investment favorability in the second half of the year. So overall, we estimate our 2022 residential investment levels now in the $180 million to $200 million range. Our sales force totaled approximately 975 people on June 30, an increase of 105 sales reps from the end of last quarter and an increase of only 150 reps from where we began the year. Our growth is the largest increase in sales in a quarter or a half year, and it’s a well-balanced increase across all of our major product areas. Contract renewal rate was 91% for the second quarter of 2022, similar to the 91% renewal rate in the first quarter of this year. Subscription revenue on annual contracts was 80% for the second quarter of 2022, compared to 77% this time last year and consistent with the first quarter of this year. Turning to the outlook, we expect full-year 2022 revenues to range from $2.165 billion to $2.18 billion, an increase of approximately $12.5 million at the midpoint of the range, implying an annual growth rate of 12% at the midpoint. Organic growth, excluding the revenue runoff from the Homes.com products, is expected to be 13%. Third quarter 2022 revenue is expected in a range from $552 million to $557 million, representing growth of 11% year-over-year at the midpoint. Once again, organic growth, excluding those pesky running-off Homes.com legacy revenues, is expected at 12%. The 2022 full-year adjusted EBITDA is expected now to be in the range of $610 million to $630 million, which is an increase of $20 million from our previous guidance. Roughly half of the increase is due to improvement in our revenue outlook with the other half being the result of lower forecasted residential levels that I just mentioned. For the third quarter 2022, adjusted EBITDA is expected to be in the range of $130 million to $140 million, indicating a margin of 24% at the midpoint. With regards to capital allocation, our strategy remains unchanged. With interest rates on the rise and economic uncertainty and market volatility, we see valuations moderating with regards to acquisition opportunities. Our balance sheet is in great shape, and we are well positioned to take advantage of opportunities should they arise in the near future.

Thank you, Scott. I would like to ask participants to keep one question and one part, please. I’ll turn it over to Austin, if you could please open up the line for questions.

Thank you. Our first question is with George Tong from Goldman Sachs. George, your line is open.

Hi, thanks. Good afternoon. You indicated that multifamily vacancy rates are improving. To what extent do vacancy rates need to reach historical levels before Apartments.com revenue growth can return to 20% organic? And what’s the timing for this recovery?

Well, I think we’re on the way to that, and you’re already seeing our second-best sales quarter ever. So, I think it’s just a question of continuing to do that for a year or so. The trends appear to be clear and obvious and expected. So, I think we’re on our road to that result. Would you want to add anything there, Scott?

No, I’ve been encouraged that even as the industry recovers and the vacancies start to move up slightly, our sales performance is recovering faster than the industry, which speaks to the strength of the platform. So, we definitely expect Apartments.com back up to that 20% that you alluded to, George. We haven’t given any guidance or outlook into 2023 yet, but when we do, we’ll be sure to let you know when that’s expected. Thanks for the question.

Our next question is with Pete Christiansen from Citi. Pete, your line is open.

Thank you. Good evening. Thanks for the question. Scott, I was wondering, I just want to dig a little bit into the multifamily a little bit, break it apart. In terms of the great sales quarter, how should we think about at least the glide path in terms of revenue per property versus new volumes coming on? Just generally, how do you see the next two or three quarters forming out after a big sales score?

Yeah. Hi Pete, thanks for the question. The revenue growth up to this point as the industry is still rebalancing a bit of where it places ads on the different levels that we offer is primarily the price movements that we've put in place this year. So price is running ahead of the percentage that we're talking about. We're starting to see sequential volumes move up. So I'd expect those to start moving to the low to mid-single digits. I would expect our pricing to stay in that high single-digit range that we're seeing. When the vacancy rates move up a little higher, we then start to see people moving up the ad stacks again as they need to create more leads for their vacancies. So I think it's when you add that positive mix shift on top of low-to-mid single-digit volumes and mid-single digits pricing and then you start to add sales people. All those will add up then to get back to that 20% that George referenced a bit earlier. So we expect those trends to continue through the rest of the year and then strong 2023.

I apologize; it looks like our DC line is cracking out a little bit there, so Scott is not trying to avoid the answer. We will have a brand new telephone line for the next earnings call. But the and I had to come all the way to London to find a good line. But yeah, one of the things that will really drive, like there are tons of penetration opportunities for apartments still. We are definitely in the early days of that opportunity and we're adding salespeople at a great clip, and that will drive new account business and new units for sure. And I think we'll be able to continue to get a price as people are advertising new construction and the like.

Our next question is with Jeff Meuler from Baird. Jeff, your line is open.

Yeah. Thank you. Curious about your views of how you're assessing your recent ad spend efficiency, spending a big budget, I guess, in a market where some other advertisers are pulling back for macro reasons. Just are you seeing lift? Are you reinvesting the lift? Just any comment on ad spend efficiency?

I think that the sales results in the quarter sort of speak for themselves. We're having tremendous growth across LoopNet traffic growth, revenue growth. Apartments are having tremendous sales growth. So I think that we're getting good results. I mean, we're hearing all the concerns of doom and gloom that everyone else is talking about. But I have to say in our business, we simply are not seeing any of that. And we're watching for it, but it's not there. So we're continuing to invest in the opportunity and getting great results.

And I guess what I'm wondering is are you actually benefiting from advertisers pulling back in other channels that would otherwise compete with you for ad spend, as you try to drive traffic to your sites?

I think we probably are. I mean, obviously one of the biggest single budgets is our SCM budgets and it's a little difficult to, like, I think we've had a continuous progression of better and better efficiency, lower cost on our target keywords on SCM. It's tough to separate that continued gain efficiency from just the way we bid and the way we get brand recognition and our click-through rates. It's tough to separate that from less congestion competition. So we are continuing to get efficiency, but it's tough to separate out what component is less competition. I imagine going into 2023, we probably will see it like obviously and clearly.

Our next question is with Stephen Sheldon from William Blair. Stephen, your line is open.

Hey, thanks. So it sounds like you're making progress on the residential content build-out. So can you remind us when you plan to plug all that proprietary content back into Homes.com, how quickly that could potentially support stronger organic search traffic? And then I might get slapped on the wrist here for asking, but asking another part, but what did overall traffic to the residential assets look like in the second quarter? Apologies, if I missed that.

Yes. So where we would expect to see that content really start to make a difference is as we go into 2023. I have been sitting down with the content teams periodically, and I’ve been looking at the content we’re building, and I have to say, I feel really good about the fact the potential of that content. I mean, individually, the different things we’re building look pretty powerful when I think about it with my SEO hat on; I think in some across massive scale, it should be awesome. But that we’re not going to see any of that really impacting until the earliest, the very end of this year and really the beginning of 2023. So right now the traffic growth, I don’t have the year-over-year traffic growth with me, Cyndi has it. You’re not going to see major traffic growth until we relaunch the homes platform and start to bring that content in. Do you have a number there Cyndi for year-over-year homes growth?

Yes, I think it’s up slightly, but as you mentioned, we’re really going to look to get that growth through the marketing and advertising campaign launch.

Yes, we were pretty much in line with where we were in the first quarter without spending any additional money on marketing.

Our next question is with Ryan Tomasello from KBW. Ryan, your line is open.

Thanks. In terms of M&A and specifically regarding residential, was wondering if you see an opportunity to execute a similar playbook as you did with Apartments.com in terms of consolidating the peer, any peer residential portals to accelerate that timeline around those consumer traffic goals that you set out. I realized some of those peers operate with alternative revenue and business models, including in the brokerage space. How feasible do you think those types of deals could be if they were attractive?

Well. As usual, we don’t comment anything specific. But I will say that I have been flying more in the last month than I’ve ever flown in my life. It’s an interesting time. I mean, we have a great balance sheet with a lot of cash. I think we’ve just turned in a really strong quarter. We’ve got strength in all of our businesses, and I believe that we’re seeing valuations across a half dozen, dozen interesting companies fall to become more and more attractive. So we think that your question is not terribly far off of a range of opportunities we have out in the world. But it’s just – it’s sort of obvious in the time we’re in a company like ours with a great balance sheet, super performance, a track record of M&A, and following values both in the United States and Europe are interesting.

Our next question is with John Campbell from Stephens, Inc. John, your line is open.

Hey guys, great work on the quarter. Scott, you briefly touched on this, but I think the original 2022 guidance called for, I think it was $200 million, $220 million of a step up. In resi investment, it sounds like you’re now expecting maybe $20 million less moving forward. So I guess first did I hear that right? And then secondly if you could maybe unpack how much of that hit in the first half versus what’s expected in the second half, and then also just to refresh from the expected kind of breakdown and spend across content and marketing?

Yes. Hi, John. Thanks for the question. Yes, we had initially estimated the $200 million to $220 million level of spend; as you appreciate, that was early in the year. We had a strong ramp-up in the second quarter in content, more aggressive, like I mentioned, than we actually were able to achieve in the forecast, which is a very positive sign. So my current estimate puts us in about $20 million below where we were originally, with about half of that being from just ensuring I have enough cost in there for my longer-term estimates, given the uncertainty you start off the year with. And then the timing of the ramp, some of that will push out of the year, given the amount of time left in the second half. So we still have about half or a little less than half of that spend that’s going to be in content and probably about 45% of it’s in marketing, which might be a little higher than we thought at first given the success of Citysnap and other initiatives. The rest is technology and other costs. So we’ve probably got a good chunk of it in the second half and probably around 35 or a little more than that in the first half. That helps with the pacing.

You bet.

Our next question is with Ashish Sabadra from RBC. Ashish, your line is open.

Hi. I just wanted to focus on the CoStar Suite product, particularly the lender product. You talked about some pretty good traction there signing up 66 new clients. I was just wondering, as you with this initial success how do you think about the addressable market now and in terms of like how many clients are out there and total addressable market? Thanks.

Yes. So I think, I mean, again the wonderful thing is 66 new customers, most of them in the last quarter – 40 some in the last quarter. Great pace we've got, I think, 12 to 14 dedicated sales reps on that right now. The addressable market is I'm going to do this from memory but it is approximately 6,000 to 7,000 lenders who have portfolios. Again, we're selling to folks with very small portfolios and very large portfolios, then watching the gross margin. These implementations look reasonably good. So we believe that the opportunity is well north of $300 million on this product. And it's a wonderful addition to our growth drivers because it's all – it's all new opportunity.

Our next question is with Gustavo Laguarda from Truist. Gustavo, your line is open.

Hi there. Just wanted to ask how the roadmap is on resi, just comparing it to the multifamily ramp, how traffic is doing so far along versus how it was doing for multifamily back in the day? That would be super helpful. Thanks.

Yes. So I think it's very similar because back in the day we picked up Apartments.com from Classified Ventures, a consortium of newspapers, and we completely re-imagined and rebuilt the site over the course of about 270 days or so. This one's a little bit of a bigger scale project, but you set a strategy, you have a talented team from both software and field research and content building us up, and you'll really see growth in traffic once you release the product. And then once you begin to invest in SCM and in brand marketing. So that's going to be the end of this year, beginning of next year. And so it's very similar, but I think you and I, and everybody are impatient to see that story unfold over the next couple of years.

Our next question is with Mayank Tandon from Needham. Mayank, your line is open.

Thank you. Good evening, Andy. Looking at CoStar Suite as a whole, can you remind us sort of where the penetration is with brokers and outside the broker world where you obviously have a very strong presence? Where are you seeing the best opportunities for growth? Looking out over the Canadian term?

I think the most exciting – well, obviously, lender is very exciting, several hundred million of opportunity there. The owner sector remains very exciting to us because it's a huge market. It is a later stage penetration market, and its penetration rates there are probably a third, compared to where the broker market penetration rates are. So that one is just the Goliath that we can keep on working for years. One of the ones that I alluded to briefly in my comments about real estate management is the Top 2,000 tenants in the United States. Major corporations often buy the real estate manager from us. They're an obvious potential market opportunity for corporations with hundreds of facilities. It is a no-brainer to have access to CoStar Group and a good broker. And then it depresses me a little bit when I look at the penetration rate for brokers, because having been very successful at selling this product for many, many years, we still haven't penetrated all the broker opportunities out there. There's still hundreds of millions of potential penetration in brokers. So when you look at mid-size smaller brokers and even some not so mid-size like upper mid-size brokers, all the major guys do subscribe and rely on it, but there's penetration opportunity across the board. Scott and I were joking before the call about sustainability of growth rates on CoStar. And it really is something where I've answered that question for decades from the point at which we had $7 million of revenue now. And one of the things I really look forward to is crossing through a billion in CoStar revenue and then talking to you guys about the story for $2 billion in CoStar revenue. Oh, by the way, I’m talking to you from London, and we are working hard on beginning and continuing to carry CoStar out through Europe and other markets, and there are super exciting opportunities. CoStar changes its whole meaning to a lot of compliance when it allows people to see investment opportunities and asset classes across borders. So that's a whole other driver. So my answer is yes, I'm very excited about growing CoStar. Huge numbers for a long, long time, and we're just beginning.

Our next question is with Joe Goodwin from JMP. Joe, your line is open.

Great. Thank you so much for taking my question. Just curious, Andy, how are you thinking about price increases across the CoStar Suite today, as well as if you could comment on price increases on Apartments.com, the ad tiers? And if your approach to price increases is changing in the current environment at all?

Yes, it is. A company like ours must be disciplined and set our prices in real dollars, not nominal dollars. And so we are watching that closely with the sales force at renewals. And we're reminding people not just with the nominal dollar increases are what the real dollar realities are. So that's very important with Apartments, especially with Apartments where our clients are overwhelmingly doing incredibly well right now. So we have discipline on that, and you can see that in our results. On CoStar Suite, I think we're in a slightly different position. Yes, we are pushing our pricing to at least remain constant on a real dollar basis and a little bit more than that. But the real story there is this upselling activity we're in the middle of, where we're reaching out to these tens of thousands of customers who subscribe to a small piece of our product either in the modules they get or the geography they get, and we're upgrading them to our full all modules global suite because we want to see network effects grow across borders. As I mentioned, we’re seeing that happening. We’re seeing tens of millions of searches across borders. So in CoStar Suite, the more powerful driver is this upgrading, not price increasing. On LoopNet – on Ten-X, you don't have to move the pricing because in theory, it's a commission against the asset price, and inflation in theory would move the asset price up. Ten-X is more in a place of early days of penetration; it's still 1% penetrating the opportunity. On LoopNet, we are focused on variable silver ad or base ad pricing, which will be a more powerful revenue driver than just price increases. So that's the initiative where we'll begin baiting it out in a couple of markets, pricing based on the market and on the asset value. So that will be a combination of lowering our prices for low-value assets in smaller markets to drive volume and overall revenue, and increasing prices to recognize the value of the higher-end assets and bigger markets, that will dwarf surges inflation, pricing increases. So we're all over it. This is not our first rodeo, and the one thing I learned in my economics degree was the difference between real and nominal. I can't remember anything else, though.

At this time, there are no further questions.

I think with that, we can wind it up. I want to congratulate Austin, our moderator, on her big news today. And thank you all for – which I'm not going to disclose. And I want to thank you all for joining us for the second quarter 2022 earnings call. Congratulations to all the sales leaders, product folks, and developers who put in tremendous effort to deliver such a great quarter this year, and we look forward to speaking with you again in the third quarter and giving you updates on all the various initiatives we've got going on. And we will get a new speakerphone in our Washington boardroom. I apologize for that. But thanks again for joining us.

That concludes today's call. Thank you for your participation. You may now disconnect your lines.