Good afternoon. My name is Matt, and I'll be your conference operator today. At this time, I would like to welcome everyone to the CoStar Group Fourth Quarter and Year End 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Now Cyndi Eakin, Head of Investor Relations, will read the Safe Harbor statement. Cyndi, you may begin.

Thank you, Matthew. Good evening and thank you all for joining us to discuss the fourth quarter and full year 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 first quarter and full year 2023 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 include 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 and detailed in our press release issued today, along with the definition of 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 work. That was fantastic Safe Harbor. Good evening, everyone, and thank you for joining us for CoStar Group's fourth quarter 2022 earnings call. Total revenue for the full year of 2022 was $2.2 billion or 12% year-over-year growth coming in at the high end of our guidance range and above consensus estimates. Our fourth quarter revenue grew 13% on a constant currency basis over the fourth quarter of 2021, up to $573 million. This is our 12th year in a row with double digit revenue growth. We had a phenomenal year in sales. We delivered the highest net new sales ever with 2022 sales reaching $305 million or 41% growth over the net new sales in 2021. We delivered exceptional sales results in the fourth quarter as well with annualized net new sales bookings of $77 million. This is a 15% increase over the same quarter in 2021 and our second highest quarterly net sales bookings result ever. Apartments.com had their highest sales quarter ever exceeding their prior record set in the second quarter of 2020 by 25%. So a shout out to Page Forest and her entire team at Apartments.com. We substantially increased the size of our sales force in 2022, adding almost 300 people net. We had a very strong profit performance in 2022 as well. Our full year adjusted EBITDA was $672 million, which was also above the high end of our guidance range and consensus estimates. Overall, we had an exceptional year with both strong sales and profit performance while continuing to invest and grow the business. Apartments.com revenue was $198 million in the fourth quarter, increasing 16% over the fourth quarter of 2021 and $740 million for the full year was a 10% increase over the prior year. Apartments.com delivered another outstanding quarter with a record in sales and an increase in net bookings of 177% over the same period last year. 2022 was an exceptional year for Apartments.com. Our efforts to attract talented sales professionals, give them world-class training and get them into production paid dividends. We increased the sales force by 40%, adding over 100 sales representatives to the team. At the same time, we were able to increase our sales productivity with monthly net new sales up 187% as compared to 2021. The team also conducted 450,000 quality meetings, both with existing clients and potential prospects, the highest number of meetings in our history. We maintained a very impressive Net Promoter Score with our clients of 93%. The Apartments.com brand is stronger than ever. In 2022, we delivered over 1.2 billion visits to our platforms. Our award-winning marketing campaign featuring the wonderful and funny Jeff Goldblum as Brad Bellflower, inventor of the Apartminternet entertained audiences and delivered over 12 billion impressions across linear TV and our other 130 media channels. We continue to reach renters and potential renters where they consume the most content including streaming video, audio, social media platforms and through marketing influencers. Our investments keep proving successful with the new all-time high and unaided brand awareness in the fourth quarter and the number one ranking among our target audience. Rent Dynamics, a leading CRM platform for multifamily properties conducted analysis of over 500,000 rental leads submitted in the fourth quarter of 2022. They determined that the Apartments.com network converted leads to leases at twice the rate of Zillow. To be clear, this data shows that a community would have to get twice as many leads from Zillow as from Apartments.com in order to provide the community with an equal number of leases. In fact, the same studies show that Apartments.com network provided communities with almost 4 times more leases than the Zillow rental network and over 9 times more leases than rent period. As we look ahead, we are well positioned to penetrate the estimated $1.4 billion marketing opportunity in apartment buildings which have less than 50 units but more than five. In 2022, we more than doubled our sales force dedicated to this opportunity and in the fourth quarter we introduced flexible listing plans, the perfect solution for managers who oversee multiple properties in this under 50 unit apartment category. The product allows managers the flexibility to swap properties they advertise at any time based on their current needs and upcoming availabilities. I'm proud to say we launched Apartments.com in Canada in the fourth quarter, marking the brand's first expansion outside the United States. Renters in Canada may now search Canadian geographies for apartments, homes, condos and townhomes for rent. Searches can be conducted in English or French. Some of the key clients in the United States have either already moved into Canada or plan to move in 2023 and we're ready to support them. 42 of Canada's largest property management companies have already provided us with their data on their communities and we've acquired listing data from the Canadian Real Estate Association. This allows us to present rental listings for various Canadian MLSs on Apartments.com. We have already experienced enormous traffic growth since our recent launch and are positioned at or near the top of organic spot for searches. We believe we are well positioned to penetrate this $600 million estimated Canadian apartment marketing opportunity with our strong brand and unique product offerings. The U.S. macroeconomic conditions continue to support an increase in the demand for advertising. U.S. multifamily vacancy rates rose another 50 basis points to 7.1% compared to the last quarter. The U.S. and Canadian market conditions along with the strength of our brand and our sales force give us confidence in our ability to return to 20% annual revenue growth. CoStar revenue was $837 million and 2022, up 16% over the prior year, making it an outstanding year. CoStar net new sales were record high and 16% more than our prior highest sales year. Both the North American and European sales teams delivered the highest net new sales ever. We added over 60 new sales representatives to the CoStar team this past year, which is an increase of almost 20% over 2021. We're in the final stages of transitioning customers to the global CoStar platform, which to date has generated over $40 million in incremental revenue. We launched the CoStar Lender product, which generated almost $6 million already in net new sales and 140 new customers and we're just getting started there. This quarter, we expect to complete the process of linking over 70,000 commercial properties to 12,600 investment funds or property investment funds, providing our clients with insights into these property fund portfolios. The product will allow users to search for funds raising capital and those with dry powder to invest and gather insights into a fund manager's investment strategy, property type, target country, and/or transaction history. We're about to deliver significant enhancements to our tenant product as well. In the past, our tenant product has provided our users with valuable details on over 5 million tenant locations. With the coming upgrade of the tenant product, we will provide users with an aggregated rollout of all of a given company's locations so that the users can better understand how the most important tenants utilize space across their portfolios and how our clients can best capitalize on these various tenant space needs. CoStar definitely had a tremendous year. I'm confident in our ability to continue to grow at double-digit rates with the strength of our product capabilities, high renewal rates and continued ongoing thoughtful investments. LoopNet fourth quarter revenue was $61 million, up 12% over the prior year. Net new sales bookings in 2022 set a record for LoopNet. Net new sales in the fourth quarter were up 198% over the fourth quarter of last year and trailing 12-month net new sales were up 56% over 2021. We added over 100 sales representatives to LoopNet in 2022, which almost quadrupled the size of the LoopNet sales team. With the successful launch of LoopNet in Canada and the U.K., we now have a growing international offering. We have planned launches in France and Spain in 2023. Our brand and our product remain strong with traffic to LoopNet network of sites continuing to outperform competition dramatically, both domestically and internationally. LoopNet now ranks number one for 129,000 relevant commercial keywords on Google, and we have twice the number of keywords ranked in the top three positions than our next closest competitor. In 2023, we'll continue to grow the sales force as well as our SEM investment along with our digital and broad-based media campaigns. The new marketing campaign will be focused on elevating LoopNet brand owners and brokers across a mix of multimedia channels, including linear, digital and social platforms. These marketing efforts will drive leads to our expanded sales force and reinforce our position as the most popular place to find a space. Overall, I'm extremely pleased with the progress we've made building out the LoopNet team and its international platform, which gives confidence in our ability to achieve our target of 18% to 19% revenue growth in 2023. STR's revenue growth accelerated from single-digit growth in the first quarter of 2022 to 12% year-over-year growth in the fourth quarter of 2022 on a constant currency basis. The hotel industry has recovered in the U.S.; average daily rates and revenue per room are well ahead of pre-pandemic levels. Internationally, the industry isn't far behind. Current market conditions put us in a great position to launch our new benchmarking product, which we believe will provide incredible new variable to hotel brands, operators and owners around the world. Our new benchmarking product combines the very best of STR's deep hotel industry acumen and expertise with CoStar's innovative technology and industry-leading software. Users will find an interactive benchmarking platform with areas that preserve the familiarity of the STAR report, whilst introducing new features and functionality in analytics, charts and graphs to deliver additional insights into their hotel's performance. The deep proprietary performance data and user-defined competitive sets aggregates will be available for users to manage their properties, set rate and occupancy strategies and optimize performance. CoStar now houses an inventory of more than 0.25 million hotels, including 77,000 benchmarking participants in over 180 countries with 175,000 unique users for that information. These users will access their performance data and industry data from 572 hospitality markets, 1,900 submarkets and over 6,000 class segments in their selected currency. Owners will have clear visibility into asset performance, market performance and the competitive landscape. This insight is valuable for asset acquisition, repositioning and disposition. Operators will have access to data and tools to better forecast budget yield, manage and identify demand drivers and supply implications. Hotel brands will have its full suite to support development teams, franchise and owner relationships and management contracts. During 2023, we'll be migrating those 175,000 users, including 900 corporate customers and 6,000 independent hotels to this new digital marketing platform based in CoStar. They've already begun to integrate the outputs with their workflows and we're experiencing significant productivity improvements. In short, we're on track to achieve our goal to effectively utilize a digital product that an entire industry relies on and unlock significant new value for our clients. These enhancements will help us to gain further share and penetrate the $300 million addressable hotel market. Ten-X brought $5 billion in assets to the platform for sale in 2022 for an increase of 42% year-over-year. That's the highest level we've seen the platform since 2012. Ten-X closed $2.5 billion of those asset sales which is up 16% over last year and the highest level since 2016. This performance was in the face of a significant slowdown in overall commercial real estate sales volumes, which had declined almost 55% compared to the fourth quarter of last year. We continue to see consistency in the percentage of non-distressed assets brought to the platform at approximately 80%, indicating that the volume of distressed sales has not yet picked up. Full year revenue for Ten-X grew 11% year-over-year. In 2022, we made significant progress enhancing the platform. We've now fully integrated Ten-X with our CoStar and LoopNet platforms and that's driving sales and operating efficiencies. We had our first buyer bid on a Ten-X property from within LoopNet last week and they won the auction for that property. So they're really fully integrated now. With integration, Ten-X is now positioned to handle dramatically higher volumes. We've also doubled our Ten-X sales force since the last year. New Ten-X sales representatives with tenure under 24 months are productive and brought 318% more assets to the platform in 2022 than the prior year and they accounted for 55% of total assets. The commercial property transaction market is in a period of disruption with $93 billion of CMBS loans expected to come due in 2023. Trade rates continue to reflect the spread in buyer and seller expectations. Ten-X continues to maintain a significant advantage over the old offline trade rates and we've exceeded those by 81% over the course of 2021. So we're in a down market and dramatically more effective. A digital platform that can close a transaction within 90 days as compared to the market average offline of approximately 300 days has a significant advantage and is well positioned for challenging market conditions. I'm pleased to report that we're making significant gains in building consumer traffic on Homes.com. Unique visitors to Homes.com climbed 130% year-over-year in January according to Google Analytics. Our SEO traffic to Homes.com increased 78% month over month in January. According to ComScore, January 2023 over January 2022, our Homes.com traffic increased 100%, while ComScore indicated Realtor.com was down 15%, Zillow was down 6% and Redfin was relatively flat at about 6%. In total, our Homes.com network had approximately 24 million unique visitors in January according to Google Analytics. We still have a lot of work to do here, but we have a clear roadmap and have our heads down focused on building the best residential real estate portal in the United States. Our team is excited to be working on this. They're highly motivated and committed to the mission. We believe that given our progress in building traffic to date, we'll be in a position to begin monetizing Homes.com in the later part of this year. We now have over 1 million agents registered on our Homes.com platform, which is an increase of 33% over last year. During the year, we successfully integrated the back ends of Homes.com and Homesnap platforms into one efficient residential technology stack. We're making significant progress executing on our listing your lead strategy. While other sites are injecting their agents into the homebuyers search experience somewhat awkwardly, we offer a friction-free environment connecting buyers directly to the listing agents who know the property and the home best that the buyers are interested in. We're also presenting consumers with hundreds of thousands of highly qualified potential buyer agents for free based upon those buyer agent skills and experiences rather than based on how much the buyer agent is willing to give up in commission to the portal. We believe that we offer a dramatically better consumer experience than do sites that try and take commission splits from the inquiries buyers submit. I've used some of these competing sites myself and submitted leads on properties I'm interested in. The experience is remarkably awful. The moment you submit a lead and for months afterwards, you're bombarded with cold calls from countless agents who have questionable qualifications. We believe that Homes.com offers a significantly improved consumer experience over that competition. Not only do we believe we offer a superior consumer experience for buyers, we also believe we are much better aligned with real estate agents. The competing models use all the agents' listings in a market to funnel monetize leads to just a very small percentage of agents. So, some of these competing models are diverting all the agents' leads to a small number of agents who are paying the portal. In their model, these few agents pay huge fees and the vast majority of agents get little value, if not outright disadvantage from these competitors. We believe that by respecting your listing to lead, we can serve all the agents better. We are not just providing value to the agents with the listing though, we're making it easier for buyers to find agents who have expertise and experience that are the best match for the needs of those buyers, and then facilitating connecting with them and collaborating with them without us trying to again inject ourselves in the process inappropriately. Our product development and research teams have now released a robust agent directory featuring hundreds of thousands of agents and extensive media to enhance their profiles. Our agent collaboration tools are up and running. We've had tremendous feedback from both agents and consumers. The interactive experience replaces the historically inefficient email and text communications back and forth between agents and homebuyers. We've successfully previewed this new Homes.com at the National Association of Realtors Convention in November where we demonstrated our product to close to 2,000 agents and we received very positive feedback across the board. Revenue for the residential segment was $74 million in 2022, which was roughly flat compared to revenue in 2021. As we mentioned in our last call, this is legacy Homesnap revenue, mostly selling social media and search engine advertising to agents. We believe that this revenue is less strategic and less sticky than the revenue we'll generate from a high-intent marketplace like Homes.com. We have effectively transitioned most of our sales resources to other higher yield marketplaces as we continue to deemphasize the Homesnap products in favor of future Homes.com revenue. In the later part of the year, we'll begin to bring more sales resources back onto the residential segment in the Homes.com product. Our planned investment into marketing to drive traffic to Homes.com will increase later in the year as we approach the point where we are ready to monetize Homes.com. As you've heard us say before, CoStar is always assessing opportunities to maximize shareholder value, including strategic acquisitions. And the discussions announced last month by News Corp with respect to a potential sale of Move Inc., the operator of Realtor.com were part of that ongoing effort. While we typically do not comment on potential acquisition opportunities in light of News Corp's prior announcements, we are confirming here at this point CoStar Group is not acquiring Realtor.com. We have tremendous respect for the people behind Realtor.com and for the National Association of Realtors. But again, I need to make it clear, at this point, CoStar Group is not acquiring Realtor.com. We continue to believe that Homes.com's business model and our principals are well aligned with the interest of NAR members and real estate agents generally. Turning to the real estate economy, the office sector continues to show weakness with vacancies up 13% in the past 14 quarters and now stands at 14.6%. Availability rates are much higher at 18.5%. Many second-generation office properties are now in significant distress. We expect to see many of these owners with no choice but to hand the keys back to the bank. I'm optimistic about the prospects of recovery in the out years for office though. A recent Castle Index reading showed a possible shift in momentum as office usage climbed over the 50% mark over the pre-pandemic levels. That means that for the first time since the pandemic more people are working in an office than are working at home. I believe that's because people are more productive, efficient, and in touch when they work together in person. I also believe that teams that work together are more competitive. While we expect vacancies to continue to rise and office properties to be negatively impacted in the near term, we see the continued return-to-work trend as a positive sign for the office sector's future. With 1.3 million office-using jobs added since the beginning of the pandemic, and negative 118 million square feet of absorption over the same time period, there may be significant pent-up demand for office space. The industrial sector posted a healthy fourth quarter and the sector is seeing an unprecedented amount of new supply due to high levels of demand for goods seen since the beginning of the pandemic. The sector's vacancies are at half of their long-term average. The retail sector exhibited the strongest fundamentals in the fourth quarter, and was the only asset class to see vacancies decline. Relatively strong demand and relatively low supply are both a continuation of trends we've seen since the beginning of the pandemic. Demand has outpaced new supply for seven consecutive quarters leading to a fourth-quarter vacancy of 4.2%, the lowest retail vacancy rate ever recorded. So it would appear that the death of retail real estate was only a rumor. The residential housing market is continuing to see softness. Home prices soared during the pandemic due to cheap money, but now mortgage rates have climbed over 7%, as you likely know. In combination, this has resulted in a terrible affordability issue at levels not seen in more than 30 years. With buyers being priced out of the market and existing homeowners being discouraged from moving due to having finances at historically low rates, existing home sales have fallen for the 11th consecutive month, an overall drop of 38%. We've recently celebrated our introduction to the NASDAQ 100 and the S&P 500. That's probably connected to the fact that we've now achieved 12 straight years of double-digit revenue growth. 2022 was our highest net new sales bookings year ever, and we now have over 1,100 productive sales representatives, executing on many of our significant market opportunities. We published our second environmental and social and governance report, which you can find in the Investor Relations sector of our website, highlighting our ESG goals and accomplishments for 2022. We are now reporting our baseline greenhouse gas emissions. Inside CoStar Group, we continue to prioritize being a leader in sustainability. We have a hybrid or electric fleet of over 200 research vehicles, we select LEED certified or ENERGY STAR rated buildings for most of our 80-plus offices. We have facilitated over 30 million virtual tours through Apartments.com, LoopNet, Homes.com and marketplaces thereby potentially avoiding massive amounts of carbon that would have been created by people driving for traditional physical property tours. We've also increased the transparency of our human capital disclosures, including publishing both our EEO-1 and pay gap analysis. I am extremely proud of our diverse and equitable workforce. I'm encouraged by all that we've done and all that we're still poised to do in making CoStar Group as sustainable, transparent, and a diverse a company as can be. Our 2022 employee engagement scores climbed to a well above average 83%, which is the highest engagement scores we've ever obtained. We're also proud to have a highly engaged workforce, which is reflected in our low average monthly voluntary turnover rate of just 1.6%, which is way below the professional and business services industry rate of 3.3%. So with that, at this point, I'm going to turn the call over to our approximately 83% engaged Chief Financial Officer, Scott Wheeler.

Thank you, Andy. I think I'll get through about 83% of my script, and then I'll turn off the mic, how's that Tim? Actually, I think you are probably increasing or you brought down our turnover rate given your tenure here at the company. So thank you for that contribution. So as Andy talked to a lot of this, so that 2022 was certainly a very strong year for the business, particularly in light of all the economic uncertainty we've had with inflation and higher interest rates, continued fears of recession. You've seen so many technology companies, particularly property technology companies that have seen steep revenue declines and their cost cutting in this past year. But fortunately, that certainly is not our CoStar situation. We've pointed this out many times before over the years, but it's certainly worth repeating. Our business model is extremely resilient to economic and transactional fluctuations. We have mission-critical information, counter-cyclical marketplaces, a disciplined subscription revenue model with 90-plus percent renewal rates, and we have a monstrous balance sheet. All in all, we're coming out of 2022 stronger than ever. It's important and strategic, I believe, at this time for us to continue to invest in our biggest growth opportunities. As similar to our strategy in 2015 when we increased investment levels to build Apartments.com which we believe is now the undisputed leading rental marketplace in the United States and soon Canada. More on that later. So financially, in the fourth quarter and in 2022, we certainly crushed it all around. We beat our revenue goals every quarter, topping the high end of our guidance range once again in the fourth quarter. Our $2.18 of revenue for the year is well above the initial forecast that we communicated at the beginning of 2022. Our organic revenue growth rate was 12% for the year. Profit results for 2022 also came in above expectations with fourth quarter adjusted EBITDA exceeding the high end of our guidance range. Our commercial information and marketplace businesses delivered strong operating leverage, improving margins by 300 basis points in 2022 to get within 1% of our established 40% margin goal for the year, and we made excellent progress with our residential investment program while spending less. Overall, we ended the year with $672 million in adjusted EBITDA, which was 15% above the middle of the guidance range that we set out to start the year. We're determined to repeat and improve upon our 2022 performance in 2023 using the same strategic formula. Our focus is on accelerating revenue growth in our Commercial Information and marketplace businesses while delivering cost productivity, operating leverage and strong margins. This commercial business engine is expected to provide increased profit levels and cash flow to fund our growth investments, most notably our Homes.com residential marketplace expansion. With regards to revenue performance and outlook in our various businesses, I'm going to have to give my MVP vote this year to Apartments.com. Our multifamily revenue growth continued to accelerate throughout 2022, ending the year at 16% in the fourth quarter, up 5 percentage points from 11% revenue growth in the third quarter. We see positive signs in both volume and ad level mix. The number of properties advertising on the Apartments.com network continues to grow, and we're now at a peak level of over 62,000. As vacancy rates increase, we see more properties moving up ad levels to increase their exposure and their lead volumes creating positive revenue mix. We expanded our sales force in 2022 by 40% in Apartments.com, and we certainly expect these new sellers to increase their productivity in 2023. So we expect revenue growth to increase to 19% in the first quarter of 2023 and 20% for the full year for Apartments.com. That's truly an amazing comeback this past year for the team, and the best is still ahead. CoStar revenue grew 15% in the fourth quarter and 16% for the full year, in line with our previous guidance. CoStar's 2022 revenue growth rate was 7 percentage points higher than that of 2021 on the strength of our sales efforts and the global product upgrade initiative, which to date has contributed approximately $40 million of revenue to CoStar. For full-year 2023, we expect CoStar revenue growth to moderate somewhat to 12% as the global product upgrade campaign nears completion and our CPI renewal pricing is expected to soften throughout the year with the rates of CPI. We expect CoStar revenue growth in the first quarter of 2023 to be approximately 13%. LoopNet revenue grew 12% in the fourth quarter and 11% for the full year of 2022, in line with our guidance. Over the past 12 months, we've increased our LoopNet sales team by over 100 heads with two-thirds of those hires joining us in the last six months. Our LoopNet dedicated sales team made a significant contribution to the increase in net new bookings of over 50% for the year. As our new sellers ramp up their experience and productivity in the year ahead, we expect further increases in LoopNet sales. We expect first quarter 2023 LoopNet revenue growth in the 14% to 16% range and full year growth around 18% to 19%. Residential revenue was $16 million in the fourth quarter and $74 million for the full year, up slightly from the $73 million guidance we previously provided. We now estimate that the revenue of approximately $45 million will be in 2023 for residential, a reduction of around $30 million. Half of that reduction is revenue from the concierge lead scrubbing product with another 25% of the decline resulting from the annualization of Homes.com and MLS revenues that we discontinued in 2022. Homesnap Pro and Pro Plus continue to perform well with over 1 million registered users and nearly 500,000 active agents on the platform. We expect residential revenue of approximately $13 million in the first quarter. We've not included estimated revenue from Homes.com advertising products at this time in our 2023 forecast. We'll provide further updates as we make progress throughout the year. Other marketplace revenue was $38 million in the fourth quarter of 2022, a growth rate of 8% year-over-year. Our lands for sale and business for sale marketplaces continue to perform well, growing 17% in aggregate in the fourth quarter of 2022. Ten-X continues to generate solid revenues despite the significant disruption in the transaction markets, with fourth quarter revenue up slightly over the fourth quarter of 2021. Ten-X revenues are expected to trend lower in the first half of 2023 on a sequential and year-over-year basis before recovering in the second half of the year with stronger growth. We expect the lands and businesses for sale marketplaces to continue to deliver strong double-digit growth in 2023. Overall, we expect full year 2023 revenue growth of 10% to 11% in our other marketplaces sector with first-quarter revenue down in the range of 10% to 13% year-over-year on lower Ten-X transaction revenue expectations. Information services revenue grew 12% in the fourth quarter and 11% for the full year of 2022 ahead of our 10% guidance. For 2023, we expect first-quarter revenue growth of 10% to 12% and full-year growth in the range of 7% to 9%. Our sales force totaled approximately 1,130 people at the end of the year, an increase of 300 sales reps over the ending 2021 sales team levels. We're already seeing strong contributions from our new sellers in the booking results, and we expect this sales investment to produce revenue growth acceleration in 2023 and beyond as they become more productive over time. We intend to continue to selectively grow the sales force in 2023, albeit at a little slower pace than in 2022 with a focus primarily on Apartments.com and LoopNet both of which are expected to benefit from the positive countercyclical effects of lower occupancy levels. Our contract renewal rates remain in the 90% to 91% range that we communicated last quarter, while the renewal rate in the fourth quarter for customers who have been subscribers for five years or longer remained strong at 95%. Subscription revenue on annual contracts continues to climb and was 81% for the fourth quarter of 2022, up from 77% in the previous year and up 3 percentage points sequentially from the third quarter of 2022. These improvements reflect modest increases in both multifamily and LoopNet and a positive mix effect of winding down some of those unattractive legacy products in the residential sector. So looking ahead to 2023, we expect revenue to range from $2.46 billion to $2.48 billion, an increase of approximately $290 million at the midpoint of the range, implying annual growth rates of 13%. First quarter 2023 revenue is expected to range from $575 million to $580 million representing revenue growth of 12% year-over-year at the midpoint. Now the big question around here is, who's going to reach the $1 billion revenue run rate first? Will it be CoStar or Apartments.com? It's going to be exciting to watch as we get into the second half of the year and down the home stretch into the fourth quarter. With our biggest commercial businesses of CoStar, Apartments.com, and LoopNet growing in the strong double digits with bigger sales teams, we expect revenue growth rates to accelerate for our commercial information and marketplace businesses from 13% in 2022 to 15% organic revenue growth in 2023. We plan to operate our commercial businesses in 2023 to deliver similar adjusted EBITDA levels as we achieved in 2022 on a margin perspective in order to provide growth capital for our Homes.com residential marketplace investments. 2023 adjusted EBITDA is expected in the range of $500 million to $520 million, reflecting an adjusted EBITDA margin rate of approximately 21% for the year. First-quarter 2023 adjusted EBITDA is expected in the range of $111 million to $116 million, indicating a margin of 20% at the midpoint. As we move through 2023, we expect adjusted EBITDA margins in the 20% range during the second and third quarters of 2023 with fourth-quarter adjusted EBITDA margins expected to improve modestly to around 22% to 23%. Included in our 2023 outlook are a number of our most important strategic investments for the future growth of the company. As Andy talked through, we're making significant progress with regards to our Homes.com residential marketplace and we plan to increase our investment levels in 2023. Our investments continue to be focused on product development, content creation and building consumer traffic on Homes.com. Growing our sales force across all of our major businesses is another important area of investment. The majority of the new sales resources in 2022 were added in the middle of the year, the cost of which carries over to 2023 along with the added investment in new sellers that we plan to add this coming year. We expect a great return on every salesperson and are more than happy to carry the investment at this point ahead of when they become fully productive. Closely aligned with the growth of our sales team is our plan to invest in fresh marketing campaigns in both Apartments.com and LoopNet with so many new sellers. We plan to provide the necessary marketing air cover to generate quality sales leads for our sales team. Finally, with regards to areas of growth investment, we plan to continue our European expansion in order to build the pan-European LoopNet marketplace and increased information content for CoStar expansion. So in summary, I'm very encouraged by the exceptional results we delivered in 2022 at a time when the markets and interest rates and inflation all created a healthy dose of economic volatility. Our team is laser-focused on our most meaningful growth investments while producing strong sustainable profit levels in our established commercial businesses. With the early success and increased momentum in our Homes.com residential marketplace, I remain confident that we are on pace to achieve the long-range targets we set last year of $5 billion in revenue and $2 billion in adjusted EBITDA in the year 2027. So thanks to the entire CoStar team for a fantastic 2022, and I look forward to our next update in a couple of months. With that, I will now turn the call back over to Matt, so we can start the Q&A session. Matt, over to you.

Your first question comes from the line of George Tong from Goldman Sachs. Your line is now open.

Hi. Thanks. Good afternoon. Your guidance assumes significant EBITDA margin contraction this year to 21% at the midpoint. And you touched on some of your growth investment priorities. Can you elaborate on where the bulk of your investments are going, as well as what margins will be this year in your nonresidential businesses and what the path to 40% EBITDA margins by 2027 would look like?

George, thanks for the question. So yes, we do have a significant investment plan for the year. And as I listed the investments that we're working on in 2023, I listed those in priority and size order. So as you can expect, our investment into residential will be the biggest increase that we will have in 2023. To your question about the commercial businesses, I said we almost reached the 40% margin that we set out for this year, and we expect to continue to deliver that same margin level next year in our commercial business as we really focus on getting productivity out of our sales resources and the rest of the teams in the commercial side of the business. So we'll be at the about the 21% margin rate next year Interestingly enough, and this wasn't planned that way, but when we made the Apartments.com investment back in 2015, our margins also went to 21% at that point and have moved up nicely since then. We are in a market with residential that's at least 2 to 3 times the size of the Apartments.com opportunity. So I think that gives you a sense of where our focus is for investment and why we think now is the right time to make that investment ahead of the growth that we're going to get up into 2027. We're not providing any margin guidance right now past 2023. So stay tuned as we'll move throughout time. We'll give you more guidance there.

Thanks for the question. Good evening. Nice results. Andy, now that we've moved past Move and considering the considerable resources you still have on the balance sheet, I’m curious about your current thoughts on M&A. Are you still seeing opportunities in the residential sector, or are you more focused on the commercial segment? I would appreciate any insights you can share about your current M&A perspective. Thank you.

Sure. As we explore various opportunities, we continue to evaluate each one for its potential return on investment, complexity, and risk. There are additional opportunities available in both commercial and residential sectors. We are also consistently considering whether to buy or build. Using a real estate analogy, one can either purchase an existing property or construct a new one, with different seasons yielding better returns for each option. Currently, we are witnessing notable success in traffic growth and receiving positive feedback regarding our market approach. We believe we have a unique organic offering that stands apart from others. Consequently, we are focusing more on that and on acquisitions that can support a more organic strategy for expanding opportunities. It's essential to note that the majority of residential agents do not make purchases from leading portals, with about 97% of active agents not engaging with existing portals. Therefore, we see a significant organic opportunity there and believe there are acquisitions that can help achieve that target, along with other acquisition opportunities that may not be directly related. The landscape is evolving, and we must make informed judgments to ensure the best return for our investors.

Going back to the question about mergers and acquisitions, regarding your balance sheet, you have a significant amount of cash. It seems like you are focused on organic growth and potential acquisitions, possibly smaller ones or something more transformative. In the meantime, how are you approaching your balance sheet and managing the cash you have?

Yes. Thanks for the question. The continued view of our strategy is to focus on acquisitions and adding meaningful scale to the company through that vehicle, which is why we raised the capital over the last few years. And in the meantime, obviously, we'll try to maximize the returns from the capital that we have. It's helpful that interest rates have gone up to help us a bit with that. And of course, we'll always keep open other alternatives for that capital as time goes on. But that's how we're thinking about our capital still today, and we have many other acquisition opportunities in the pipeline that we hope to deploy that capital against in the near future.

I apologize, but can I ask about the investment spend for residential in 2023? Thank you.

Yes. No, we haven't provided that information in 2023. And let me explain, I'm sure everyone is wondering, Matt, that now that we've integrated Homesnap, we've integrated Homes.com. They're all in our combined technology stacks with the rest of the things that Frank Simuro runs in our marketplaces. We also have significant resources in our research team now embedded under Lisa Ruggles, working on residential as well as the research for CoStar Apartments.com, LoopNet. And so as they deploy folks out into the field to do media shoots and other property information, those resources go all across the different property types that we have and they produce information. And so we don't spend the time to go back and track time sheets or record what everyone's working on in a way that would say, hey, we're going to track margins by each of our businesses. And as you know, we have not provided margins by businesses in the past, and we don't intend to do that because of the integrated nature of the business we run. So what we found out this year was that as we go into this more integrated residential strategy that comes a lot of work and is difficult to break that out. Now in broad sensors, I think you can get to roughly what that looks like given the commercial growth, the commercial margins, and we do give revenue breakouts by the different businesses. So hopefully, that will allow everyone to get a sense of where we're going. And you can tell how important this residential strategy is to us by the amount we're willing to invest, again, knowing that we've got a phenomenal opportunity in a few years for the revenue to get to that $1 billion or so in residential that we spoke about before.

And there are competitive elements here where you don't want to be terribly transparent on every detail, and you want, we believe investors and analysts can figure some of the stuff out, but we don't want to put it in an earnings call script to make it that easy.

Hey, thanks. So it seems like you're ramping the residential investments pretty heavily this year. And Andy, I think you said that you could start to see some better monetization of content, et cetera, later in 2023. It doesn't seem like you've assumed that really in the residential revenue guidance that you laid out, Scott. So just curious to get some more detail on when you'd expect to see residential monetization really improve? And do you think that 2023 could be the peak drag or disconnect, however you want to frame it between residential revenue and operating expenses?

So I believe we met with a number of investors and discussed a point where we begin to do the first levels of monetization at 25 million uniques. And in January, we were at 24 million uniques. So we're a little ahead of our plan there. And so we are focusing on the back half of the year to build out that product or to build out that offering and apply sales resources to it. It would be no way that it would be meaningful revenue in 2023, just because of the timing of the ramp-up. I think that the question of where you see peak investment includes a psychological element to it. So I think where the point at which you are an investor is not yet seeing the first stage of monetization or seeing traffic strategy or unique positioning of a product. From that perspective, I would say that 2023 is probably the peak psychological negative operating margin time period. And we would hope to be showing signs of success by 2024, 2025. So we've done this a number of times. This is if you use the analogy of building a building and you're building out first year, you're acquiring the land, design the property second year, you're getting the permits, bidding out the work, third year you're building out, if you're leasing it up. We've built a number of buildings just like this before. And so typically, when people see the groundbreaking in year two, three and the buildings start to come up, they can begin to imagine it. And we're still in the early phases. We're near to really of this initiative. But eventually, people get pretty excited because they realize as a digital building and it has a fixed cost, and you can lease it up repeatedly and repeatedly, repeatedly to make a lot of money on it. So I think 2023 is a substantial investment year. I would anticipate that there would be investment in 2024, but with more KPIs that the world could see and appreciate.

Hi. Thank you for taking my question. I would like to discuss the commercial business. Can you elaborate on the factors affecting the current environment in commercial real estate, specifically regarding CoStar Suite and LoopNet? For the Suite, with the anticipated reduction in growth this year, does that factor in any slight challenges due to the core broker base losing some members? Regarding LoopNet, it's encouraging to see the growth acceleration for 2023, although it appears to be more weighted towards the latter part of the year. It would be helpful to know what gives you confidence in executing your growth strategies for LoopNet, especially for the owner-focused advertising product in the current market.

On the CoStar side, the renewal rates are excellent, and we are not experiencing any issues with brokers. There was a noticeable increase in global platform sales over the past year. Our sales force is now concentrating on other initiatives that are valuable on the lender, corporate real estate, and owner sides. We believe there are significant opportunities to maintain the growth rate in CoStar, and I've consistently indicated this during approximately 140 earnings calls. As for LoopNet, we are at a crucial point where we are building a sales force capable of pursuing opportunities at a national level, which is the first time we have dedicated a sales force for LoopNet at this scale. Earlier this year, we conducted extensive focus groups and spoke with market researchers, gathering insights from owners, brokers, and corporate real estate users. A key finding was that all of the Fortune 1000 real estate professionals we consulted heavily utilize LoopNet to choose and locate their facilities. This suggests that LoopNet is the most vital marketing vehicle in commercial real estate. In a challenging environment, particularly in sectors like office space, where success often hinges on having tenants, smart investors will focus on digital marketing campaigns to improve their chances of leasing properties. We are building our sales team one representative at a time, and the outlook appears promising. Given the market conditions, LoopNet is optimally positioned to assist property owners with valuable assets through relatively small digital marketing investments. When I observe a broker or owner facing significant leasing challenges who has not marketed their property on LoopNet, I find it astonishing. After listening to hours of focus groups, I am convinced we have an outstanding product, and by building our sales force and marketing this opportunity, we can continue to accelerate the growth rate you are already beginning to see.

Yes. Thank you. I know you don't have like formal subsegments or product level margins. But the 39% flattish margins for nonresidential, I just want to confirm that, that includes the investment in sales force as well as Apartments.com and LoopNet marketing and other initiatives. And then, so that's just the first part. And then second, can you help us with the Q1 margin guidance? Is that the Apartments.com marketing? Or are you starting to market Homes.com significantly more aggressively this early in the year as well?

Yes. To address the first part of your question, the margins I mentioned regarding the commercial information marketplace businesses do include CoStar, LoopNet, Apartments.com, and all the investments we make in these platforms. This refers to everything outside of the residential marketplace. Notably, in the first quarter of the year, the hiring we undertook in the second half of last year, along with the wage increases in the first quarter, which we implemented to keep our employee base ahead of inflation, had an impact. These factors are what influenced the first quarter, rather than any increase in marketing spend across the company. As I mentioned earlier, we will not be hiring as many salespeople this year or adding other resources, which will help moderate and flatten the increase as we progress through the year.

Hi, guys. Good afternoon. Thanks for squeezing in my question. Just sticking on the M&A conversation. Andy, when you talk about the build versus buy, is it safe to assume that you're now, I guess, fully committed to building the traffic based on an organic basis versus acquiring it? Or should we not necessarily rule that out with it maybe just coming down to whether you can get the right price for the right asset?

I don't think we can rule anything out since it's a flexible situation. You described it accurately. We are fortunate to have a strong organic growth path. As we move into this year, it sometimes felt like there were too many M&A opportunities available. There are several possibilities, but as you know, we typically cannot discuss these matters in detail.

Thanks for taking my question. I just had a broader question about the guidance and the conservatism that's baked in. Last year, we saw a pretty like expectation for pretty upfront residential investment, and we saw numbers being beaten and raised as we went through the quarters. Is that something similar this year as well where we have taken some conservatism around these growth investments? Thanks.

Thank you for the question. Last year, as we began to increase our investments, we provided a wider range for our expected outcomes, with an EBITDA range of $40 million, which is something we had not previously done. This reflected the uncertainty we faced as we started to ramp up investments, particularly in content and other focus areas. Thankfully, we ended up spending less than anticipated in those areas. This year, you may notice that we have narrowed our initial range, indicating we have a clearer understanding of our progress. Being a year further along allows us to better assess our investments. However, the market is always evolving, and we remain responsive to new opportunities and challenges. We continually search for ways to optimize our investments, ensuring that we grow at a steady pace without overspending. When we reach the point of launching products and experiencing revenue increases, we will certainly factor in additional investments in our forecasts. Overall, I believe we have a more defined perspective this year, but as is common in the early phases of an investment cycle, we must stay prepared for potential adjustments. I hope this gives you some insight.

Hi. Good evening, guys. Thanks for taking the question. Appreciate it. Recognizing, Andy, that the company has a very good track record, as you pointed out, of identifying big opportunities, investing against them, and putting up outsized revenue growth and in light of the fact that you're asking investors to sort of stomach another year of down margins as you do that in residential. Can you maybe give us a little bit of a sneak peak of what you think the business looks like on the other side? Can this be as you start to monetize residential, should we think about this being a mid-teens organic revenue growth business? Are there some trade-offs? I recognize you have these 27 targets out there. Just sort of wondering kind of what a post-investment in CoStar growth profile looks like?

I believe Apartments.com provides a solid example of what this could resemble. Establishing a platform with a unique value proposition and a substantial presence typically leads to multiple decades of growth, supported by examples from around the globe as well as from Apartments.com, CoStar, and LoopNet. This certainly represents a multibillion-dollar revenue opportunity, and I see it as having the potential for over $1 billion in EBITDA. It occupies a multitrillion-dollar sales market, indicating a vast opportunity. Building this platform requires investment, similar to the investments made in developing the CoStar, LoopNet, and Apartments platforms. The benefit is that once established, one can enjoy predictable high-margin growth for many years, much like constructing a building. However, it differs from traditional building in that there’s no need to lease it up; you can continuously sell more once you reach that point. We are further along in this process, and our confidence in the clarity of our position is growing, contributing to our current strategy.

Thanks so much. You talked about moderating the hiring of sales force, but you're still going to make some investments. I'm just curious, given what's going on in the market, especially in the real estate area. Is it easier to find salespeople than it was maybe six to 12 months ago?

Yes, I would think so. Yes, we've on a number of elements. One is that we've been through a large hiring stage. And so our own processes and ability to identify the right candidates has increased. I think the candidate pools that are seeing tightening up in other sectors and reductions in staff and other sectors are helping us find good quality candidates. And anyone that's selling digital products can be effective for our sales forces on the information side. And then, we're getting better at not only the candidate identification, but then the onboarding and the training and the coaching as we bring in these cohorts. So starting from the market side, all the way through the pipeline, it's getting easier. And so adding another, let's say, 100 folks in 2023 versus the 300 we added last year seems like a layup for us now, but there's still a lot of work to do to onboard and make sure all of the 300 are getting to be productive and contributing members to that strong revenue growth and then to replace the ones that inevitably, there are some that won't be able to pass that hurdle and we'll know that within about six months and then we replace and move on. We're definitely in a place where we can be selective, and we definitely are able to put together the absolute highest quality team that you'd want to put together with the ability to hire and the ability to retain right now.

Hi. Good evening. Thank you for the question. I wanted to address the situation with your end customers and inquire about any changes you've observed in customer sales cycles as the year has progressed. Thank you.

I think the sales cycle for Apartments.com has become quicker as the markets have weakened. In contrast, the sales cycle for CoStar is varied because we cater to different sectors, including lenders and large corporate clients, which typically involves a more careful, extended sales process. The ownership aspect on the LoopNet side is similar. It’s not primarily about the sales cycle; rather, it usually takes six to nine months for LoopNet salespeople to truly adapt and grasp digital marketing and commercial real estate concepts. Therefore, it’s more about the ramp-up time, but the actual sales cycle for LoopNet is quite fast. The only significant change we are witnessing in the sales cycle is with Apartments.com, where it is shortening.

Great. Thank you so much for taking the question. I guess, Andy, when you set up investment in Apartments.com in 2015, that business was at a larger scale than the residential business is today. It took you around six, seven years to get to north of $700 million in revenue for apartments. Your 2027 target calls for at least $700 million of residential revenue on an organic basis, I believe. So I guess just other than the residential market being larger, what are some of the other elements or factors in the residential market that gives you the confidence that the residential business will effectively outperform farmers.com business?

Sure. The revenue remained relatively stable, similar to what we had last year, around 75 million. However, the residential market has significantly expanded. Our expertise in managing digital marketplaces has also improved, and we have increased resources in various areas such as sales talent, SEO, SEM marketing, and software development. Additionally, I see some synergy across our platforms. Having a strong presence in apartments or LoopNet creates an accelerating effect across these different areas. It’s important to remember that when we first entered the apartment market, we faced tough competition from well-established players like Craigslist, Zillow, Apartment Guide, Rent.com, and Apartment Finder. Many apartment communities were purchasing services from these larger competitors. In contrast, most residential real estate players today are not engaging with the major established residential portals. In fact, I view the United States Postal Service as our main competitor. I feel confident going up against them. My mailbox rarely receives residential ads, which I collect from various sources and display at our office to illustrate how little money is spent on marketing properties by residential real estate firms with the entrenched industry players.

Thank you for your question. There are no further questions at this time, so I will turn it back to Andy to conclude.

Thank you for joining us for our fourth quarter 2022 earnings call. In 2023, we anticipate accelerating revenue growth and strong margins in our commercial business, while we continue to invest thoughtfully in the residential market. Our solid performance in core commercial real estate products supports our investment in Homes.com. Reflecting on 2015, we invested significantly in marketing Apartments.com, which temporarily lowered our margins, but has since become a multibillion-dollar asset for our shareholders with an impressive return on investment, similar to our investments in CoStar. We believe our focus on the residential sector will provide an equally attractive, if not better, return over time. We look forward to discussing this further during our first quarter call on April 25 at 5:00 PM Eastern Time. Until then, stay safe, and thank you for participating in the call, except for our competitors listening in.

This concludes today's conference call. You may now disconnect your lines.