CoStar Group, Inc. Stock

Good day, and thank you for standing by. Welcome to the Q3 2026 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Thank you, operator, and thank you all for joining us today to discuss the Third Quarter 2026 Results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Robin Rossmann, our CFO, I'd like to review our safe harbor statement.

Certain portions of the discussion today may contain forward-looking statements and the company's outlook and expectations are 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. 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 because of new information, future events or otherwise.

Reconciliation to the most directly comparable GAAP measures of any non-GAAP financial measures discussed on this call are shown in detail in our press release issued earlier today, along with the definitions for these terms. The press release is available on our website located at costargroup.com under Press Room. You have joined via webcast. Please refer to today's press release on how to access the replay of this call. And remember, we want to give everybody a chance to ask a question. So please limit your question to just 1 during the Q&A, and you can requeue and time permitting, we'll be able to ask a second question.

And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance.

Thank you for joining us today. CoStar Group delivered an outstanding third quarter. Revenue grew 14% year-over-year to $952 million, marking our 62nd consecutive quarter of double-digit growth. More importantly, we delivered record quarterly adjusted EBITDA of $229 million, double the prior year and surpassing the previous record $193 million from Q4 2021. EBITDA increased $166 million year-over-year to $179 million in the quarter, also the highest in our history. Net income was $74 million, an increase of $105 million year-over-year.

Third quarter adjusted EBITDA, excluding the positive impact of Zonda, exceeded the high end of our guidance range due to strong cost control with quarterly operating costs declining 2% year-over-year. We expect to continue to benefit from these savings in the inclusion of Zonda, and we're therefore raising our full year adjusted EBITDA guidance to the midpoint of $830 million, 24% above our previous record of $672 million set back in 2022. That represents an adjusted EBITDA margin of 22%, up from 14% in 2025 and 9% in 2024. As we've done repeatedly over the past 4 decades after completing an investment period, we focus on generating strong multiyear increases in adjusted EBITDA. This time is no different, and we remain firmly committed to our adjusted EBITDA target of $1.25 billion in 2028.

We're generating strong margin expansion while simultaneously investing aggressively in high potential future revenue drivers. Our 2026 margin growth came from initial steps to improve workforce marketing and procurement efficiency. Last quarter, we expected to bring our 2026 expenses $100 million below our original guidance. We now expect to bring them $150 million below that guidance, excluding Zonda. A day [ review ] of our expense base over the last 2 months identified approximately $200 million of additional cost efficiency opportunities across procurement, organizational design, technology infrastructure, marketing effectiveness and post-acquisition integration. That's incremental to the $150 million we expect to save this year which we expect to realize the additional $200 million over the next 12 to 18 months, while continuing to invest in future revenue drivers.

Our annualized net new bookings were below our expectations, coming in at $37 million for the third quarter. We attribute this to economic headwinds and slower-than-expected sales force growth. Our renewal rates remained high, but with a growing multibillion-dollar subscription base, we need to continue to grow high ROI sales force headcount. Our sales team met with hundreds of thousands of clients and prospects, the lack the scale to reach the hundreds of thousands of additional prospects we have. We currently have about 2,000 sales professionals down about 10% from the prior year.

We launched Homes.com with a large centralized inside sales team in Richmond, many of them without prior sales experience, not a profile we have traditionally hired. Many have succeeded, others have not. We'll continue to build the Richmond team, but we are shifting most of our growth effort to the field sales professionals with prior real estate and sales experience in our top cities. Field reps who meet with clients face-to-face are, on average, much more productive than inside sales and having visited prospects and clients with our home field sales teams at the agent's open houses and offices. I can tell you, agents are very receptive to local, in-person sales professionals.

We have taken action. We expect to publicly announce the appointment of a new highly qualified CHRO within the next 2 weeks. We are decentralizing sales recruiting from Richmond into our major city hubs with recruiters reporting into our field sales leadership, and we are building sales force growth into our sales management compensation plans. We expect to reaccelerate sales force growth in 2027 to serve our growing customer base and reach our prospect opportunities. Nonetheless, the impact of the third quarter net bookings together with lower transaction volume at Domain means we're revising our revenue guidance for the full year. Our updated full year guidance is up $25 million at the midpoint and includes approximately $60 million from Zonda. So excluding Zonda, the outlook is $35 million or 1% lower than in July.

Our commercial real estate business generated $492 million of revenue in Q3, an increase of 7% year-over-year and adjusted EBITDA of $180 million, down 2% year-over-year due to investments in upcoming product releases, including Australia, France and the new homes modules. CoStar had a great quarter with revenue of $344 million, up 8% year-over-year. Renewal rates remained strong at 92%. NPS reached a record 70 and users grew 17% year-over-year to 331,000 subscribers. The CoStar sales force of [ 485 ] grew 4% in the quarter but remains 4% below the beginning of the year. We anticipate returning to Q4 2025 levels by year-end.

We are launching a transformative new AI-driven research process for CoStar tenant that I believe can expand the productivity of our tenant researchers more than tenfold, allowing us to offer much deeper, more accurate information on order of magnitude more corporate occupiers. Our tenant AI agents combined 4 decades of proprietary property level and ground truth from our field researchers with thousands of other sources. So we can now update all 6.7 million tenant locations every year instead of just updating a small percentage. We're updating with higher accuracy than we've ever achieved. In head-to-head test and AI agent using only publicly available data had a 75% air rate. We believe our solution operates with single-digit error rates.

Our CoStar's international growth momentum is continuing. In Canada, we now serve all 5 leading brokerage firms as we do in the U.K. where so CoStar subscribers now participate in 80% of commercial real estate transactions and August renewal rates reached an impressive 94%. In France, following CoStar's launch last quarter, we made a strong start in the migration upselling of over 1,100 business customers, onboarding our first major global brokerage from nearly right away. In Australia, we're nearing launch with a proprietary data set of more than 93,000 commercial properties, 45,000 curated listings and 123,000 tenant records, plus close to 10 million pages of government filings abstracted with AI, which we believe will make CoStar Australia one of the most compelling solutions we've ever offered.

This week, we are launching CoStar Debt Solutions Benchmark built on $1.5 trillion of CRE debt across more than 155,000 loans, giving lenders visibility into nonsecuritizing activity for origination, portfolio risk and compliance. Next year, we expect to add loan origination capabilities to lending workflows.

LoopNet generated $89 million of revenue in Q3, up 13% year-over-year. LoopNet's sales force of 220 representatives was up 20% year-over-year helping drive a 30% sequential increase in Q3 annualized net new bookings. LoopNet and CoStar sales reps generally call in the same firms with large owners, brokerages and enterprises that makes sense as the decision-makers differ and the solutions can be more complex. For small to midsized clients and prospects, one skilled rep can sell both products more effectively, reducing our cost of sales and offering a single point of contact prospects desire.

Our U.K. trial of this approach this year has produced very good results. U.K. revenue in Q3 rose 22% year-over-year and silver level renewal rates reached 96% in August, and we are now cross-trading reps to roll out the same strategy in the U.S. later this year. [ 10x ] is regaining momentum under its new President, [ Steve Price ], winning back volume for the industry's largest brokerages, investors and loan servicers. The third quarter trade rate of 60% was the highest since the second quarter of 2022. CoStar Real Estate Manager grew annualized net new bookings 15% year-over-year, with the majority of new bookings replacing competitor applications, and we're expanding our direct sales presence into Europe.

Matterport delivered strong Q3 performance with subscription revenue up 11%, direct sales bookings up 14% and new enterprise customers up 46% year-over-year. Following the rebalancing of the Pro3 commercial model towards subscription July, shipments of the Pro3 reached their highest level since launch, up 52% year-over-year. Matterport's profitability has improved massively since it was a stand-alone public company prior to acquiring it, and we expect Matterport to be profitable by the end of 2027.

BizBuySell's Q3 net new subscription revenue grew 282% year-over-year, driven by strong supply side demand and membership increased 23% to a record level. Residential revenue was $460 million in Q3, up 23% year-over-year. This included Zonda from August 21, on a full quarter basis, Zonda would take our annualized single-family home revenue to approximately $500 million. Residential third quarter adjusted EBITDA quadrupled quarter-over-quarter to $49 million. This growth was delivered despite some of the most challenging residential and [indiscernible] market conditions in many years across the U.S., U.K. and Australia.

In the U.S., the interest rate environment drove the pending home sales index to its lowest level on record in September and multifamily remains under pressure with 8% vacancy, rent growth of 1%, which is real growth of negative and the 43% of properties offering concessions in September, the highest we've ever observed. In Australia, rising interest rates were compounded by the government's shift in residential tax treatments -- investment tax treatments. Sydney home sales fell 27% in the quarter and house prices are falling across every Australian city for the first time in 15 years. That's a very significant headwind for Domain.

Apartments.com delivered Q3 revenue of $320 million, up 6% year-over-year. The Apartments.com network reached 48 million average monthly unique visitors, up 10% and 237 million quarterly visits up 6%, both the highest since Q2 2024. While tour requests rose 57% and applications for apartments more than doubled. Our sales force remains a key differentiator. The team conducted 191,000 quality [ meetings ] in Q3, maintained a very impressive 86 NPS and held our average revenue per property steady year-over-year. One of our top priorities for Apartments.com through 2027 is to grow our sales team. Since Q1 '23, Apartments.com revenue has grown by an impressive 53%, but the sales team has only grown 21% and is down this year.

During the third quarter, we suffered the consequences. Our team did not have enough time to both service their existing customer base and pursue new business. Our monthly renewal rate dipped 20 basis points to 98.4% and we ended the quarter with 91,155 properties, down 2% sequentially. The team still delivered impressive gross monthly sales, averaging 6,355 in gross monthly sales per field sales rep. With our restructured sales recruiting process, we believe we can achieve our growth goals and put more reps in front of clients and prospects with the evidence of our unique renter audience product and position to serve the industry.

Renters love our Matterport 3D technology. They viewed more than 65 million tours, up 99% year-over-year and listings with Matterport generated over 4x more leads and nearly 6x as many tours or application requests. Apartments.com remains the most recognized department search brand with unaided awareness of 63% in September, up 4 points year-over-year and more than 25 points ahead of the nearest competitor. That awareness drives a unique audience per [ comScore ]. 74% of Apartments.com visitors have never visited Zillow Rentals. 90% have never visited Rent.com. 95% have never visited apartment list. If you want to reach apartment seekers, one site reaches far more than any other, and that's Apartments.com.

We launched Apartments.com AI this summer and are promoting it nationally, nearly 2 billion consumer impressions by year-end and our partnership with OpenAI lets renters move directly from a ChatGPT conversation to a transaction on our trusted inventory, extending the reach of Apartments.com in an AI world. Attribution is another area where a large sales team will help us. Most of our clients reporting credits, the last touch, often the communities property website. and they think that's the source of the lease, missing the discovery touch point that first introduced the renter to the property.

In September, we launched the attribution challenge with [ highlig.ai ], an independent measurement partner to analyze clients' actual lead and lease sources. The first 6 clients that took the challenge found that Apartments.com delivered on average more than double the leases they're reporting indicated twice the value they believed on a cost per lead basis. And in less than a month, 75 property management companies have signed up.

Homes.com delivered strong Q3 growth with revenue up 50% year-over-year to approximately $31 million. We ended the quarter with more than 36,000 members with average subscriber pricing increasing to 271 in September. We welcome [ Felix Kush ] as President of Homes.com in September. Felix brings extensive real estate portal experience, including leading [ Immowelt ] in Germany and [ Immoweb ] in Brussels. We introduced Platinum premium advertising in mid-September to Homes.com a classic depth advertising product like the premium levels we offer Apartments, LoopNet and Domain. Platinum moves a listing on -- that an agent selects the top of the sort order with 5-time retargeting and extensive audience boost across the Internet. Member listings generate 50x the exposure of basic listings, but premium listings generate 233x the exposure. With the introduction of platinum the average sales price increased 58% in October to $429.

Sales productivity also reached its highest level of the year. Homes.com generated $7 million of annualized net new bookings in the third quarter despite reducing inside sales reps from a peak of [ $655 ] a year ago to $267 today. When we demo Homes membership to an agent, we consistently achieved close rates above 40%. The objective is more demos and expanding our field sales team is how we get in front of more agents. Brand health remains strong, unaided awareness rose to 37% in June. Net Promoter Score held at 41 and more than half of September traffic came from direct and organic channels, reducing our reliance on paid traffic. We are adding Apartments.com's independent owner rental features to Homes.com to expand our revenue at the lower end of the market. In Q3, Homes.com renter traffic increased 12% year-over-year, organic traffic rose 30% and leads from Homes.com for Apartments.com multifamily customers grew 462%.

Domain delivered Q3 revenue of $70 million, down 5% year-over-year on a pro forma basis with core residential revenue flat at $48 million and residential depth advertising down 5%. Domains revenue is transaction-based, not subscription-based, so it's sensitive to swings in transaction volume that I described earlier. Dozens of CoStar Group demand Homes.com product managers and engineers are advanced planning to combine the best of Domain and Homes.com products on a single lower net cost global platform which we believe will enhance our competitive position in both the U.S. and Australia and drive EBITDA expansion. We anticipate releasing combined platform, the combined platform in 2027 after which those teams will integrate our U.K. platform on the market as well.

On the market has delivered 29 consecutive months of positive net new bookings. We serve over 17,000 customer branches and new homes developments up 6% year-over-year. Total listings are up 14% to $875,000 and more total stock than Zoopla per third-party data, and our leads grew 7% to $4.7 million in Q3. Land.com revenue grew 8% year-over-year and annualized net new bookings increased 22% driven by 44% growth in signature ads and a 15% reduction in cancellations.

We welcome Zonda to CoStar in August as the leading B2B homebuilder information platform, serving more than 3,000 builders, developers and suppliers and lenders. Zonda extends our proprietary data software and marketplace model into new home construction. Zonda positions CoStar in a nearly $1 trillion annual market that remains reliant on fragmented data and manual processes. Its subscription analytics provide lot level insight from entitlement through sales and it will expand Homes.com's new construction inventory and builder advertising opportunity.

This month, I had the opportunity to meet with a number of Zonda clients, the leaders in home building. and the reception has been very positive. I'm struck by the similarities to an earlier Apartments.com. When we purchased Apartments.com, the industry had not yet benefited from demand creation and scale. Once we began marketing Apartments to major consumer audiences, property managers love the demand we created, and we grew Apartments.com revenue from $85 million to well over $1 billion today. American homebuilders produce a great product, and I believe we can create similar demand at scale for new homes through Zonda and Homes.com.

Today, we announced a definitive agreement to acquire Vexcel, the operator of the world's largest and highest-quality aerial imagery program. Vexcel's cameras produce the aerial imagery behind Bing maps at Microsoft, and it was spun out as an independent company in 2016. Since then, it has built something nobody else has. Vexcel designs its own camera system in [ Graz ], Austria flies its own fleet of aircraft and collects more than 60 million images a year across 45 countries, much of it at 7.5 centimeters, 16x more pixels per square meter than the roughly 30-centimeter resolution of commercial satellites. That combination of quality, accuracy and global coverage is why the largest technology companies in the world who could buy imagery from anyone buy it from Vexcel.

Vexcel is a strong business with roughly $140 million of revenue in the last 12 months, growing more than 30% on reoccurring multiyear data contracts and profitable with an adjusted EBITDA margin of around 20%. Its camera and processing road map should keep lowering the cost of capture, sharpening resolution and shorten the time from flight to deliver data. That's before taking into consideration what we believe will be significant synergies from bringing Vexcel into CoStar.

Since 1989, CoStar Group has deployed thousands of researchers driving tens of millions of miles to fund document and photograph real estate tenants and construction. Direct observation of on-the-ground facts that has differentiated CoStar from its competitors and made us the leading CRE information solution in the world. Advances in aerial photography and LiDAR, let Vexcel produce extremely high-resolution images and precise measurement of every kind of property in the built environment. Combine those images with rapidly evolving ability of AI to recognize and extract information and features from them, and we can now create a transformative new ultra low-cost proprietary data source. Every aerial image we own becomes a data record. Computer vision reads a properties fit attributes straight off the pixels, roof material parking count architecture, condition, year built and hundreds of more data fields. All into a structured attribute database covering the entire market dramatically reducing the cost and time it takes to expand our geographic coverage and improving our data quality and depth of data.

Vexcel collects data from 45 countries in more than 320 major global metro areas and sees hundreds of millions of buildings and houses clearly from the air. It took us 4 decades to inspect several million properties. With Vexcel and AI, we believe we can observe and capture valuable data on hundreds of millions of properties in 24 months. CoStar can differentiate the data we collect from the air and from that of competitors by connecting with all the intelligence we have on who and what is inside these properties. Real estate brokers, developers, construction companies, utilities, insurers, state and local federal governments by both CoStar and high-resolution [indiscernible] imagery. So combined these 2 companies, we can cross-sell our solutions highly efficiently. Vexcel has reached $140 million in revenue with just salespeople. We believe we can accelerate its growth by expanding its sales force and leveraging our 2,000 salespeople who already have relationships with many of Vexcel's most important prospects. Robin will address more details of the Vexcel acquisition in his remarks.

We look forward to welcoming Vexcel to CoStar Group. It is clearly aligned with our mission of digitizing the world's real estate with an incredible ability to leverage AI to create proprietary real estate data, durable value. So in his decade at CoStar Group, Robin Rossmann, has proved to be an invaluable executive in a number of roles with increasing responsibility. I have had the honor to work with a number of great CFOs. And I can already tell that Robin is a great fit. And I think you can see that in some of our cost control initiatives we're achieving. So I'm pleased to turn the call over to him for his integral earnings call.

Thank you, Andy. It is a real honor to be in the seat. Over the past 3 months, I have loved building on my decade of operational experience across the group by analyzing the financial drivers of our business in detail and comparing them to both internal and external benchmarks. This has led me with conviction in 2 things: Firstly, the strength of our products; and secondly, the opportunity to realize significant efficiencies that can both improve margins and drive revenue growth. In many cases, the opportunities are the same as those that I found when running our European operations just at a larger scale.

In Europe, we fund savings equivalent to approximately 25% of the cost structure, whilst accelerating annual revenue growth from 9% in 2024 to 14% over the last 2 years. We did this by reviewing the necessity of every single role across the organization and the return on investment of every major expense. Just like any organization that has grown rapidly, both organically and through acquisitions, there is an appropriate time to step back, realize integration savings and reshape the organization to align with the strategy going forward. Together with Andy, we have commenced a deep review of expenses and to date identified approximately $200 million of efficiency opportunities. This is in addition to the $150 million anticipated savings this year from original guidance. If you do the math, that is still well below the 25% we found in Europe, that would be $750 million. But this is early days, and I'm still hunting.

In Europe, we completed this exercise over 2 years, and we reinvested a significant portion of the savings. That's what enabled us to launch new products and delivering an acceleration in revenue growth. Likewise, for the group, we expect to use the efficiencies to both improve margins and invest to grow revenue. Accordingly, these savings give me strong conviction that we will deliver our adjusted EBITDA target of $1.25 billion in 2028.

With that in mind, I'll cover 6 things, the quarter against guidance, the commercial and residential segments, bookings, cash flows and capital allocation, updated guidance and Vexcel. So starting with the quarter against guidance. Revenue in the third quarter was $952 million, up 14% year-over-year and 7% on an organic basis. Revenue excluding Zonda, which was not in our guidance, was $933 million, about $7 million below the midpoint of our guidance. The shortfall was in residential with 60% coming from lower transaction volumes in Domain and 40% lower subscription revenue and apartments.

Adjusted EBITDA in the third quarter was a record to $229 million, double the prior year and up $45 million or 25% from the second quarter. Excluding $3 million from Zonda, adjusted EBITDA was $16 million above the top end of our $190 million to $210 million guidance range. Adjusted EBITDA margin in the third quarter was 24%, that's 10 points higher than a year ago and the seventh consecutive quarter of expansion. Net income in the third quarter was $74 million against a net loss of $31 million a year ago. Adjusted EPS was $0.38, up 65% and above our $0.31 to $0.34 range. The outperformance came from cost management. Adjusted operating expenses were down [ 2% ] year-over-year, as Andy said. And a few pro forma to include the savings we've achieved in Domain and Zonda, it was down by an even larger 5%.

Our 2026 cost base is running about $150 million below our February guidance, up from the $100 million we described in July. Now if we break down that $150 million, roughly $100 million or 2/3 is run rate savings that we will keep going forward and the remaining $50 million relates primarily to lower-than-anticipated sales headcount.

Moving into the segments. Commercial revenue in the third quarter was $492 million. That's up 7% year-over-year and in line with guidance. CoStar revenue grew 8% to $344 million with subscriber accounts up 17%. The gap to revenue growth reflects changing customer mix and the renewal rate remains a very strong 92%. LoopNet grew 13% to $89 million after delivering the highest net new bookings quarter of 2026. Other commercial revenue was $59 million, down 8% over year driven by 10x where we expect the turnaround Andy described to show in revenue from the first quarter of 2027. Matterport subscription revenue grew 11% and is now 70% of its revenue. Commercial adjusted EBITDA was $180 million a 37% margin and above the $162 million to $172 million we guided. Third quarter margin was 2% below last year, reflecting prelaunch investment in Australia real estate manager, new homes and debt solutions. Excluding these, the margin would be close to 40%.

Moving on to residential. Third quarter revenue was $460 million, up 23% as reported and 8% organically. Apartments.com grew revenue 6%, down from 9% in the second quarter. ARPU was unchanged as our sales team held price, while paid properties ended the quarter at 91,155, up 5% year-over-year, but down 2% from June. Homes.com revenue in the third quarter grew 50% to $31 million. Membership was more than 36,000, up 47% year-over-year and roughly flat sequentially. So growth was driven by pricing and mix. Domain revenue in the third quarter was down 5% pro forma and a weak Australian market, particularly in Sydney and Muthorne, where its premium listings are concentrated.

Residential adjusted EBITDA in the third quarter was a record $49 million, up from $12 million in the second quarter and $118 million improvement on prior year. Excluding Zonda, residential adjusted EBITDA was $46 million, well above our $28 million to $38 million range.

[indiscernible] to sales performance. Net new bookings in the third quarter were $37 million, down from $84 million in the third quarter of last year. The decline was concentrated in residential as a challenging economic environment compounded by insufficient sales capacity impacted Apartments.com and Home.com bookings moderated following the sales force reduction earlier this year. Where we have added sales reps we are seeing results. Among our largest brands, only LoopNet added sales headcount in 2026 with its North American team up 20% year-over-year, enabling them to deliver their strongest bookings this year in Q3. As Andy mentioned, we have taken action. Our sales head count has stabilized in the third quarter, and we expect it to rise again next year. As a result, we expect the third quarter to be the low point for bookings with sequential improvement in the fourth quarter. In the third quarter, our contract renewal rate was 88%, with customers of 5 years or more, renewing at 94%. Subscription revenue on annual contracts was 72% of the total.

Moving to cash flows and capital allocation. Operating cash flow was $188 million in the third quarter and $455 million year-to-date. This is post the $109 million brand settlement. So excluding that payment, year-to-date operating cash flow was up roughly $300 million on the prior year. We repurchased 2.7 million shares for $81 million in the quarter, bringing 2026 repurchase to 16.5 million shares for $668 million. We expect to complete the $700 million 2026 program in the fourth quarter. We closed Zonda on August 21 for $815 million. Zonda's pro forma third quarter revenue was $42 million, 3/4 of which was subscription, which grew 4% despite a difficult new homes market.

Turning our attention to guidance. This now includes Zonda, which we report within residential. For 2026, we expect Zonda to contribute approximately $60 million of revenue and $10 million of adjusted EBITDA and to be accretive to adjusted EPS in its full year. For the fourth quarter, we expect revenue of $976 million to $996 million, up 10% at the midpoint. Commercial revenue is expected to be between $490 million and $500 million, up 5% at the midpoint and residential $486 million to $496 million, up 14%. We expect fourth quarter adjusted EBITDA of $275 million to $295 million, a 29% margin at the midpoint and more than 900 basis points above the fourth quarter of 2025. With commercial at $177 million to $187 million and residential at $98 million to $108 million.

For the full year, we are updating revenue guidance to $3.75 billion to $3.77 billion, up 16% at the midpoint. The $35 million shortfall to prior guidance covered by Andy is split evenly between lower domain transactional revenue and residential subscription revenue. Commercial revenue is expected at $1.935 billion to $1.945 billion, up 9% and residential at [ $1.815 billion to $1.825 billion ] up 25%. We are raising full year 2026 adjusted EBITDA guidance to $820 million to $840 million, that is $30 million higher at the midpoint of our prior guidance, $20 million excluding Zonda and $60 million above February. It represents a 22% margin, more than 800 basis points above 2025. We are raising full year 2026 adjusted EPS guidance to $1.38 to $1.41 and 405 million weighted average shares, $0.04 above July and $0.12 above February at the midpoint.

On Vexcel announced today, the purchase price is approximately $730 million to be funded from cash on hand of $500 million at the quarter end and our undrawn $1.1 billion revolver. Andy has already shared its profitability and high growth trajectory. The resulting deal, excluding any synergies is accretive in the first year and by year 2 is more accretive than an open market CoStar Group share buyback. Taking into account modest synergies, the deal is 4x more accretive than a share buyback by year 3. For the avoidance of dot, we have not included Vexcel guidance. So to close, we've delivered a record quarter for revenue and adjusted EBITDA, 10 points of margin expansion and a raised profit up.

With that, operator, over to questions.

[Operator Instructions] And our first question comes from George Tong with Goldman Sachs.

This is [ Sami ] on for George. Starting off on bookings, you cited both economic headwind and slower sales force growth as a reason for the step-down in bookings. When you look at the prospect opportunity today, how are you thinking about the portion of demand that is already present, but cannot be fully addressed versus the demand that still needs to improve before additional sales capacity can generate stronger bookings. Thanks so much.

[Operator Instructions]

Can the operator hear us?

We can hear you.

So should we start again here. So we lost connection for a second there. Okay. So George -- or I'm sorry, Samuel for George. We can track comfortably the massive prospect universe for Apartments.com with the information we have. We can see the LoopNet prospect universe, the additional CoStar universe, the LoopNet universe, and the Homes.com universe and others. So we can see hundreds of thousands of prospects that we are not able to reach currently with the current scale of sales force. And so we don't need demand drivers to return in order to grow revenue as we grow sales force.

So you can see that where LoopNet grew 20% year-over-year in sales force, something like that, revenue accelerated with it. So we anticipate being able to return to growth in the right areas of our sales force in the most efficient places and reaccelerate revenue going into 2027.

Our next question comes from Pete Christiansen with Citi.

Thanks for the question here. Andy, Robin, you lowered revenue expectations given the bookings, but at the same time, you're finding a lot of these cost synergies and expecting to maintain your long-term EBITDA framework here. But I just want to get a sense at least for '27, should investors think of the story turning to bookings reacceleration, margin expansion or some combination of that? And which of those do you think is -- would be a larger driver?

I think it would be a combination of the 2 for sure. So we think there is bookings expansion opportunity. And then Robin and I are definitely on the hunt for margin expansion, and I think there's a lot of opportunities. You heard some of the numbers Robin presented, if you looked at the efficiencies, cost efficiencies we achieved in Europe and you bring them to the global operations, a huge opportunity. But while we are looking to manage and control our costs, we are simultaneously investing in new revenue drivers and new salespeople in an efficient way. So both.

Yes. Just to add to that, when we went through this process in Europe, the impact of becoming more efficient was not reducing our revenue growth. It actually accelerated it. And so when you look at the opportunities that we've found to date, they're not related to reducing revenue growth going forward.

Our next question comes from Alexei Gogolev with JPMorgan.

Andy, can you talk more about the Vexcel acquisition and maybe elaborate on potential aircraft and capture requirements, possible data rights and exclusivity as well as contract duration with some of the customers? And how you will sell it? Will it be stand-alone or [indiscernible] to deploy dedicated textile reps?

Okay. I think we just picked up 30 questions. I'll see how many I can remember. And Alexei, if I forget some, just circle back and remind me.

So it would be in terms of how we sell, we'll continue to sell bulk data contracts for sure. That's a continued large opportunity. particularly with state local governments and utilities. There's thousands of those targets out there. But we will do relationship management with our existing 2,000 CoStar salespeople. So we have a relationship with the utility in Los Angeles or local government in Los Angeles. With a CoStar rep, they can work with a sales engineer from Vexcel to chase that sale.

We also anticipate it's early days, but we also anticipate putting enhanced functionality into CoStar around aerials. We are imaging aerial imaging. We're aware that major brokerage terms developers have 7-digit budgets often to purchase at city levels to purchase aerial photographs and imagery and we'll be putting some of that into the CoStar product as well.

In terms of exclusivity. I think this works a little bit like Matterport, so Matterport continues to grow as a stand-alone product, but because it's a combined entity with CoStar, the team at Matterport does a great job in making sure their products are responsive to the needs of our core product areas, whether it be Apartments, LoopNet, Homes. And so they're growing on their own, but they're also accelerating growth in our core products. I think it will be similar here. We know what we're looking to add into CoStar databases from the Vexcel acquisition and what we're looking to add into some other product areas from the Vexcel acquisition and that will not interfere with Vexcel's ability to pursue its current core business. So we'll be pursuing both.

Alexei, what did I miss?

Anything maybe like CapEx that is required for this?

The CapEx -- I'll let Robin hit it, but just before he does, CapEx is actually not that large in this business. For our specific uses in order to -- we think that there's up to 1,000 fields of data you could pull on a building you see from the sky. In order to achieve the full data extraction we want to achieve. Now remember, this is data extraction across United States, Australia, monitoring, construction activity and a much higher frequency than ever monitored. This includes Europe, Japan, Australia in order to achieve the full potential of extraction in the intermediate term, there might be a $20 million CapEx incremental over a 2-year period, probably as fast as you can manufacture the cameras we need. But I'll turn that over to Robin.

Yes. I think just to add to that, the CapEx is a meaningful part of the operations at the moment ranges $8 million to $10 million a year. So there might be a short-term spike where we do some extra R&D, but we'd expect it to return to that level.

Our next question comes from Ryan Tomasello with KBW.

This is Juan on for Ryan. Could you help share what the 4Q outlook includes for multifamily revenue growth broadly, just what kind of visibility you have into the near-term revenue growth there, just given the recent bookings pace. And also, if you're thinking about maybe other tactical adjustments to the multifamily strategy given the kind of competitive environment that you're in?

So Robin is pulling up what we're going to answer on the fourth quarter element of guidance. On the tactical side, I think I presented some of that. One of the things we're doing is we are embedding this technology into our clients' websites so they can actually see the source of their lead flow. We believe we're pulling twice as many leads as they can tell from their in-place lead generation systems. We think that represents huge value to them and allows us to continue to maintain a value premium over other solutions.

The other tactical thing is you saw the lead flow from Homes.com up 450% and that's an ongoing process. So we believe that Homes.com will be a growing and growing bigger source of lead flow to Apartments.com and the combined solution will be quite valuable. So we're actually pretty confident in where we sit right now in a competitive positioning. And remember that there is a massive, massive untapped market in the rental segment. So no competitor has 40% share of the opportunity. So there's plenty of room to grow into the greenfield space.

And then just to add on the growth rate being assumed for the fourth quarter, it's mid-single digits.

Our next question comes from Curtis Nagle with Bank of America.

Okay. Great. Maybe somewhat of a high-level question. Just trying to understand sort of what's going on with the sales force. And I guess where the biggest holes are in terms of capacity by segment. Did you cut to deep? I think there might be some of an issue of not having the right tenured people in the right place? Are you seeing attrition? Just -- so if possible, sort of holistically, I guess, frame kind of what's going on.

Yes, sure. I think it's a different story based upon whatever -- which brand you're looking at. I think LoopNet has done a decent job keeping up with the growth in its sales force. And still didn't meet quite its expectations. I would say that CoStar and Apartments, the recruiting side and the management side. Could have done a better job and continue to grow. I mean, this is the age-old story of with a growing subscription base, you have at a fixed renewal rate, you have a growing churn number you have to cover with your sales force.

So it is -- frankly, we've made some changes in our recruiting team and HR team to pursue the performance that we expect to achieve in those areas. With the Homes sales force, there was growing a large inside sales team there were a lot of people hired who were new to sales, and you're going to get some churn when you do that. So folks who are right out of college with churn. We knew that over the 5-year horizon, we want to have a very substantial field sales force for Homes.com I believe in that very strongly. Not something you can do in the first year or 2. It's just too complex to do initially. So growing national field sales teams is a difficult task and takes 5 years or so and we're halfway into that process.

But I've actually been going out with some of our field sales people attending open houses on Saturdays and the like the way we do in Australia, super effective. The agents when you visit them in their open house and you bring them in orchid and some cookies. They love to talk to you, and we're getting high demo counts from that activity. And as you know, we have very high close rates. And it also -- that field sales also allows us to also allows us to service those accounts better.

So with 15 to 20 folks in, say, Washington, D.C., that allows you to have an open house [indiscernible] line you get 10,000 face-to-faces a year, which is about the size of the top prospects in the market. So I'm very optimistic about that, and we'll be focusing heavily on growing that field sales force. So I don't want to diminish the accomplishments, a lot of the inside sales teams -- there are a number of successful folks in the inside sales teams who are growing and maturing, but it has been it has been a process, and we are making changes to how we recruit and how we incent the managers to achieve their growth targets.

Our next question comes from Jeff Meuler with Baird.

Andy, just within Apartments.com, what are the specific metrics that give you the most confidence that the primary challenge is sales capacity? And then can you just address regrettable attrition among sales force head count in a tougher selling environment or tougher macro, just given that you've been talking about the need to expand sales capacity for a while.

Yes. I would -- so I would say that -- the vast majority of the attrition in the sales force is in the inside sales team with Homes.com and Richmond, and that's directly attributable to hiring people right out of college with no prior sales experience. So all attrition, I would say, is regrettable. But I look closely at what percent of the attrition from that group is from the top 25% of performers. And it is actually pretty low. Most of the attrition is in the lower-performing ranks.

The attrition inside of the Apartments in the CoStar and the LoopNet area is not a big driver here. We -- there is some elevated attrition in a tougher selling environment but not notable. And then in terms of what metrics give me optimism around Apartments.com. I think I ran through them. The unique audience we have, the very high brand awareness we have the growth -- continued growth in lead flow the growth in lead flow from Homes.com. So it's -- I spoke with Fred yesterday just reviewing all those things. Fred saying he's the President of Homes.com we both feel pretty optimistic about our ability to accelerate bookings into 2.

I think, Andy, the one that I'd add to that, that you also mentioned is the gross monthly sales by our field [indiscernible] so $6,350 per month per rep which is by far the highest in the group.

Any sales force. So that's an important point. So the preserving the price, we're holding the same ASPs and the net -- the gross sales production from the reps in the field is huge. So if you look at 6,000 some that 72,000 annual gross sales bookings per month, there's a lot of demand out there to buy the product. So that's clearly the case.

And when you add the extra sales reps, your cancellations also come down because you have more time to service those customers. So we're confident on the gross level, and we're confident that adding reps reduces the cancellation rate back to more normal levels.

And I also have to say that the leadership in Apartments.com from [ Page 4 ] is run the whole group and the RVPs down to the RDs, this is a season-season team that's quite capable of guiding the group back into the growth numbers we're looking for.

Our next question comes from Brett Huff with Stephens.

Appreciate the time. Question on Apartments.com, a little bit different. We're still getting lots of questions on sort of the changes in AI, top of funnel, LLM discovery and things like that. Andy you've talked about that. So any update on that would be helpful just to give us some comfort that we've wrangled that?

And then kind of related to AI on Apartments.com, we're still getting lots of questions on how are we keeping the data proprietary, what percentage of the data is proprietary for Apartments because I think that is maybe getting convoluted with some of the competitive questions that people have. I don't know if that makes sense, but would love any updates on those.

Sure. So I hope you noticed when ChatGPT related their latest model featured Apartments.com in their release PR as an example of outstanding solution connected to ChatGPT. So the GAO still remains a LLM sourcing of leads into any of these sites still remains low single digit but we are getting direct connections in from a lot of the models. So I think we're doing quite well there. But when you look at our metrics, we're seeing growth in traffic to the site in lead generation of the site. All the core metrics are continuing to grow and improve. And then when you look at Homes.com up 450% on lead flow into Apartments.com the metrics are positive and are going in the right direction.

We are very optimistic about the Apartments AI. We have a lot of, I think, very good marketing with [ Jeff Goldblum ], encouraging people to use the enhanced functionality of Apartments.com with Apartments AI. So I think that we're pretty optimistic about where things are going. And then overall, looking at all of the initiatives within CoStar Group around there is a trend here towards us producing dramatically more content at higher quality, greater depth at dramatically lower cost and content is proprietary, whether it be the Vexcel acquisition, or whether it is the project that we're doing in Australia that I'm not going into detail on or the way we're now capturing Corporate America using our proprietary property data and our ground truth inspection of the properties. We're developing more and more data than we've ever done before.

Now U.S. copyright law still stands with Apartments.com. And there are instances of people violating copyright law and taking copyrighted content, particularly imagery that though it may work its way through over courses of years, still the law is the law. And ultimately, that will pay off for us and not pay for the folks who are abusing those copyrights. So there is a lot of activity that's always been there where people attempt to scrape sites and build information systems off the site and you battle that continuously. But we still have the core of what we've got here is, I guess, 75% of our content is not visible to the broader Internet. And the LLM are definitely working with us in a positive way sourcing us and directing content to us, tracking traffic to us.

Our next question comes from Stephen Sheldon with William Blair.

On the cost savings, can you just give some more detail on the $200 million that you're expecting to realize next year, some of the bigger components of that and whether some could be reinvested? And then are you including the planned reduction in profit drag from Homes.com of at least $100 million in that number? Or is the $200 million, I guess, would that be on top of it? Any detail there would be precise.

It's on top. Let's let Robin dive into it, he's living in [indiscernible].

Yes. At a high level, the $200 million, you can split into 3 buckets. 1/3 of it is organizational efficiencies, just looking at places where we're doing things in silos where we have roles that don't make sense anymore and becoming more efficient. So that's about 1/3 of it. Another 1/3 of it is integration synergies. So these are known savings that we get as we continue to integrate products and systems into our core platforms. And another 1/3 of it is procurement-related savings and improvements in marketing ROI.

Our next question comes from Surinder Thind with Jefferies.

Robin or Andy, can you maybe help me understand the reaffirmation of the 2028 adjusted EBITDA guidance given the roughly $150 million in savings, plus another $200 million, is the idea that the bulk of that I guess, gets reinvested into new projects? Or like why wouldn't the '28% adjusted EBITDA guide go higher?

Yes. We haven't gone through a whole new planning cycle and redone forecasts for the long term. So that's something we'll do as we go towards the end of this year. What this is, is really focusing on where we can make significant improvements in the short term that we'll realize over the next 12 to 18 months and giving us that confidence that we can reconfirm those targets. So there are decisions we still need to make about how those savings are allocated to margin improvement or investments.

Got it. So it sounds like that there's probably -- basically, you still got to go through the longer-term planning cycle, but this is just what you've identified in the near term, and you'll make those decisions at a later point in time.

100% right.

That's right.

Our next question comes from Nick Jones with BNP Paribas.

Thanks for the question. On [indiscernible] I think you mentioned maybe a little bit of churn on the supply side due to some, I guess, lack of servicing and the sales force and kind of not being able to target on more adding, I guess, new logos. I guess, can you speak to kind of what is driving the churn beyond just servicing? Are they going to competitors? Are they kind of going it themselves on Google or meta? I guess just curious as to kind of what the conversations are as those are churning.

So I would say that the servicing at Apartments.com remains exceptional as evidenced by the extraordinarily high NPS rates that we've got there. You always have -- we do have headwinds here. So you have negative real growth in rents, and you still have elevated vacancy rates likely well above people's reform expectations for their properties. So you have you'll have that relationship between the owner, the owner group and the property manager with the owner group is looking for cost savings aggressively and the property managers trying to figure out how to achieve that. And so that creates some churn pressure in the system always has. You will get people periodically if you're a marketing manager for a property manager in a particular market, it's always appealing to explore your own SEM strategies to your website. But ultimately, as we mentioned, when you actually track core source or first source, we are the primary core source for those leads to your website. So usually, that's a short-term adventure as they go into their roll your own SEM.

And you do have aggressive pricing from competitors and very aggressive incentives to try things out. So that also creates some churn. But I am proud of the sales team for holding our value prop up and holding our ASP in a tough environment. And again, I'd point to the -- the bigger issue is that we've got a lot of folks that we don't have time to get to because of the growth of the core business.

And the only thing I'd add to that is there is a bit of a mixed story there, too. As you all know, we have significantly grown the inventory that we have in under 50 units, and those smaller properties tend to have in cancellation rates that are 4x higher than the larger ones. So some of that growth is missed.

So during the churn at Rent.com and during the switch out as Redfin got out of that business with Rent.com, we picked up a mix shift to the smaller. And we don't regret it, but that smaller end does churn higher. And then also, there's been more growth in our sales force at the inside sales team, they tend to be selling at the lower end and again, there's more churn at that lower end. Often, you're leasing up a 40-unit community. You have 4 units open, you lease 3 and you pull back your advertising because you've got 1 left and then you may turn it back on a couple of months later when you have another vacancy or 2. We are shifting to prioritize more at the upper end and have more field salespeople rather than continue to grow the inside sales team at the same pace.

Our next question comes from Andrew Boone with Citizens.

I wanted to go back to curing at Homes.com. As mentioned in the prepared remarks, but can you give a little bit more qualitative analysis of kind of what are agents thinking? How much more runway you guys have? How is the whole process of rolling out platinum?

Thank you for the question. it is and has always been a part of the 1,000-year plan. So when you look at the successful very profitable real estate portals, whether it be Apartments.com, LoopNet, Domain, REA Group, [ Rightmove ], Scout24, any of them. The vast majority of the revenue from these platforms comes from depth advertising or advertising beyond the basic subscription. So with Apartments.com, I would imagine it's 80-some percent is in-depth advertising. With domain it's probably 87%, 85%, 87% depth advertising. I think we'd say an REA group, it's 90-some-percent debt advertising. So everything we've been selling to date up until September with Homes.com was basic membership just participation.

So we went ahead and launched the Platinum advertising in September, and it sorts your -- if I'm a member of Homes.com similar to what we do with Domain, I got my 10 listings and they're all above the basic listings and they get 50x more exposure to basic listing. When I go for platinum, I select one of my properties it's priced per property, and that one then sorts above the membership listings, and it typically gets approximately 233 times the exposure gets more audience boost. It also includes photography services. And it is typically somewhere from the $400 a month on up to $1,700 a month something in that neighborhood. It's an annual contract, and so you can rotate one property time up through that. You can put multiple properties in there. It's got a bigger placard, bigger presentation of the actual agent.

I think a huge part of the appeal is that if I am a very successful agent in a market, say, Orange County, my ability to have my name and likeness and brand pinned to the top rail of a site that has massive traffic and has a huge share of Google [ SEO, SEM ]. That's just an amazing billboard in that market since 100% of home shoppers are online. So we anticipate that, that begins a 20-year journey of selling different depth levels. We're starting with platinum through time, we'll introduce more and more depth levels. So with Apartments.com, I probably have 7 or 8 different depth levels, but this is the first one, and we begin that journey.

Our next question comes from Scott Wurtzel with Wolfe Research.

I'm just wondering if you could maybe talk a little bit more about the bookings pipeline on the CoStar Suite side of the business, specifically around maybe some of these new products that you're introducing, just wondering if that can help contribute to a reacceleration there?

Sure. So there are a number of new initiatives there. I am very optimistic about the Australian CoStar. There's some opportunities there that I think allow us to launch that product with a very compelling value proposition. The bulk of that would happen and those bookings will begin happening in the first and second quarter. There will be some bookings probably this year, but bulk of those bookings start happening for second quarter next year.

In new homes. We're now in the process of integrating Zonda and CoStar together that will take a little bit longer to start accelerating that opportunity. The integration of Real Estate Manager and Visual lease and CoStar, I think, is an incredibly compelling product offering that will be occurring in the later part of '27. With the Vexcel enhancements, I think that is probably a late '27 initiative with what's happening with CoStar bet solutions, that is near term, and that is very strong right now. And the benchmarking capabilities, I think, are outstanding. I think that's very compelling for any lender to have that view of their portfolio, being able to see how my LTVs, my CECLs, my premiums compared to other lenders is incredibly valuable.

So I think that gives you a sense of it. But I think one of the big ones there is just the sales force growth has not kept up with my expectations and needs to improve because there are many, many people that are good prospects that we're not reaching right now. I do think that the combining the go-to-market strategy at the middle lower end with LoopNet and CoStar will allow us to have a more productive sales force. It is -- the experiment in the United Kingdom is working. We're getting typically 50% of the CoStar customers are not subscribing to LoopNet and 50% LoopNet subscribers are not subscribing to CoStar and by servicing them as one group at the middle and lower end, you can get good cross-selling. So I think that's another driver in the intermediate term -- short to intermediate term.

Our next question comes from Jason Haas with Wells Fargo.

I'm curious if you envision consumers increasingly using personal AI agent to search for apartments? And if so, can you just talk about how that effect the Apartments.com business model and if there's any way to monetize that?

We are seeing that. And ultimately, those models are bringing people back into Apartments.com to do the transaction. So as we improve the with Homes and Apartments, you are people do build agents, but it does lead them into the store sites with the content, the imagery, the matter ports, the ability to do the actual transaction applications in our site. So that is working, and we're seeing like our integration with ChatGPT, we're seeing good results there.

So again, you need systems of record transaction systems and you need the rich environments of imagery that we're providing. And none of our products are standing still, we're evolving those products rapidly and improving the quality and depth and the value of being brought there for the ultimate sort of end stage of the transaction.

Our next question comes from Craig Huber with Huber Research Partners.

Great I have a housekeeping question first. Can you tell us what your losses were at Homes.com in the quarter? Were they roughly like $125 million. In the past, you've said you think you're going to get to $550 million of losses this year, basically come hell or high water. But where were you at in the third quarter, please?

I can -- I don't know if we're disclosing at that level of granularity, but I would say we are doing slightly better than that goal. And I know exactly where it is. I asked just before the call. So we're doing better than that.

We're definitely on track to hit our commitments of no more than [ 550 ] for the year.

I appreciate that. And if I can just ask my main question. You talk a lot about your sales force. Can you just sort of, in your mind, give us a little more granularity on your expectations to grow your various sales forces, say, over the next 180 days. Where should we expect the biggest growth on a percentage basis to come from? What few areas plays?

Apartments.com, CoStar and field home sales, where the greatest growth would come from. And again, transitioning from having a centralized recruiting team in Richmond will continue to have a centralized recruiting team. But identified, it's about 20 top cities where we typically have 30-plus salespeople. So in Chicago, we might have 50 salespeople working out of Chicago field salespeople across all the brands. we're going to be putting a dedicated recruiter in each one of those offices. They report to the most senior sales leader in that office that all sales leaders, then there's a dotted line to the sales -- a straight line to the sales leader, dot line back to recruiting. So we'll be doing more in-person face-to-face recruiting in the actual markets. That allows the bandwidth from someone like that allows us to more than comfortably cover normal turnover and then also achieve 30% field sales growth just to wake everyone up, putting both carrots and sticks and the compensation plans for all those managers to do the right thing at the right time.

General service sales force health. But pretty straightforward. I remain very -- I am very impressed with the production numbers we're getting from Apartments.com, [ 6,000 7,000 ] and I'm impressed with the reaction, the very positive reaction we're getting from real estate agents, residential real estate agents in markets where they're interacting with our field salespeople. And then -- yes, so I think that gives you some idea.

Our next question comes from Ashish Sabadra with RBC Capital Markets.

Maybe just a question on CoStar Suite. Have you seen any impact of higher interest rate on the bookings or on the sales environment? Any -- have you seen any kind of elongation of sales cycle?

There are so many -- there's a lot of different drivers in CoStar. You have dramatic improvement in leasing office but higher grade office space right now is normalizing return to office. And but you'll probably be seeing some softness in investment sales or smaller consumer investor sales as the interest rates are going up, there'll definitely be a slowing volume there. But at the same time, you see more interest from banks and what is the risk here is the risk profile in their portfolios and a rising interest rate environment. So there are lots of different drivers there.

We're not yet seeing a clear picture in the CoStar side. We definitely are seeing a clear negative in say, Australia, U.K., residential real estate U.S., where home sales are down. Home sales being down in the United States actually has 2 sides to it. We provide the only real marketing product that is trying to market the house instead of marketing by our agents. So in a time when it's hard to sell a house, we think we'll see a little pickup there. But we're not seeing anything specifically in CoStar that is clearly negative on interest rate rises at this point could change.

Thank you. And I would now like to turn the call back over to Andy Florance for any closing remarks.

I appreciate everyone joining us for this call, and it was great to be here for Robin's [indiscernible]. Did a great job, Rob.

So this quarter's EBITDA acceleration demonstrates CoStar Group's margin potential and our clear commitment to achieving the adjusted EBITDA targets we've laid out for all of you and for our investors. So we're simultaneously growing revenue at double-digit rate. We're launching significant new products. We're expanding internationally and having some real success doing that. We are integrating acquisitions that we think will create a lot of value, and we're investing aggressively in AI, I think, successfully. And most importantly, we're delivering record profitability and love and looking at the quarterly EBITDA numbers on charts, looking at it through time and excited about the next 2 years ahead. Thank you for joining us.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q2 2026 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Thank you, Josh, and hello, and thank you all for joining us to discuss the second quarter 2026 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our CFO. I'd like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements. The company's outlook and expectations are based on current beliefs and assumptions. Forward-looking statements involve many risks and uncertainties and 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 in our filings with the SEC.

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 because of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure of any non-GAAP financial measure discussed on this call, are shown in detail in our press release, along with the definitions for those terms. The press release is available on our website located at costargroup.com under Press Room. You've joined us via webcast, please refer to the press release today to see how to access the replay of this call. Operator Instructions]

And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance. Andy?

Again, thank you for joining us today. Our second quarter 2026 financial results marked a profitability inflection point for CoStar Group as adjusted EBITDA more than doubled year-over-year to $184 million. This is the second highest quarterly level in company history. We generated $925 million of revenue in the second quarter, an 18% increase year-over-year. That is our 61st consecutive quarter of double-digit revenue growth. Net income increased by 817% and EBITDA rose 441%. We held our increase in operating costs to just 2% year-over-year, all while continuing to invest in numerous long-term growth initiatives. We expect to deliver the highest full year adjusted EBITDA in CoStar Group's history in '26, and we're confirming our full year guidance range of $780 million to $820 million. Along the way, we expect to deliver two consecutive quarters of our highest ever adjusted EBITDA.

Net new bookings for the quarter were $69 million, up 3% from the first quarter. Our commercial real estate business generated $481 million of revenue in Q2, an increase of 8% year-over-year, and it generated adjusted EBITDA of $172 million, up 7% year-over-year. CoStar revenue was $337 million, up 9% year-over-year and net new bookings accelerate up 24%. Renewal rates remained an impressive 93% and MPS held historically strong at 68%. Net new bookings to brokers increased 48% year-over-year including a multiyear renewal of our largest brokerage client. Subscribers in the CoStar platform grew 19% year-over-year to 327,000. That subscriber base creates a powerful demand for commercial property sale and lease listings, and it makes the platform extremely valuable to the brokers and owners who list with us. CoStar Debt Solutions delivers differentiated risk analytics to commercial real estate lenders by intelligently combining CoStar's information resources with each lenders owned proprietary loan data. It delivered its best quarter ever with over $4 million in net new monthly bookings, up 96% year-over-year.

We are now applying the benchmarking expertise we developed with STR to debt solutions. 300 lender clients are contributing information on over 100,000 active loans. Over $1.2 trillion in outstanding debt, and this is an anonymized and aggregated basis. The product will give lenders unprecedented visibility to improve decisions across origination, portfolio risk and compliance. As an example of this value lender might discover his office -- his or her, office loan book is at 80% loan-to-value ratio, while peers are a more conservative 60%. That insight would provide and prompt the consideration of a significant risk premium or perhaps a shift to a more conservative lending policy going forward. Clearly, it's a game changer in the lending world.

Overall, commercial revenue accelerating growth was partly offset by 10x where we have been restructuring the business for future growth and cost control and enabled us to reduce costs by $7 million year-to-date. During this restructuring, revenue declined by $4 million. Going forward, 10x will be separated from LoopNet with dedicated sales, marketing and leadership to more effectively drive growth. We launched 4 major product initiatives on the core CoStar platform in the second quarter. First, in June, we released CoStar Rent benchmark, a first of its kind data set built from 4 million AI abstracted actual leases and lease documents. Rather than using less reliable asking rents or broker report information, this is the real data.

Today, we present actual rent benchmark data. And over time, we plan to add model rents derived from that information. We have plans to build similar high-quality rent solutions in Australia and the United Kingdom. Secondly, we launched CoStar in France in Q2, building on our BureauxLocaux and Business MO acquisitions and significant proprietary local research. The platform covers office logistics and hospitality across Paris, Leon, Marsai and more than 290,000 properties, [ 385,000 ] commercial tenants, 90,000 availabilities and 75,000 leasing sales comparables. It is one of the deepest serie databases in the country. Over the next two years, we plan to migrate and upgrade roughly [ 1,100 ] business Immo subscribers to CoStar. Early customer response has been very encouraging. Within days of launch, we signed our first major global brokerage customers French business. And a major global investor told us this was the first time they had ever been able to get an absorption number for Paris. That's a KPI their investment Board requires that until now was not readily available in France.

For our third CoStar product launch in Q2, we launched public record search in the U.K., providing extensive transparency into 6.9 million freehold and leasehold ownership titles and 6.8 million properties in parcel groups. Fourth, we extended our AI-powered lease substraction engine into CoStar Real Estate Manager. It converts complex lease documents into structure audible records and significantly reduces the time clients spend onboarding and managing leases. We remain focused on launching CoStar in Australia in the second half of this year. We now have 124 researchers and photographers deployed on the ground in Australia, covering 30,000 listings, 23,000 property profiles and more than 10,000 sale lease transactions.

Matterport performed well in the second quarter. Subscription revenue grew 16% year-over-year, and we achieved Matterports all-time best month of Enterprise customer acquisition in June. Tomorrow, we will deploy a new pricing plan that reduces the price of the Matterport [indiscernible] camera and shifts more of the revenue into SaaS. We believe this will accelerate both adoption and subscription revenue growth. we continue to advance the product road map. We fully released E 57 import, strengthening Matterports position as a unified platform for storing, managing and using multiple sources of 3D spatial data in one spot. The team also released a more powerful digital twin experience. It presents homes exterior through a gas spot less viewers rotate and fly around the house and then move seamlessly inside to experience the home in high-resolution panoramas, or they can virtually remove the floor and various floors for a true dollhouse view of the home from the sky. This capability was on our acquisition rationale road map, and it's really exciting to see it successfully deliver.

The Matterport 3 camera has proven a highly efficient, reliable capture device and post acquisition we have restarted hardware development. We have now produced the first prototypes, the next-generation Matterport 4, which offers higher measurement location accuracy at a higher-resolution panoramas which is particularly valuable to architecture and construction uses. We anticipate delivering the Matterport 4 in late '27.

LoopNet generated $87 million of revenue in Q2, up 14% year-over-year. Paid listings increased 9% year-over-year in the U.S. to 220,000 and grew 24% in Canada and 52% in the U.K. year-over-year. We expanded the LoopNet sales force to 225 reps, up from 191 a year ago. Asset-based pricing is driving adoption among lower-value listings while capturing more value from higher value listings. This is contributing to sequential acceleration of net new bookings from Q1 to Q2. LoopNet's European revenue grew 10% year-over-year with average monthly unique visitors up 88%. Our investment of Wicke Casa in Italy creates the opportunity to add Italian coverage to LoopNet. We are now partnered with dozens of Italy's largest brokerage firms, and Wicke Casa list over 100,000 commercial real estate listings for more than 12,000 broker branches.

Our Australian CRE marketing platform, commercial realestate.com.au continues to grow, with Q2 visits up 76% year-over-year. We have decided to shift the release of LoopNet in Australia to 2027, prioritizing instead releasing residential integration first to achieve significant potential margin enhancements sooner. SDR delivered a strong Q2 with nearly 70% of its net new revenue coming from brand new logo sales, a clear signal the growth is being driven by market expansion, not just pricing. We landed 261 new logos globally with U.S. headliners, Nobu Hospitality and Bay wood hotels alongside a standout Japan cohort in Kajima and UDS. Even with the Iran conflict weighing on the Middle East, we continued expanding the Estima in Saudi Arabia and secured a significant Indian win with Sami Hotel investments.

Biz by Sell revenue grew a moderate 5% year-over-year. We're expanding the business with benchmarking tools that help buyers and sellers, understand business value and evaluate opportunities while partnering with SBA lender to embed financing into the marketplace. Nearly 1 in 3 buyers now complete a robust buyer profile Biz by Sell and an NDA to speed the deal process. There's over 32,000 profiles in total, including 8,700 added in Q2 alone. Residential revenue was $440 million in Q2, up 33% year-over-year. Second quarter adjusted EBITDA grew $41 million over the first quarter, bringing our residential segment to a positive adjusted EBIT in Q2. Apartments.com delivered $318 million of revenue in the second quarter, up 9% year-over-year.

June's gross sales were the third highest sales month in Apartments.com history. Apartments ended the quarter with nearly 93,000 paid properties, up 12% year-over-year, sustaining 18 months of adding approximately 1,000 paid properties each month, with monthly renewal rates holding strong at 99%. Average revenue per property was largely flat, just down about 3.6% year-over-year. The decline was primarily due to a mix change in sales to smaller communities, which carry a lower average pricing. We're holding firm on price integrity while competitor discounts aggressively to buy share because their quality gap is measurable. PRQ, a leading digital marketing analytics firm, analyze lead-to-lease conversion across more than 1,000 properties and found that Apartments.com leads convert at 2.5x the rate of the next closest competitor. [indiscernible] data shows apartments lead-to-lease conversion rose 14% year-over-year through May, and a leading national property manager reports an 18% improvement.

We believe that the ROFR product will win out over the medium term. Our sales organization, the largest and most active in the industry, conducted 196,000 quality meetings in Q2 and maintained an industry-leading Net Promoter Score of Apartments.com delivered more than 228 million highly engaged renter visits in the quarter, with traffic up 7% year-over-year in June, according to Google Analytics. By contrast, comScore reports that June visits to Zillow's network declined 35% year-over-year. Apartments.com remains the most recognizable brand in apartment search with 66% unaided consumer awareness among apartment seekers. That's 25 points ahead of our nearest competitor according to Dynata. We have continued to grow despite competitive distortions in the multifamily rental marketplace. The FTC and multiple state attorney generals have sued Zillow for allegedly entering an unlawful agreement that reduced competition in multifamily rental advertising and CoStar Group has separately suite unauthorized use of tens of thousands of CoStar-owned Copyright apartment photographs that it used to build its rental marketplace.

While these cases are pending together, they raise a broader question whether rental expansion was built through lawful competition or through shortcuts that regulators and rights holders are now challenging in court. Conduct that may result in significant setbacks for them. At June's NAA Apartmentalize, the multifamily industry's largest event we confirmed our leadership position and innovation road map. Our team conducted 728 sales appointments and welcome more than 3,000 visitors to our booth with 1,500 attendees visiting the Apartments.com Innovation Lab for demonstration of Apartments.com AI, Matterport and our ChatGPT app. To date, the sales leads generated from the conference resulted more than $7 million in new annualized sales, up $1 million from last year. Leveraging our successful Homes AI technology, we introduced Apartments.com AI at the event, an immersive conversational search experience that help renters find, understand, compare and contact properties through natural dialogue or text. It supports the full apartment search journey combines AI with Apartments.com's unmatched property data and media, so renters arrived better informed and more prepared when they reach out to leasing teams.

Early engagement has been extremely encouraging. In just a few weeks, users completed approximately 0.5 million AI sessions Apartments.com. AI users and 3x longer on the site than non-AI renters, averaging 20 minutes per session. They viewed twice as many listings and spend 40% more time on each listing. 3D tour usage is up 225% and traffic to lead conversion is up 256%. Based on these early results, we expect AI to meaningfully improve lead-to-lease conversion over time. [ Homes.com ] rentals were showcased at the all-new homes.com rental experience at Apartmentalize. Homes.com is the natural place to find a single-family home townhouse or condominium to rent and has become an important extension of the Apartments.com network. Through Q2, Homes.com rentals drove more than 11% of Apartments.com's traffic, making Homes.com its largest single syndication partner and leads from Homes.com to Apartments.com increased 162% year-over-year. By the end of '26, we expect every tool that independent owners use on Apartments.com to also be available on Homes.com.

We just released upgraded native Apartments.com apps for iOS and Android. Apartments.com is the industry's highest rated rental app, and both these apps are off to a strong start with leads up 10% year-over-year in the first month. Our Q2 marketing generated more than 2.2 billion media impressions, co-branded Homes.com campaigns produced approximately 11 million views across YouTube and other outlets and targeted digital campaigns, including World Cup-related YouTube placements. In April, Apartments.com launched a ChatGPT partnership in 100 markets and have since expanded to 500. According to Criteo, Apartments.com has greater visibility in ChatGPT than any other competitor. The U.S. multifamily market is stressed and continues to work through elevated supply, making owners more price sensitive. Q2 absorption remains strong at approximately 139,000 units, down 3% year-over-year, while 2026 deliveries are projected to decline 23%. The Concessions remain widespread with roughly 40% of communities offering incentives. In this environment, property owners are increasingly focused on lead quality and leasing efficiency exactly where Apartments.com differentiates. Homes.com revenue grew 66% year-over-year to $28.5 million in Q2, and the annualized run rate reached $116 million at the quarter end, up 78% year-over-year. We now have over 36,000 Asian subscribers, up 107% from a year ago.

12-month trailing ARPU is approximately $265 and the average subscriber price rose to $305 in June. We expect average pricing to continue to rise as we use learnings from our growing subscriber base to optimize pricing. Subscribers paid to promote close to 305,000 active listings in Q2, that's 9.3% of the 3.2 million homes for sale in the U.S. And homes member agents listings increased 92% year-over-year. We believe agent subscribers are earning an 11x return on investment based on the first year commission data we shared last quarter. That positive result shows up in lower cancellations. Our monthly cancel rate dropped again to just 2.4% in June, our lowest yet, down from 6.5% in June of '25. The Homes.com organic traffic is up 115% year-to-date. Average session duration hit an all-time high in Q2, up 52% year-over-year in June. Balance rates hit an all-time low of 34%.

In the third quarter, we plan to roll out our Platinum marketing tier, Homes.com's first step advertising offering. Platinum listings will receive enhanced placement and search results and across key neighborhood and community pages, enhanced social marketing and the full range of Homes.com still in drone photography and Matterport tours. We expect platinum ads to be priced at multiples over standard listings. Most revenue on most real estate portals around the world comes not from the base subscriptions we've sold to date but from enhanced depth advertising sales, we're about to begin selling. 70% of Apartments.com customers by depth advertising and 91% of Domain's total revenue is generated by it. We believe that in the future, the majority of Homes.com revenue will be generated by depth advertising. So it's an important milestone to begin selling it this upcoming quarter. Homes AI continues to drive exceptional engagement. Home AI users spend more than 17 minutes on site. They conduct 3x as many searches, favorite 5x as many properties, share listing 6x more often are 48% more likely to return to Homes.com within the week. Consistent with managing our Homes.com investment, we are optimizing our sales force for efficiency and productivity, reducing inside sales reps from 660 at the end of Q4 '25 to about 400 today or retain the top producer so generate an outsized share of the revenue.

We always believe that a field organization would be the most productive, consistent with our experience Apartments.com, LoopNet, CoStar, but it takes years to build a good one. So we initially built an inside team for speed to market. It worked as we achieved over $100 million of organic revenue in the first two years. But as expected, our small field team is delivering higher productivity, so expanding that field team to 50 reps focused on 5 major metros, Washington, D.C., Tampa Land, Dallas, Chicago and plan to expand further as successful performance warrants. Even as we reduced the sales force, Homes.com net new bookings were consistent with Q1 and production per rep increased 19%.

Domain in Australia delivered a strong Q2, growing revenue 9% year-over-year on a pro forma basis. Strong age engagement with Domains growing audience, the rollout of Matterport enabled premium packages and increased industry presence drove record upgrade activity. Core residential revenue, excluding Developers Agent Solutions and Print increased 15% year-over-year on higher listing volumes. We launched Matterport integrated with Domain in Australia in July 1. We've had very positive response in the first several weeks driving significant uptake of platinum ads on domain. We believe Domain is Australia's fastest-growing property of [indiscernible], with average monthly visits reaching 41 million in Q2, up 35% year-over-year. We are narrowing the audience as to historically defined this market by delivering a differentiated better user experience. Our program to divest noncore software assets in Australia is progressing as expected which will enable management to concentrate the most important residential and commercial objectives and will improve overall profitability.

We expect to finalize all divestitures by the end of 2026. Q2 was another strong quarter for on-the-market, our U.K. residential portal. Total property inventory increased 12%, surpassing Zoopla now for the first time, making on market the second largest property portal in the U.K. by inventory. We achieved our 26th consecutive month of positive net new bookings with leads up 14% in the first half. Average engagement increased 43% year-over-year and pages viewed per active user rose 64% and total time on the site grew 16%.

Turning to land.com. Revenue grew 9% year-over-year. First half sales net new bookings increased 22%, and Signature ads grew 55% year-over-year. This month, we delivered our consolidated headquarters campus in Richmond, Virginia, on schedule and under budget. A decade ago, we chose Richmond for its ability to attract and retain in a low-cost market, the highly skilled talent need to build and scale CoStar's business. The new campus consolidates nearly a dozen scattered spaces and buildings into one facility and allows us to scale from 200 employees today to 4,000 with limited capital costs and no additional construction. The campus pairs a premier 21-storey office tower with the mass timber amenity building and our original 9-storey office building. It's [indiscernible], displays a generative AI art by [ Refik Anadall ] built from our own real estate data and imagery appropriately keeping us focused on our AI future.

The campus is tracking toward lead platinum and will Platinum certifications has slated to achieve NetZero through 100% renewable energy. Financially, this is a highly strategic deployment of capital. Centralizing operations eliminates fragmented lease costs and directly enhances employee efficiency, accelerating product cycle sales and client retention. Because we own this premier trophy assets highly on our balance sheet, we have red substantial equity value and position ourselves for a future sales leaseback that could unlock hundreds and hundreds of millions in liquid capital for acquisitions or share buybacks while retaining uninterrupted operational control.

We hope to replicate the playbook from our former DC headquarters, where we achieved a 145% value gain than in 1 year. In May, we announced our agreement to acquire Zonda leading provider of new home construction data, analytic software and online marketplaces. Zonda comprehensive data set covers land development, construction activity homes, community performance and builder operations, serving more than 3,000 builders, developers, lenders, manufacturers and suppliers across North America. We expect the transaction to close in the second half of this year.

At this point, I'll turn the call over to our CFO, Mr. Christopher Lown.

Thank you, Andy. For the second quarter of 2026, we generated revenue of $925 million, an 18% increase year-over-year and in line with our guidance range. Adjusted EBITDA was $184 million for the quarter, above the high end of our guidance range and represented a 20% adjusted EBITDA margin. This is an impressive 900 basis point increase year-over-year. Commercial revenue was $481 million, up 8% year-over-year and in line with our guidance. Residential revenue was $444 million, up 33% year-over-year and also within our guidance range. Adjusted EBITDA for the commercial segment was $172 million, up 7% year-over-year and above the high end of guidance with a 36% adjusted EBITDA margin. Our Residential segment generated a record adjusted EBITDA of $12 million marking its first quarter of profit since we launched homes in Q1 2024. We expect this to continue to grow as we focus on monetizing our investments and driving profitable growth and margin expansion.

The outperformance in adjusted EBITDA overall was driven by actions to reduce personnel costs and continued operating efficiencies. We are particularly pleased that we delivered a 20% adjusted EBITDA margin a full quarter ahead of our expectations. Net new bookings in the second quarter of 2026 were $69 million. Within our Commercial segment, CoStar revenue grew 9% year-over-year in the second quarter to $337 million. Subscriber counts increased an impressive 19% versus the second quarter of 2025 and CoStar Debt Solutions delivered its second consecutive record sales quarter. LoopNet revenue increased 14% to $87 million, supported by continued momentum in paid listings as we continue to build the only global commercial real estate marketplace.

Other commercial revenue was $57 million, down 5% year-over-year. This was primarily driven by lower transaction volumes at 10x. Matterport continued to outperform with subscription revenue growth rates in the high teens versus high single-digit growth prior to the acquisition. Residential revenue was $444 million, up 30% -- 33% year-over-year and up $19 million sequentially. The sequential growth primarily resulted from continued strong revenue from Domain as well as increases in apartments and homes that exceeded their sequential increases in Q1 2026. Adjusted EBITDA increased to 39% sequentially from $132 million in 1Q 2026 to $184 million this quarter. Our focus on disciplined expense management, particularly in personnel and operating expenses, as well as continued efficiency gains across the business, including early benefits from AI and other expense initiatives contributed to the increased profitability in Q2 2026. Importantly, proactive expense management from the first half of the year has established a new baseline for expenses that will continue to benefit us moving forward. Year-to-date, revenue was $1.82 billion, up 20% year-over-year with approximately half of the revenue growth coming organically. Commercial revenue was $953 million, 11% year-over-year and residential revenue was $869 million, up 32% year-over-year.

Turning to operational metrics. Sales headcount at June 30 was 1,975, up 8% year-over-year and roughly flat on an organic basis. Increases in LoopNet and apartment sales staff were offset by the strategic reduction of home sales reps as we focus on productivity and efficiency at Homes.com. Our contract renewal rate remains strong at 89%, with customers of 5 years or more, renewing at 94%. Subscription revenue on annual contracts was 72% for the second quarter, consistent with post-domain acquisition subscription rates. We repurchased 2.4 million shares for $82.1 million in the second quarter, which brings our total share repurchases in 2026 to $13.75 million shares for a total cost of $587 million.

Since the beginning of 2025, we have repurchased nearly 21 million shares for approximately $1.1 billion. We expect to continue our open market repurchases throughout the remainder of 2026. And expect a total of $700 million in share repurchases for 2026. For Zonda, we are still in the regulatory approval process. We are excited to welcome the talented Zonda team to [indiscernible] Group and expect to close in the second half of 2026. We will provide an update on the accretive financial impact of this transaction in the earnings release after the deal closes.

Turning to guidance. To be clear, we have not included any financial impact from the expected closing of the Zonda acquisition in our 2026 guidance. For the third quarter of 2026, we are guiding revenue to range between $935 million and $945 million, representing a 13% year-over-year increase at the midpoint. [Audio gap] Commercial revenue is expected to range from $489 million to $494 million, 7% growth at the midpoint with residential revenue expected to range from $446 million to $451 million, a 20% increase at the midpoint. Adjusted EBITDA is expected to range from $190 million to $210 million and adjusted EBITDA margin of 21% at the midpoint. This is over 700 basis points higher than Q3 2025's adjusted EBITDA margin. We are guiding commercial adjusted EBITDA to range between $162 million and $172 million with residential adjusted EBITDA of $28 million to $38 million. We are providing adjusted EPS guidance of $0.31 to $0.34 for the third quarter, which assumes 403 million weighted average shares outstanding.

For the full year of 2026, we are revising our previous revenue guidance range to $3.715 billion to $3.755 billion, representing a 15% year-over-year increase at the midpoint. Commercial revenue is expected to range from $1.94 billion to $1.96 billion, a 9% increase at the midpoint, while residential revenue is expected to range from $1.775 billion to $1.795 billion, a 22% year-over-year increase at the midpoint. Our revised revenue outlook reflects a series of recent operating decisions designed to drive profitable growth over the long term. The key drivers of the revision include 10x, where we restructured the business to improve profitability, Homes.com, where we optimized our sales organization for productivity, reducing average sales headcount by 21% sequentially, while still delivering similar total net new bookings compared to Q1 and Apartments.com, where we chose to retain price integrity based on our confidence that we deliver the best ROI to our customers. Taken together, these actions moderated near-term revenue growth, but we believe they position our businesses to generate increased revenue growth over time, leading to better long-term profitability.

As a result of our stringent focus on expense management, we are affirming the adjusted EBITDA guidance that we provided last quarter, which calls for adjusted EBITDA to range from $780 million to $820 million. This is an increase at the midpoint of $30 million from our 2026 guidance provided on our February earnings call. We are also affirming our full year adjusted EPS guidance range of $1.32 to $1.39. This range of $0.08 or 6% higher than our guidance provided in February of this year, and we remain committed to achieving our long-term range EBITDA targets laid out earlier this year.

With that, I'll turn the call back over to Andy Florance.

Thank you, Chris. As announced, this is Chris' last earnings call in our CFO seat. On behalf of the Board of Directors and our colleagues, I want to thank him deeply for his many contributions to the company over the past two years. We wish him godspeed, he heads to Allstate to take the CFO seat there. Allstate will be in good hands.

As Chris departs, we congratulate Robin Rossman on his promotion to CoStar Group's new Chief Financial Officer. Robert brings more than two decades of financial, operational and strategic leadership, including over a decade at Deloitte and more than a decade successfully running CoStar Group's businesses around the world. He has proven it can drive margin expansion and profitable growth. Over the past two years, he dramatically improved the margins of our European business, eliminating approximately $50 million in costs, roughly 25% of the European cost structure while still delivering double-digit revenue growth. And early last week, Rob and I enjoyed dinner with CoStar Group's 3 former CFOs, Carchedi, who served 9 years, enjoying 80 -- I'm sorry, a 489 stock appreciation, Radecki who served for 8 years with only a 270% stock increase and Wheeler who served 8 years with a solid 300% stock appreciation. They each challenge Robin to beat their stellar performances given the fact that Robin's got talent, it should be no problem.

Chris could have given these guys a run for their money if Allstate hadn't recruited him. But Robin is up at bet. On behalf of our shareholders, our Board and our 8,000 colleagues welcome Robin. In conclusion, CoStar Group is off to a strong start in '26 with solid revenue and EBITDA growth. During the road show earlier this year, where I met with most of our investors and analysts, I emphasize that we're fully committed to the adjusted EBITDA targets we provided for 2016. This year, we have reduced our projected 26 expense base by roughly $100 million. This gives active cost -- I'm sorry, this active cost management gives us a head start on delivering our '26 through '30 adjusted EBITDA targets.

With that, we'll turn the call over to questions.

[Operator Instructions] And our first question comes from George Tong with Goldman Sachs.

Net new bookings were $69 million in the quarter, that was up 3% sequentially, but down roughly 26% year-over-year. Given the reduction in the revenue guide for the full year, can you help us understand the primary drivers of the year-over-year decline in bookings was the softness concentrated in any particular product line or end market? And what gives you confidence that bookings growth can improve from here?

Thanks, George. I think a couple of things. As was mentioned, we gave you a net new bookings for Homes.com. We continue to scale that business. We made a very strategic decision to drive efficiencies and improve profitability and performance. of that sales force. So that will continue to grow. And I think as Andy mentioned, we're very excited about the metrics we're seeing and the uptake and the launch of depth advertising there. The commercial side performed well, and we feel good about those businesses. We talked about 10x. I mean 10x is a transactional business, and it's a business we continue to work on and focus on we're making some changes, but that did represent roughly 25% of the revenue guidance change. And then on apartments, I think what you saw there is strong continued performance, a great NAA event but we continue to face competition. But I think what you see is when the market looks at ROI our customers look at our ROI, we get through the 1-year anniversary of the transaction they did that gave them the benefits that they have seen -- we believe we will continue to win the day purely based on our performance and the superior product that we have. And anything else you'd add?

I would concur with that, and we continue to invest on optimized sales force growth. I mean, obviously, we've gone from a 0 to 600-and-some -- [ 60-person ] sales team. We are now focusing more on productivity of each of the salespeople, including shifting to more field salespeople in both homes and apartments, which we think will have a benefit. And again, to reiterate what Chris said, the -- as we move into depth advertising, it's a pretty important new offering in Homes.com which we think will by some good revenue pickup there. So we do remain confident we can accelerate revenue.

And George, I'd add two other things as I kind of thought through the question. One, we're excited about additional product launches and the investments we've made on the commercial side primarily that are coming in the next 4 to 6 quarters. So we think those -- the take-up will be fantastic. So we're excited that by that. And we continue to expand our sales force, while some of our sales forces have reached our objective, we're still a little behind in some of them. So we think that as we catch up with those sales forces and drive productivity, we'll be able to get that as well. So I think both of those also give us a lot of comfort in being able to achieve our growth objectives.

Our next question comes from Stephen Sheldon with William Blair.

Can you talk some about what the updated revenue guidance assumes in terms of working at growth in the back half of the year. I think the full year guide was assuming close to 10% organic revenue growth before should we thinking it's more like 8% organic for the full year now, and it's below that in the back half. And then just given what you're seeing in the bookings trajectory, and I know it's early, you're not -- you're still a ways away from giving guidance for next year. But just with the trends that we're seeing there, I guess, what's the imply of that, the pace of revenue growth heading into 2027.

Yes. On your second question, as you know, we don't give guidance for net bookings and we haven't given out a 2027 forecast. So nothing to add on that question. Remind me, your first question was?

The pace of just as you think about the back half of the year, what the organic revenue growth looks like you're embedding in the updated guidance. you have the roll forward, you know the net booking. So as we mentioned, we said that it was 10% organic growth for the first half. So somewhere inside of that by 1 point, 1.5 points is sort of what we're looking at.

And is that for the full year, just to be clear, what is that?

No, that's for the second half of the year. Second half of the year, that was your question, right? The second half of the year.

Our next question comes from Ryan Tomasello with KBW.

On multifamily, the growth deceleration there suggests pressure on pricing per community, which I know you've called out mix shift to smaller rooftops. But the extent of the decline also seems to suggest pressure on outright peer downgrades. So can you talk about to what extent that's been a factor and how you would weight the your downgrade pressure between macro-driven budget tightening versus competition? If there's any signs of that downward pressure abating, that would be helpful.

Yes. So I think that the -- it's a combination of both the macro environment or an elevated vacancy environment and that is stressful to the apartment owners and property managers making them more price sensitive. And then there is enhanced competition with a competitor trying to buy share with pricing with really low pricing. We're maintaining our pricing integrity successfully. You see us maintaining the average ARPU roughly at about the same level, including with a share mix. And what we see is that with a 2.5x lead-to-lease conversion rate we recapture a lot of business that cycles away chasing a lower price line. They tend to come back through time, but it just puts a lot more work on the sales force to to cycle through. So there's nothing wrong with competition. We've had a lot of competition through time. We start out with 8, 10 competitors in the space. We're now down to 2, that the FTC thinks there should be more than 2 -- and 2 or 3 maybe. And we feel very good about where we are and the advantages we offer in ROI, and we continue to lead with the best lead to lease quality.

On top of that, property growth was up 12% year-over-year. So we continue to grow rooftops at an attractive level, and we held pricing basically flat at the package level. So bring on the competition, but we continue to grow and expand our business. We're excited about.

Our next question comes from Peter Christiansen with Citi.

Andy, with the productivity efficiency change there on the residential side, just curious if it's changed your time to scale expectations or I mean is this initiative effectively lengthening that? Or do you still think you can reach your internal expectations longer term to scale this business with these new efficiency measures?

Yes, I think it remains very similar. So the -- as I said, you really would prefer to have people in the field meeting with your clients. We see higher -- about 2x the productivity with Apartments.com field staff to inside sales staff. With CoStar, we see a similar significant advantage from field staff to inside. And the same thing is true typically with LoopNet. So -- but you don't have that choice when you're starting out a major new sales force because in order to build the sales force quickly, you really have to keep them concentrated in one location. Now in fact, we have -- now that we're 2 years in or really a year into having a full size scale sales force. We have the optionality now to begin to put more people in the field, and we'll be cycling through that over -- through time over the next couple of years. It probably takes several years to build out a full national field sales team. And then we're also -- the inside sales team continues to mature and get better. I mean remember, this is a very rocky sales team at this point, but you saw fewer people sell the same amount with about -- just about 20% productivity increase by focusing on the better sellers. So what we'll do is continue to optimize and optimize the go-to-market and I feel very good about being able to go out there and bring out the depth advertising for the first time. So I think we have a strong offering. Our clients are seeing a very strong ROI that is demonstrable and that shows up in really good renewal rates and very low cancellation rates now. So we're achieving a lot of our goals. I feel very good about where we are and getting very good feedback from clients.

Our next question comes from Surinder Thind with Jefferies.

Just following up on the Homes.com strategy at this point. Is the idea like where we were at the beginning of the year, and how you thought you were going to move forward with the sales force and everything. Is the idea that there's just a certain level of productivity for end market demand that you can fulfill right now in the marketplace. And so that's why we kind of have the size of the sales force that we do and then ultimately, the realization that I guess you need a field sales force. And does that raise the cost of customer acquisitions with more field sales force? Like where does that balance kind of shake out? And how did your assumptions change over the course of the last 6 months, I guess?

Well, yes, so I'd say the fundamental strategy remains the same. And the way you optimize from quarter-to-quarter, you don't want to lock yourself into an assumption that you had at one time period and dogmatically not change from it. So we're looking at -- as you build -- so first of all, it's a huge opportunity. There is no one -- we're not competing with anybody for these clients. We're the only people providing this service that provides a high ROI. No one else is providing marketing listings the way we do. Other perceived competitors sell are basically lead brokers, which is very different. So going to market, it's a massive audience of real estate agents across the United States and initially, as you scale up the sales force, you really have to go inside sales because it's not possible to train salespeople in 50 cities simultaneously. Having done this a couple of times. So you start out with the inside team and through time, you evaluate the productivity of the various folks on that team. Some are very productive and doing a great job. Others are not doing a great job. And you don't want to dogmatically carry them along. And what we're seeing is we had a very small sales team in the field, and those folks are producing at a much higher level, which is not a surprise to us. We would expect people in the field to produce more. There is not a material cost differential between the folks that are centralized and in the field. We already have field offices, conference rooms in most of these major cities. We have a lot of infrastructure out there. It's just a question of being methodical cycling up 5 cities, 50 salespeople letting that set, building additional management going to the next wave of cities, letting that set go in the next wave and not getting ahead of -- getting over your skis. So it's also a shift from prioritizing revenue growth and revenue growth as the first priority to committing to -- are hitting our EBITDA goal. So we're not going to sacrifice one for hitting the EBITDA goals through time.

Our next question comes from Curtis Nagle with Bank of America.

Yes. Great. Maybe just to bridge to get to the resi EBITDA guide for the year. I understand given things like sales force, but it does imply a fairly steep step up between 3Q to 4Q, lower revenues, I think, in the quarter there. But just walk through the -- if you could, the pieces. And again, just what's driving that inflection between the 2 quarters?

Let us come back to you because I don't have that [ bridge ] in front of me, so we'll come back to you.

You're on mute.

Let us come back to you. I don't have that [ bridge ] in front of you, but we'll come back to you in the calls after.

All right. I'll ask a follow-up then. Just for the other CRE segment, ex 10x, it looks like you strip that out implies basically flat growth. So just kind of what's going on there?

Well, actually, if you strip it out, it's the primary delta between the change in guidance. So like I said, we still feel really good about the growth in those businesses and where they're heading, especially with the launch of the new products. So we feel good about the businesses. The change in guidance really was primarily driven by 10x, which as you know, is a transaction business.

And the core business is accelerating.

It's growing for sure. I mean, CoStar continues to grow. And so like I said, we're excited about what we see ahead of us.

Our next question comes from Brett Huff with Stephens.

Welcome, Robin. Question follow-up on the residential business, less about the numbers and just more about how the sales sort of pitch is going, given the really strong, I think you said 10 or 11x ROI, which is super compelling, what's our rate-limiting step in getting folks to kind of believe or understand that how is it like pushing a rope, or is it education? Or how do we -- just given how you're rejiggering the sales force, can you just give us the kind of bridge between those two things would be helpful.

Yes. So in June, our demo to close rate, I believe, was 45% number I saw. So that's an incredible close rate. And so the story is very compelling people that listen to that story are subscribing. And those that subscribe are renewing now. So we're getting lower and lower cancellation rates, ergo, higher and higher renewal rates. That's the most important number to me. Those two numbers are very important. But having hundreds and hundreds of folks inside sales team centralized, is challenging to get the demos, the presentations, the ad bet that you want you have an advantage when you're in the field because you go to industry events, you show up at open houses, you drop in -- on residential offices to visit one customer and you come across other customers. So through time, that's why you see 2x the productivity in a field sales force that you tend to see or we have seen an inside sales force. So it's really getting more at bats. We remain very confident the numbers you really care about, like close rate and renewal rate are good, you want more at bats. And just anecdotally, as I talk to clients that I encounter here and there, we're getting positive referrals now, and that's a big help. And so the combination of performance management, the inside and moving to the field I think will keep us on the track we want to be on, and we'll get us good results.

Our next question comes from Faiza Alwy with Deutsche Bank.

I wanted to follow up on the apartments question. And your desire to kind of maintain pricing or your ability to maintain pricing. I guess are you seeing some of the macro pressures and the competitive pressure sort of build over time? Or I guess, what phase are we in in terms of both of those things? And how confident are you that you can sort of maintain your price integrity?

Yes. So we are maintaining our price integrity because third-party sources show us at 2.5x the lead-to-lease conversion. And that's because if you have a dedicated -- if you have a site that's identified as being a rental site with a lot of high-quality information and a good experience, you get a higher conversion rate which makes it more valuable to your customers. That is something you have to communicate, again, again, again. And we're doing that. And so having been through 100 competitive situations over the last 4 decades, they do have patterns to them. This one is combined with adverse market conditions. So it's not a helpful market environment. There is stress in the market for multifamily owners. Everyone is probably aware of that. But typically, in a competitive game like this, you have a run, and you've had a period where they have acquired a company that FT said was an illegal merger. And whether or not they can keep that company not who knows, they create some headwinds on the comps through time. And then as well, there is the need for them to have to be able to deliver the lead-to-lease conversion through time, which is likely challenging. And ultimately, the value we provide is worth the pricing we charge, so we're able to maintain that. And again, I think the evidence is in the numbers you're looking at roughly the same ARPU despite fast growth at the lower end. So we're doing quite well there. And we're retaining the clear leadership position with all the major players.

Well, Andy, I think that's also highlighted by June was the third best month in Apartments.com's history on gross sales. So what that demonstrates is obviously a strong continued interest and desire to be part of the Apartments.com network, use the capability. And so we face a competitive environment, we shrunk down to basically 2 primary competitors. But even in like that, we saw one of the best sales months in the company's history. So it gives us a lot of confidence in the road ahead.

Our next question comes from Andrew Boone with Citizens.

I wanted to go back to Homes.com again and ask about advertising spend. And I understood the optimization of the sales force. But can you help us understand how you guys are thinking about marketing? What happened in 2Q? And then what's the expectation for the back half of the year?

Yes. So I'd say there's a -- you've seen a couple of shifts occurring in the marketing for Homes.com. One, you've probably noticed a shift away from very expensive celebrity production. We think we're getting a better result from some of the newer marketing advertising, brand advertising we're doing. We get more into what is the actual functionality of the product and the advantage it offers, particularly when we believe we have the clear cut strongest AI solutions in search with great advantages there. So you've seen some of those newer ads, which will, through time, be much less expensive to produce. But then also, we are less than thrilled with results that we've seen through time on linear TV and some of the streaming and we're finding, and we're shifting a little bit more to SEM and digital. We're maintaining an aggressive SEM profile and will through the rest of the year. But we're going further down the full. We're not working the upper brand identity as much, and we're more looking for marketing vehicles that are down the funnel, the transition to leads more directly. And that's one of the core reasons for that is that we have a pretty solid customer base right now. We're running about 9% of all listings in the United States market on the platform or enhanced on the platform. 36,000 customers in just 2 years. And you see by focusing on the ROI on those customers, you see the renewal rates going up and up and up. So we believe it's working. And then we'll be looking for more tactics and strategies around getting our sales force at [ bats ] for demos over the next year with B2B.

It's also important to remind everyone, and I think this also bridges back to the question asked before is that there's seasonality. And so we have lower marketing spend in our resi marketplaces in the second half of the year. And all of this is within our plan. And so we just continue along our plan, but there is lower marketing spend in the resi marketplaces from seasonality in the second half.

Our next question comes from Scott Wurtzel with Wolfe Research.

Just on the kind of the change in the sales force in Homes.com I'm wondering if you can talk about just kind of how long you would expect it to take for these new field sales reps to sort of ramp in productivity, how that may compare to the ramp time on some of your stronger inside sales reps. Any color there would be appreciated.

I'm going to -- I would hypothecate that the ramp time is similar, though the profile we're able to hire in the field, I believe, is better suited to the task. So when you're hiring hundreds and hundreds, when you're hiring 1,000 people in Richmond, you're not able to hire people with the experience profile you want to get. So you're not going to get that real estate experience that you would love to see or that B2B marketing sales are sort of marketplace sales experience. When you're trying to hire 10 folks in Dallas or 20 folks in Washington, D.C., you can actually get the real estate background. You can get portal experience, you get advertising sales. You can get some at 5 years of sales experience. So I personally have been looking at every resume that's coming into that field sales team, and it is a much higher profile of salesperson. In Richmond, when you're hiring that many people at a market like that, really last year and in the first quarter. You're often hiring people right out of college. And some of them can be very successful. Our #1 salesperson is in her first year out of college. And -- but many others turns out is just not -- it's not there. So in the field, you can actually hire folks with a better profile and more experience. Now the other thing is, at a certain point, when we were scattered all over Richmond in multiple buildings and some odd shapes and sizes and hot places, and it was hard to find anybody we purposely slowed down recruiting until we were in the new facility. And I think we have -- in the new facility, I think we can out recruit just about any company. So we'll begin a more measured pace of growth inside while we're also doing field sales, which is our ultimate preference to build a robust field sales force. But again, it takes time.

Our next question comes from Nick Jones with BNP Paribas.

I guess maybe on AI initiatives, can you talk about how you're balancing AI investments as you target kind of your midterm EBITDA -- 2030 EBITDA target. And as you deploy this out to more users, I mean, are token cost something we should be thinking about as you try to drive more and more engagement and maintain this kind of AI platform we've deployed.

Yes. So so far, and I'll let Chris follow up correct me. But so far, I believe we have more cost savings from AI than we have cost increases from tokens. So when you're looking at something like releasing the rent benchmarking or the real estate manager, [ Lisa Jestin, ] you're saving a ton of money on labor, and we expect to save even more money on labor. And then we also see going forward, the opportunity to generate a lot of content by using our proprietary content using expert models, but do it at a way in which we can resell the token we've used to generate that expert knowledge off of proprietary data to many, many, many people. So the sort of business model we've had through time where we invest to collect a piece of information and then sell it across a broad audience thereby driving -- having a very high gross margin of these information you're selling. The same thing exists in the proprietary information token world, where you generate a piece of combined expertise with proprietary data and then you sell it across a very broad audience and thereby have a very small per unit cost or a high gross margin. We're not seeing anything that is unpleasant on the tenant consumption on the platforms we've got right now. For sure, we're getting significant coding efficiencies through the LMs we're using for coding. And we are seeing the providers there trying to shift off of a la carte to token pricing. But I feel reasonably comfortable that, that has to come with efficiency gains in labor or it doesn't make a lot of sense. But I did notice that it's a competitive market because I went down to the cafeteria today, and I was -- a bunch of the tables were blocked out, and I couldn't sit in them because one of the major LLM providers was serving meals to all of our developers trying to win them over. So there should be some token competition there.

Yes, I add a couple of other things. We're actually below budget on what we had forecast for token consumption cost in 2026 even in light of the initiatives we've undertaken. So we're excited about that. We've talked previously about creating optimization engines within our AI infrastructure to seek out the best pricing on tokens as we go down that route. I'm sure you're all keeping abreast of token pricing in the event of additional frontier models and the massive cost differentiation that exists. So I actually think we're probably in a better position than we were. I'd also highlight, we really haven't taken into account a lot of cost savings that we know are going to accrue to us. across all of our businesses as we drive more AI within the business, I would say we're relatively agnostic on that. And as we continue to go day to day, I see a lot of opportunity across all of our businesses, research included to drive down costs with AI. So I actually think it's a real positive story for us. We're on the cusp of it, and costs are under budget, and I think that's likely to continue given pricing trends given how we've optimized the business and given what we're planning on doing. So Andy took a very measured approach and focused approach in doing that. And I think it's actually proving to be the right outcome.

Did we mention that Robin Rasmus just an LLM model.

Our next question comes from Jason Haas with Wells Fargo.

I'm curious if you could talk a little bit more about the Apartments.com Chat partnership just how it's a mutually beneficial relationship. And I'm curious if you're considering launching something like that for Homes.com and maybe even for CoStar Suite, curious to hear you thoughts there.

Yes. So starting from the back forward, I have been seeing some of the implementations of CoStar AI, and it's got a lot of potential because you have a lot more data there and a lot more modules. And so the ability to query across multiple data sets and then merge the content together and the answer is pretty powerful. I don't see that being something that makes sense to put out on a -- in a module and a ChatGPT that's not who the customers. They're really looking for something much more in-depth. With Homes.com we are very prevalent on ChatGPT. I've heard that we are more prevalent than just about anybody else on there for actual -- for generative optimization. We think actually the experience of the full going into Homes.com and the full AI integration at the UX level is more powerful than a module in ChatGPT. With Apartments.com, we're hitting both the integrated UX AI, agentic AI, along with a module on ChatGPT. However, the story is still the traffic is not coming from that source. You're still single digit right now. So it's more of a window dressing than a reality, but we'll keep an eye on it, and we think it will be a one of many options for where you create the front door and bring traffic in.

Our next question comes from Ashish Sabadra with RBC Capital Markets.

I just had a quick clarifying question on the residential guidance. the updated guidance, which is $50 million below the prior guidance, I just wanted to better understand how much of it was due to Homes.com versus multifamily. Any color there?

As I mentioned, around 1/4 of it came -- you talked on the revenue side, I think, is -- came from 10x and then the remainder from -- on the residential side where the primary participants. And like I said, we don't give out net new guidance by each segment. But we did mention that Q2 net new bookings for Homes.com was similar to the first quarter. So I think you can kind of come to some conclusions based on that math.

I would now like to turn the call back over to Andy Florence for any closing remarks.

Well, I think we did a decent job in keeping the prepared remarks section reasonably brief and having an extended Q&A question. Thank you, everyone, for joining it -- thank you for joining us, and we look forward to updating you in the next quarter.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Hello, everybody, and welcome to the CoStar Earnings Call for Q1 2026. Thank you all for joining us.

Before I turn the call over to Andy Florance, CoStar Group's CEO and Founder; and Chris Lown, our CFO. I'd like to review a few of our safe harbor statements. First of all, certain portions of the discussion today may contain forward-looking statements. The company's outlook and expectations are 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 today and in our filings with the SEC. All forward-looking statements are based on the information available at CoStar Group on the date of this call. CoStar Group assumes no obligation to update these statements, whether as a result of new information, future events or otherwise.

Reconciliations to the most directly comparable GAAP measure of any non-GAAP financial measure discussed on this call are 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 on costargroup.com under Press room. Please refer to today's press release on how to access the replay of this call. Remember, one question during the Q&A session, so make it a good one.

And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance. Andy?

Thank you, Rich. Thank you for joining us today. I want to start with 3 things. First, this was an exceptional quarter. We delivered our 60th consecutive quarter of double-digit revenue growth. Our adjusted EBITDA doubled, and we're on track for the highest full year adjusted EBITDA in CoStar Group's history. Second, the Homes.com investment is delivering exactly what we said it would. Member agents are generating extraordinary returns on their subscriptions, consumer engagement Homes AI is multiples of conventional residential search and Homes.com is the fastest-growing residential portal in the United States. I'll walk you through the evidence later in the call. Third, the activist distraction is behind us. With the noise gone, we have more focused energy than ever to spend on what matters, growing EBITDA.

Let me take you through the numbers. Third (sic) [ First ] quarter 2026 revenue grew 23% year-over-year. Q1 '26 adjusted EBITDA of $132 million doubled year-over-year and came in 26% above the midpoint of our guidance. After a record 2025 for annualized net new bookings, we started 2026 stronger still. Q1 net bookings of $67 million were up 20% year-over-year. We expect productivity to build over the year, particularly from the sales reps we hired throughout 2025.

Our commercial business generated $472 million of revenue in Q1 up 15% year-over-year with adjusted EBITDA of $161 million. CoStar revenue was $330 million -- $331 million let's get that extra $1 million there in Q1 with annualized net new bookings from our core CoStar product up 16% year-over-year. CoStar users grew 22% year-over-year to $317,000. Sales to brokers and tenants were especially strong with broker sales up 29% and tenant sales up 27% year-over-year. CoStar NPS was 69 and our quarterly renewal rate was 92%.

CoStar rent benchmark launches this summer, drawing on our proprietary lease database and public records it will be the industry's only net effective rent benchmark product, giving landlords occupiers, investors and brokers visibility into starting rents, effective rents, TI allowances, free rents and escalations across U.S. markets. CoStar New Homes is in development with phase 1 plan for Q2. The module tracks new residential construction from planning through delivery and serves homebuilders, mortgage bankers, retailers and retail center owners. That integrates builder feeds, drone imagery and other data sources to deliver insight into housing supply-demand and market trends.

CoStar Debt Solutions, formerly CoStar Lender, had a strong quarter with net new bookings up 26% year-over-year as the business crossed $100 million in revenue. That solution now serves over 500 financial institutions across the full lender spectrum, including banks, pre-lenders, debt funds and regulators. Debt Solutions is on track to launch CRE debt benchmarking in the second half of '26 with CRE loan origination workflow following in Q1 of '27. The final product will be a full workflow solution to originate and underwrite a loan. Our first release will focus on seamless delivery of property details, peer properties and market information.

We launched a client advisory committee with over a dozen institutions to shape the loan origination road map deep an understanding of how AI is reshaping their workflows and strengthen product market fit. Across the platform, debt solutions is actively building these AI-enhanced workflows. CoStar U.K.'s growth accelerated in Q1 with revenue up 25% and net new bookings up 44% year-over-year. This growth was supported by the release of new land registry lease modules that gave clients authoritative effective rent data sourced from government records and the recollapse of one of our primary competitors there.

CoStar Canada revenue grew 22% year-over-year. We released multifamily analytics coverage for Montreal in Q1. CoStar France launches in Q2, we will cross-sell into the 32,000 French CRE professionals who already subscribed to news and information from our Business [ Immo ] acquisition, accelerating adoption as we build the only pan-European CRE data and analytics platform. In CoStar Australia, we are rapidly building proprietary property data with our local research team now approaching 100 people. We expect to launch CoStar and LoopNet in Australia in Q3 and Q4.

Real Estate Manager added AI lease abstraction capabilities to the visual lease platform this quarter and will extend these capabilities to CoStar Real Estate Manager later this year. Customers are eager to bring this best-in-class capability into the lease management and accounting workflows to save them a lot of time and hassle. We're also deploying multiple AI agents internally to accelerate customer onboarding support enablement and the automation of reputable professional services work.

In Q1, STR launched profitability benchmarking supporting more than 150 detailed data points across a hotel's P&L. Customer interest was immediate with 750 hotel subscribers submitting data to unlock the functionality. Building participation at scale is critical to future monetization and this early engagement reinforces the long-term value of the investment.

LoopNet generated $85 million of revenue in Q1, up 16% year-over-year. Paid listings rose 10% year-over-year in the U.S., 35% in Canada and 63% in the U.K. Last month, after more than a year of successful testing, we rolled out asset-based pricing across all U.S. markets. LoopNet advertising is now priced to match the size of the asset and the value LoopNet delivers to listers. Early results have been really outstanding. At the high end, the volume of silver listing sold at $300 or above per month grew 650% from February to March. At the low end, listings sold below $40 grew over 1,100%, opening up an entirely new category of inventory and bringing in smaller advertisers who could not justify the higher price points for one size fits all that we had before. We expect this to drive more listings, more traffic and more revenue.

LoopNet's European revenue grew 17% year-over-year following last year's launch in France and Spain, we're seeing the network effects of being the first and only global commercial real estate marketplace. Average monthly unique visitors on LoopNet Europe more than doubled to over 900,000 up 102% year-over-year. Crucially, these users are not just searching their home countries, they're searching globally. We will extend this network effect as LoopNet launches in Australia, Germany and other markets. Our Australia CRE marketing platform, commercialrealestate.com.au grew 10% year-over-year on a pro forma basis, driven by higher depth revenue, improving depth penetration and higher average revenue per listing. That commercial unique visitor audience was up 129% year-over-year in Q1.

Subscription revenue for Matterport was up 19% year-over-year. Enterprise momentum built through the quarter, new enterprise accounts in March were up 31% year-over-year and direct sales were up 16%, supported by a healthy and expanding pipeline that continues to build into Q2. Matterport has become a critical point of differentiation across CoStar Group. It drives engagement, list conversion and generates valuable proprietary data. Integration is proceeding exceptionally well across Apartments.com, Homes.com, LoopNet, CoStar domain. Matterport is already a key component of Homes AI and will unlock huge future AI innovation all across CoStar Group. Matterport exteriors with X-ray now in alpha lets users virtually remove a roof or floor of a virtual building to see the buildings interior in the context of the yard, the neighborhood. That's a real estate marketers dream. We've also released a number of new innovations with strong use cases in architectural engineering construction, facilities management and manufacturing.

BizBuySell revenue was $8.8 million in Q1 with broker subscriptions reporting 2,300 with broker subscribers. I'm sorry, reporting 2,345 completed sales transactions of businesses representing $2 billion in enterprise value, 59% of which involved commercial real estate. We're rapidly turning BizBuySell into a true end-to-end transaction platform with integrated financing 3D tours and document sharing now driving over 24,000 [ Brier ] profiles and 15% broker adoption.

Residential revenue was $421 million in Q1, up 32% year-over-year. Adjusted EBITDA improved by $56 million and we expect the residential segment to reach profitability in Q2 2026. Apartments.com generated $312 million of revenue in Q1, up 10% year-over-year, the 15th consecutive quarter of double-digit revenue growth. Apartments.com delivered 220 million highly engaged renter visits, 370,000 tours and 300,000 applications submitted directly on our platform to apartment owners alongside 40 million Matterport tours. Our monthly renewal rate held at 99%. Apartments.com brand media impressions nearly tripled in Q1, up 189% year-over-year to $1.7 billion. The longer we invest in our brand on behalf of our clients, the more efficiently we deploy that investment.

Clear example, our first-ever co-branded Super Bowl commercial with Homes.com aired on February 8, reaching 126 million viewers, the highest peak viewership in U.S. media history. Combined with our industry-leading SEO and SEM, these efforts continue to produce the most qualified audience of apartment seekers on the Internet. According to Google, overall rental search demand remains soft. Even so, comScore data shows Apartments.com network unique visitors, up 3% year-over-year in March. Zillow unique visitors were down 5% year-over-year and Zillow's expanded rental network, [ Zillow plus ] Realtor plus Redfin was down 3%. Zillow has now seen unique visitors decline year-over-year for 15 consecutive quarters. Let's make that 15 consecutive months, not 15 consecutive quarters. I was just sort of picking up the 15th consecutive quarters of double-digit growth we had.

Our sales force conducted 185,000 quality meetings in Q1 for Apartments.com and achieved an outstanding NPS of 89. In Q1, Apartments.com introduced Smart Search, our natural language search feature and the first AI-powered voice search in multifamily. Smart Search lets renters search the way they speak packing every detail and even multiple locations into a single query. Results are faster, more detailed and dramatically more efficient. The early metrics are really strong, renters use Smart Search and 94% more time on site and view 63% more listings.

Ahead of the [ Juno Pardiamentalized ] trade show that [ NAA ] host, the big show of the year, we will launch Apartments AI, our pioneering conversational search experience built on the same technology powering Homes AI. Apartments AI will more deeply engage renters and continuing delivering best-in-class advertiser ROI through the industry's highest quality leads. We will also highlight homes.com's expanded rental capabilities and the value add to Apartments.com at that same [ apartmentalize ].

Apartments.com leads the industry on price transparency. Any property can now display a complete all-in monthly price with all the extras reoccurring onetime required fees with a prominent badge alerting renters. 6 states already require this sort of transparency and the FTC just concluded its public comment period on similar rules. Matterport continues to be a true differentiator for consumers on Apartments.com. We now have approximately 250,000 3D tours in the platform, including over 1,500 Matterport 3D exteriors that give prospective renters an immersive 360-degree view of the entire community.

In Q1, renters spent 46% more time on listings featuring a Matterport and those listings generated 56x more tour requests per listing than listings without one. It's an amazing stat. Homes.com revenue grew 58% year-over-year to $26 million in Q1. We are on pace to hit our stated 2026 net investment target of 550 million homes. And what that investment is buying is becoming clear in the data. Membership growth and monetization are both accelerating. We added over 4,300 members in Q1 up 205% from Q1 of '25. We now have 35,175-agent subscribers with 76% of them on annual contracts. Net new bookings were $11 million in Q1. March annual revenue run rate reached $106 million, up 92% year-over-year. Our trailing 12-month average ARPU is $287.

We are now seeing clear quantifiable evidence that Homes.com business model is working and that our subscribers gain an extraordinary return on their investment. We analyzed the first 11,400 Homes.com members and compared the commission earnings in the 12 months before joining Homes.com to the earnings in the 12 months after they became a Homes.com subscriber. The findings are striking. On average, a Homes.com subscriber earned 36,400 more in commissions in their first year as a member. Against an average annual subscription costs of just $3,400, that's an 11x return on their investment. In the same time period, our members saw commissions grow 16% while the average nonmember saw their commissions decline. The ROI is even stronger for the agents who need it most. Agents who have had earned 50,000 or less in the prior year, earned 58,000 more after joining, pre-membership earnings were 26,000 on average, and that jumped to 82,000 on average. There are hundreds of thousands of agents in this earnings cohort.

Agents in the 50,000 to 100,000 bracket earned $41,000 more in commissions after joining, agents in the $100,000 to $150,000 bracket earned $38,000 more once they became Homes members. These numbers almost certainly understate the value. The benefit extends beyond our 12-month analysis window and we exclude the significant rental marketing value members generate through Homes.com and our syndication to Apartments.com. Based on these results, we will raise subscription fees for new customers on May 1 and evaluate measured potential renewal increases.

For CoStar Group as a whole, this is the fastest organic revenue build we've ever achieved for a new product, and we hit these revenue levels faster than our U.S. competitors did at their start. Our NPS is 41 and [ Exoscore ] after just 2 years and still improving. Homes.com subscribers paid to promote 260,000 active listings in Q1, representing 8.7% of nearly 3 million homes for sale in the U.S. In 2025, the Homes.com network grew nearly 2.1 billion views and 108 million average monthly unique visitors. We achieved a healthy balance across SEM, SEO direct traffic allowing us to optimize SEM for quality leads, not just quantity. The result is better traffic and more engaged visitors.

Organic traffic to Homes.com was up more than 100% year-over-year in every month of the quarter and March specifically, up 119% year-over-year. Homes.com was featured across major cultural moments in 2026, including the Oscars, the Olympics, the Super Bowl, March Madness and many other, driving over 3 billion impressions in Q1. Our new March ad showcased Homes AI in action, and I have received more positive feedback on this campaign than any of our prior Homes.com campaigns. In March, average annual session duration hit an all-time high, up 26% year-over-year and bounce rate hit an all-time load down 29%. Homes AI is the engine behind this engagement search. AI users run nearly 4x as many searches, favorite 7x as many properties and submit 7x as many leads.

In April, time on site reached 18 minutes for AI users versus 4 minutes, 32 seconds for non-AI users. But plainly, when consumers experience Homes AI they spend roughly 4x longer than they do on conventional residential search. This is precisely the dynamic that precedes meaningful consumer share shift and exactly the proof point we expected our AI investments to produce. In March '26, we significantly expanded our relationship with [ EXP Realty ], the largest residential firm by transaction size in '25. The new partnership lets [ EXP's A300 ] agents prominently display premarket coming some listings on Homes.com.

You may recall, we partnered earlier with EXP Commercial in December '24, they became a major subscriber to CoStar's information and analytics. We've been integrating Apartments.com with Homes.com since early 2025, last year, Homes.com rentals drove over 10% of Apartments.com's traffic, making Homes.com Apartments.com's largest syndication partners. This combination produced nearly 650,000 paid single-family home rental listings in '25, paid single-family rental listings in Q1 2026 grew 33% year-over-year.

According to comScore, Homes.com is now the fastest-growing rental site in the U.S. For Google Analytics Homes.com rentals visits grew by $13 million versus Q1 of 2025 making Homes.com our most powerful platform for reaching a single-family rental market. Over 214,000 independent owners now use our rental tools, and we expect that number to raise materially as we extend the full Apartments.com feature set into Homes.com. We're continuing to improve the experience for renters who search on Homes.com. By the end of 2026, every tool available at Apartments.com will be available on Homes.com letting independent owners rent their house condo or townhouse across both platforms.

At the end of August 2025, we began selling marketing on Homes.com to new homebuilders. In the 8 months -- first 8 months, we generated $3.3 million in annualized net new bookings with the run rate accelerating each quarter. Q1 alone delivered $1.5 million. We have signed data feed agreements with 663 homebuilders, looked to reach the Homes.com audience. These feeds now cover roughly 75% of all production new home activity in the U.S. These feeds provide a better consumer experience to home searchers on Homes.com and are a foundational building block to power a valuable new homes information product within CoStar.

So let me pause to speak briefly to [indiscernible] in the room. The activist campaign over the last year did weigh heavily on Homes.com sales and potential partnerships. Real estate leaders were reading a steady drumbeat of negative coverage. Nonetheless, we made durable progress through it. With that distraction now behind us, we can now apply even more focused energy to accelerating Homes.com revenue and the revenue in every other business in the portfolio.

Land.com revenue grew 8% year-over-year and net new bookings hit a record, up 126% year-over-year. Boosted by replacing a regionally targeted site-specific ad with a county targeted network ad format, inventory tripled and ads sold quadrupled.

Domain Australia delivered a strong Q1 with sustained elevated audience volume, strong uptake of premium products and disciplined cost control. Recent investments in product technology research and photography are now producing tangible outcomes and Q1 revenue was $68 million. The Australian market is highly cyclical and Q1 is always seasonally soft, which is reflected in overall sequential down revenue. Year-over-year, however, core domain residential revenue did grow 11%. We delivered EBITDA growth despite all the significant investments we're making.

In addition to expected normal seasonality, we did also discontinue revenue from [ Span Mads ] on the domain portals because it was not materially profitable and significantly distracted from the value of home sellers the value home sellers receive when marketing on those sites. CoStar Group's technology capabilities are already benefiting Australian customers. Domain site improvements are dramatically increasing traffic, monthly unique audience averaged $8 million across the quarter with March shedding $8.4 million, the second highest month on record. Total users reached a high of $21.9 million, up 47% year-over-year and listings grew 28%.

Domain launched Matterport in Australia this month bundling immersive technology into premium listing packages and giving agents and vendors meaningful savings on traditional photography. The launch generated significant positive media coverage. Q1 was another strong quarter for on the market. We closed it with our 23rd consecutive month of positive net new bookings. Total time on site was up [ 16% ] and page views up 24% year-over-year, driving a 23% year-over-year increase in leads. On the market now has 17,500 state agents and new home developer customers on site, the highest in its history. On the market has eclipsed [ Zoopla ] as the U.K.'s #2 portal by inventory and now has more new home listings than Rightmove. The growth was accelerated by signing the [ Connells ] Group, the U.K.'s largest estate agent with over 80 brands and more than 1,200 branch locations.

Our on-the-market sales team is delivering real value for customers. NPS came in at a solid 46 for the period. In Q2, we'll continue building AI search functionality as we progress towards integrating on the market into the Homes.com software environment in 2027.

In closing, I want to acknowledge our outstanding management team. The breadth and depth of expertise across this company is what makes everything you've heard today possible. There's a lot of it. I am very grateful for what they bring to this company. I also want to thank our Board of Directors, our leadership expertise and counsel were outstanding through what was at times a noisy year. We are well positioned to deliver against every objective we've set and to unlock large digital real estate opportunities ahead of us. To our shareholders, thank you for your continued support. The day of this quarter across CRE, across apartments, especially across Homes.com confirms one thing. The strategy is working. I've never been more confident in our plan to deliver double-digit revenue growth and significant earnings expansion through 2030 and beyond.

At this point, I'll turn the call over to our CFO, Chris?

Thanks, Andy. In the first quarter of 2026, we delivered $132 million of adjusted EBITDA, doubling the adjusted EBITDA from the first quarter of 2025 and $17 million above the high end of our guidance range. The outperformance in adjusted EBITDA was primarily due to lower personnel costs from cost saving efforts as we continue to find efficiencies from AI, personnel and other expense initiatives.

1Q '26 revenue was $897 million, which was 23% higher year-over-year and toward the high end of our guidance range. Organic revenue growth was 10% for the quarter. Commercial revenue in the first quarter was $472 million, an increase of 15% year-over-year and a 7% organic growth rate. Our commercial brands delivered revenue in line with the guidance we provided on our February earnings call.

CoStar revenue grew 9% to $331 million, driven by strong double-digit international growth. The year-over-year increase was driven by both volume and price. LoopNet revenue was $85 million in the first quarter, a 16% increase year-over-year or an 11% organic growth rate. The year-over-year growth was attributable to an increase in paid listings from our continued focus on selling Silver ads. Other commercial revenue was $56 million in the first quarter of 2026 up 81% compared to the first quarter of 2025. The year-over-year increase is primarily attributable to the inorganic contribution from Matterport which has performed well since the acquisition with subscription revenue growth of 19%.

Residential revenue in 1Q 2026 was $425 million, a 32% increase over last year's first quarter and at the high end of our guidance range. Organic growth for residential in the first quarter was 13%, with double-digit growth contributions from apartments, homes and on the market. Increased volumes for the catalyst for organic growth in the first quarter. Commercial adjusted EBITDA was $161 million in the first quarter of 2026, a 34% margin and above the high end of our guidance range. Similarly, residential adjusted EBITDA was also better than our guidance range, coming in at negative $29 million. CoStar posted positive net income and adjusted EPS of $0.23 per share for the first quarter of 2026, both considerably higher than our guidance.

Our sales headcount at the end of March was 2,019. Homes.com reps make up our largest sales team, consisting of 570 individuals. Apartments.com is the next largest sales force with 520 reps, with CoStar at 475 reps and 225 at the LoopNet team. For Homes.com reps, we are focused on driving productivity and efficiency in 2026. With our other brands, we will be adding reps throughout the remainder of the year given the significant opportunity that still exists across all our brands, and we expect productivity to ramp as our new sales reps mature over the coming years. Our contract renewal rate has held consistently at 89% for the past 7 quarters. Customers who have been subscribers for at least 5 years have an impressive 95% renewal rate. Subscription revenue on annual contracts was 73% of total revenue for the first quarter of 2026 compared to 71% during the fourth quarter of 2025.

As a reminder, Domain does not operate using annual subscriptions. Net new bookings for the first quarter were $67 million, a 20% increase from the first quarter of 2025. In 2025, we completed our first share repurchase program buying back $500 million worth of stock or [ 7.1 ] million shares. We subsequently announced a $1.5 billion buyback program in January of this year. Throughout the first quarter, we repurchased 11.4 million shares for $505 million, the majority of which was purchased through an accelerated share repurchase plan. We expect to repurchase an additional $195 million worth of shares during the remaining 9 months of the year, bringing our total cash outlay for share buybacks in 2026 to $700 million.

For the second quarter of 2026, we expect revenue to range from $922 million to $932 million. This range represents an 18% to 19% increase over the second quarter of 2025 or a 10% organic growth rate at the midpoint. Commercial revenue is expected to grow between 7% and 9% to a range of $479 million to $484 million. We expect residential revenue of $443 million to $448 million, an increase of 32% to 34% year-over-year or 12% to 14% organically. Adjusted EBITDA is expected to range between $160 million and $180 million, representing a margin of 17% to 19% or roughly 700 basis points higher than Q2 2025.

Commercial adjusted EBITDA is expected to be between $160 million and $170 million, a margin of 34% to 35%. Residential adjusted EBITDA is anticipated to be positive in Q2 2026 ranging between breakeven and $10 million. Our adjusted EPS guidance for Q2 2026 calls for a range of $0.27 to $0.30 per share on 409 million weighted average shares outstanding.

For full year 2026, we are reaffirming our previous revenue guidance range of $3.78 billion to $3.82 billion, a 16% to 18% annual growth rate. Commercial revenue remains at a range of $1.955 billion to $1.975 billion, and the residential revenue range remains at $1.825 billion to $1.845 billion. Based on the strength of the first quarter and the expectation of continued personnel expense efficiencies, we now expect adjusted EBITDA to range from $780 million to $820 million. This is an increase of $30 million at its midpoint and a full percentage point increase in margin. Our adjusted EPS range is also accreting for the full year. The accelerated share repurchase program in the first quarter, retired more shares than we had forecast and the previously mentioned expense reduction initiatives are primarily driving our guidance increase to adjusted EPS. Our new adjusted EPS guidance range is $1.32 to $1.39, an increase of $0.09 at the midpoint.

I will now turn the call back over to the operator for questions.

[Operator Instructions] And our first question comes from Ryan Tomasello with KBW.

Two-part question on bookings. First, was the $67 million of net new in line with generally what you're expecting for the quarter? And then second, there seems to be some variation in how we find investors are translating bookings into revenue growth expectations, given our bookings don't underpin 100% of the company's revenue base. So Chris, I was hoping you could walk us through how you think about the appropriate not there around the percentage of bookings driven revenue and how that translates to the level of bookings needed to achieve your low to mid-teens revenue growth targets embedded in your financial framework.

Yes. Thanks, Ryan. So -- Sorry. Thanks, Ryan. So a couple of comments there. First, as you heard from our comments, we reaffirmed our guidance range for revenue and increased our EBITDA guidance so broadly in line with what we're looking for from a net new perspective and from a revenue development perspective.

And your second question is a detailed question. So let me sort of think about it. Let me try to break it down this way. Today, around 15% of our revenue is nonsubscription then that increased as a result of The domain and Matiport acquisition last year. We are currently -- if you look at our guidance, currently expecting revenue to grow around $550 million at the midpoint of our range and around 40% of this increase is from acquisitions or nonsubscription revenue growth. Therefore, the remaining growth is around $330-ish million, which is the revenue driven by net new. So that is what '26 represents. But I think then you're rolling forward to sort of '27, '28 and I think a couple of building blocks there to think about. If you assume the nonsubscription revenue growth is sort of in the low double digits, that results in subscription revenue needing to grow by around $1 billion in total between '27, '28.

I think what's important to note is, during that period, we're expecting meaningful significant growth out of Homes.com meaningfully faster than our other brands with our other subscription businesses also growing in the low double-digit range along with the other group, which is consistent with our historic growth. Remember, timing has a big impact here. Obviously, when these bookings happen and how that rolls into revenue. So I think those are sort of the building products. I also think most importantly, is we are committed to delivering on the adjusted EBITDA targets we set out for 2028 and 2030. And this can occur in a number of ways. We can deliver it through our 15% revenue CAGR, which we're very committed to. We can overachieve our revenue targets and invest in additional growth opportunities, which would continue to promote additional longer-term growth.

Or finally, we can rationalize costs if revenue growth is less than 15%. Importantly, and as Andy mentioned on his call, we are fully committed to our stated Homes.com net investment number. We're well on track to hit that number this year, and we gave you guidance through 2030 and we will hit those numbers. Our primary focus at CoStar today is to drive revenue, to drive EBITDA growth and margin expansion through 2030 and beyond. But I think that Ryan gives you the building blocks to start thinking about your question.

Thank you. Our next question comes from Pete Christiansen with Citi.

Really good script this quarter, guys, a lot of like and appreciate the transparency on a number of fronts. That said, I want to dig into bookings again a little bit here. And particularly, apartments pricing. You showed some really good rooftop growth last quarter, and we know that you're winning back some share there and some of that share has been lower-priced opportunities. But we're also thinking about the competitive dynamic, how that's changed and maybe that's shifted the mix shift on tiering of ads there. Just wondering if you could give us a sense of what has been generally the pricing impact? And maybe how that might be impacting overall bookings production?

I would comment on one thing that I think I commented on last quarter. I would comment on one point that I did comment on last quarter. There -- we picked up a lot of rooftops from Rent.com. So as that whole thing went the way it went, there was an opportunity to do that. That became a primary focus for our sales force to go after those rooftops when they were in transition and they put a lot of effort into that. It's a once in a decade opportunity to try to do a share shift. And the nice thing is we weren't buying those from anyone. We were just winning them in the organic market.

Now those advertisers had been with Apartment Guide, Rent.com through a bankruptcy and through degration of a business over different several years so it tend to lean towards lower ARPU rooftops, often lower rental rates, smaller unit counts, that kind of stuff. That drove our -- that has driven for several quarters, our rooftop revenue, ARPU, whatever, down somewhat. I'm not seeing -- Chris has got a different view on it. I'm not seeing a major shift in levels or depth advertising. The thing that really struck me was these folks coming out of Rent.com or lower end -- very important customers. They just happen to have more budget properties.

Our next question comes from George Tong with Goldman Sachs.

Sticking with Apartments.com, the revenue growth moderated sequentially to 10% year-over-year. What would need to change to drive a reacceleration from here? Or do you think this is the right long-term run rate growth for the platform?

I think the thing that reaccelerates revenue growth is our target continued growth in the sales force to -- we have -- as the revenue gets bigger and bigger, you need to have more sales people to deal with the revenue opportunity. There's clearly plenty of open opportunity out there. We are still relatively early in penetrating the opportunity. I think Homes.com presents an important strategic opportunity that it can grow more traffic. It's already our biggest syndication partner into Apartments.com. It allows us to strengthen our single-family presence there and draw renters in from multiple angles and multiple perspectives.

So I think that I think we can continue to improve on the current growth rate. And I think we still remain significantly competitively advantaged. Do you want to add anything to that, Chris?

No, that's great.

Thank you. Our next question comes from Alexei Gogolev with JPMorgan.

Hi, everyone. Both you and Chris mentioned the sales productivity ramp. So with the headcount additions across the sales organization, what are you seeing in terms of ramp times or quota attainment, maybe some productivity by cohort? And how does that inform your hiring pace for the rest of the year?

It would vary by brand. So I think we're seeing CoStar accelerating productivity per rep. And you know I thought it was interesting to see that the broker sales, tenant sales are up in CoStar. That's generally an indication of improving commercial real estate market conditions and more robust selling opportunities. On Apartments.com as your revenues have grown and you need to keep growing the sales force to match, they're handling even at 99% monthly renewal rate, they're handling a larger absolute cancellation levels so you need to keep growing that sales force and actually grows productivity as you grow the sales force.

On LoopNet, we definitely want to continue to grow that sales force. The asset-based pricing will increase productivity for sure but you have a relatively large base of revenue compared to the size of the sales force. And then -- and again, ROI across all those sales force is very solid. I would say with Homes.com you are still dealing with a very rocky sales force. I mean, it's unprecedented to have that many salespeople with that little tenure, given the fact that we really just launched that group a year or so ago.

I am spending myself a bit of time -- more time now that I've got a little more free time on my hands with our sales force and feel like we're making some good headwind in improving sales force productivity, headway improving sales force productivity. It feels good to be back in there working on sales force productivity, and I see a lot of opportunity to improve sales force productivity with a group like the Homes.com group, we are going to be continuing to grow our sales force in the field because we're seeing higher productivity in the field salespeople than we do in the centralized sales force. We're also seeing high sales productivity with our new homes advertising salespeople at Homes.com and then -- but I am also optimistic that we're going to see productivity improvements with our inside sales team with Homes.com.

So the growth in that group is really field and new home sales where the numbers are pretty good. And then I am working on bringing up the core inside group, and I think we're having some success there.

Andy, the only thing I'd add is that it's important to realize that we really started on this journey to increased our sales force roughly about this time last year. And so there's been pretty significant increases in sales force across all of our brands and they all came in at different times.

For instance, LoopNet recently added a lot of salespeople to get to the number I talked about. And so -- but we do an incredible job tracking the cohorts. We look at their evolution, we track them on a 6-month, 12-month [indiscernible] more cohort basis. So we see the development that we want to see. But it is important to note that really, we started this journey basically about a year ago and they accelerated through last year and we feel good about that productivity and cohort development, but this does take time to get them up to full productivity.

I believe the number for Apartments.com is at year 5, they're twice as productive as they were at the end of year 1. So that is something where they -- it's a -- it is like a multiyear scale up. And some people enter at a really high level. Some people scale up through a couple of years.

Our next question comes from Stephen Sheldon with William Blair.

Just wanted to follow up on the sales kind of capacity and productivity topic. I guess, high level, what has changed, if anything, in terms of where you'll deploy incremental sales resources over the rest of the year and into next? Are there certain areas of strength where either by segment or geography where maybe pushing the pedal more are the output side, are there any areas where productivity isn't progressing the way you'd expect or it could make sense to cut back and or potentially shift into other areas. So I guess from here, where -- what's changed in terms of your plans for incremental sales capacity investments?

Sure. And I hope I gave you a good brain dump of all things we're thinking about there. Again, I'm seeing -- and I'll run through a couple of different parts here. I am seeing really good results with our new home sales people. The folks are going out and dealing with major homebuilders and giving them enhanced exposure on Homes.com. Those folks are very productive. We will grow that at a measured pace because you don't want to slam too many people into a segment at once.

We are seeing -- we are going to invest in adding 50 more folks or so into our field sales for Homes.com because those field sales folks who can actually have one-on-one meeting, show up an open house, show up at brokers, offices are more productive than the people in the inside sales work. We are going to do that in batches of 5 cities at a time. So we might hire up 8 people in Washington, Dallas, 3 other markets stabilize it, have an R&D in each market to the next round, we would likely prioritize our marketing spend, SCM investment around those markets. We're building that field sales team up.

We've always felt that the field sales team through time would be the most productive for Homes.com. And then I'm actually enjoying working a little bit more with the inside sales team, making sure that they've got the right value propositions, improving their pitch. And we believe that we've got the right number, but we want to tighten the pitch, the service and the pricing, frankly, I think the product is currently underpriced. When I look at the -- when I look at the kind of benefit these folks are getting when they get the marketing benefit of Homes.com, we're not charging enough, and we need to be bolder about that pricing because we're delivering enormous value.

On the Apartments.com group, I would like to see our field sales team continue to grow at a measurable pace. The field sales team with Apartments.com is consistently the most productive. And then with loopnet.com, I'd like to see that field sales team keep growing at an incremental measured pace because, again, there their headcount is too close. It is not quite adequate as a ratio relative to their growing revenue base. And I think we've been focusing on the asset-based pricing effectively now, I think that there's a lot of opportunity there. We are growing the Matterport sales team that will again, we're doing that in measured batches of probably 20 at a quarter or something like that. So we're not -- we're holding our productivity up. But it is nice to be back in the game and spending more time on sales than on other things.

Yes. And the matter for common was a great one because it's such a huge opportunity. given the limited sales force we had when we acquired the company. So we've really put in place go-to-market TAM strategies, et cetera, and we're expecting great things out of meta force sales force over the coming years.

Our next question comes from Jeff Meuler with Baird.

Can you just help put the sequential trend in net bookings the last few quarters in context. This is a third straight quarter of sequential decline in the net bookings number. And if you started picking up the pace of hiring a year ago. I would think that productivity would be building over the last year. And I get it Q2 '25 was a good quarter, but this quarter's still quite a bit below what it was in like Q1 of '23 before you launched Homes and when you had a much smaller sales force. So I know you're getting a million questions on sales productivity. I think we're startling to understand it.

Yes. I'm not sure the angle. I understand, obviously, we started putting out the quarterly total bookings we thought it was important for people just to see the trends. Obviously, there's variability. As you said, last year, we had a -- we had a very interesting situation right in the first quarter. It was deemed weak. The second quarter was great. So there's some variability, but I think we feel really good about the opportunity set, the underlying productivity we're seeing out of the sales force and should really start to -- the flywheel should really start in the second half of next year.

And so I think we feel really good about the productivity. I think the hiring was a meaningful amount across our brands, and that creates a little bit of lag effect, but I think we feel good about the direction.

And I think we have the same conversation every first quarter. It's like a Groundhog Day. So our first quarter tends to be a little lighter. Our second quarter is always tends to be our stronger. So when you talk about 3 quarters down, well, the second quarter is our strongest remember, as I mentioned, that [indiscernible]. We entered -- that's a huge bookings opportunity for the residential segment. And we entered that this year with incredibly strong product with Apartments AI, Homes being a major contributor. Our product teams have been pushing aggressively to make sure that we have a bunch of new rental features in Homes.com and we'll enter that in a strong place.

But you're still dealing with, again, you don't have very many folks with more than a year of experience at Homes.com so it's still a relatively junior sales force. It won't be a junior sales force in 2, 3 quarters. It will start to move into post rookie status.

Our next question comes from Curtis Nagle with Bank of America.

Okay. Great. Yes. So just in the press release, you cited some pretty strong numbers in terms of engagement and remember agents coming on for Homes.com right now kind of near term, how is this translating into revenue momentum within the segment. Can you comment on that?

Sure. So I would say the most important thing when you look at translating into revenue momentum is now that we have about a year or so with this -- and we -- I guess, we had 10,000 users in the Q1, Q2 of '25. Now we're up to 35,000. We have a lot more information on how the product is impacting their earnings and the results are phenomenal. So that gives me comfort that we can actually begin to bring the ARPU up pretty materially and that will have growing productivity with that group, and you've got good synergies with Apartments.com and their productivity. So all of that is why we have the confidence that we are building revenue momentum.

Okay. Not to belabor a point, but it's obviously top of mind. Would you be willing to provide bookings guidance for 2Q, just at a minimum so we don't continue to see such a mismatch between internal expectations and investor expectations.

So bookings is a number we've never guided to. There's only, I think, 2 or 3 of you actually put out a bookings number. I think if you look at it back historically, you see variability in quarters last year, Q1 2025 was 18% of bookings for the full year. So you look at these different elements, but we provided booking numbers for Homes.com because we wanted to increase transparency, we wanted people to understand the investment of what's going on. But getting into guidance around bookings is not something we're going to do.

And again, remember, bookings are up 20% quarter-over-quarter.

Year-over-year.

Year-over-year. Year-over-year.

Our next question comes from Surinder Thind with Jefferies.

Andy can you maybe just talk about the decision or the pricing strategy in Homes.com at this point and the idea of raising pricing for new numbers on May 1. Just why not maybe wait a year obviously, the metrics are very supportive of that pricing action, but just maybe to build the user base further? Or help us understand the timing there.

Well, I think we can do both. I think we can grow the user base and capture more of the value. So particularly in the folks who are earning under $250,000 a year, in agents earning other $250,000 a year. There are many, many of those agents. I'm looking at the close rates for the folks who are well trained who have the upper half of Homes.com salespeople and the close rates are extremely high. It feels like they're north of 50%. And once you get to that high close rate, you start to feel that you need to bring the price up.

I just I think that there is room to recognize more value and, at the same time, continue to keep the same growth and possibly accelerate the growth in the number of members. There are a couple of places in looking at the different cohorts of agents and profile of agents. There are a couple of areas limited that will probably bring the pricing down a touch. But in the biggest bulk of cohorts of agents, we're leaving too much on the table. We're providing a lot of value. And I think we can push price and keep headcount growing -- keep a member count growing. And we'll play with it in each of the cohorts to optimize it. But I feel pretty good about that right now.

Our next question comes from Brett Huff with Stephens.

Thanks for the ROI stats on Homes.com. That's super helpful and something we've been focused on. My question is on Matterport, we've been feeling that that's a really big underlying structural kind of piece of the business that's underappreciated. Can you talk a little bit about -- you gave us some great stats on lingering on the site and things like that. Can you -- and so it's clearly just a great enhancer to all of the products that you have. But can you talk balancing that and how you price it and distribute it just to improve the product generally?

And then also talk a little bit about Matterport as a function or a module of data that's going to help you differentiate and remain sort of on the edge of proprietary data because I kind of heard both of those themes, and I'm wondering if there's a pricing given trying to maybe do both of those, how do you think about pricing and distribution of that?

Okay. So in pricing and distribution, I mean, there are a lot of elements there. So in pricing, first of all, if I go from the last question backwards. Part of my thinking around bringing the price up a bit in the Homes.com is a core value proposition there is the Matterports and the exterior 3Ds we build and then the floor plans we build. That delivers a lot of value.

I believe there's -- and you've heard the conversion stats when people have a Matterport, they're getting 30x the views. They're getting [ 54 ] [indiscernible] 54x the tours. So we -- there's a part of the Matterport pricing that's actually embedded in a monthly subscription fee or a monthly advertising fee for either apartments or for land or for LoopNet or for Homes.com. So you could recognize a little bit of pricing value there with Matterport. With domain, it's a little bit different. There, we are using Matterport to get people to upgrade to higher depth level advertising. And so you're getting price appreciation, but you're actually giving them value so effectively, you're selling a Matterport. When you do that, and there's a lot of that going on, and we're getting a very favorable response to that in Australia.

A big change with Matterport is when we acquired Matterport, they were very focused on the mass subscription of low-end accounts using the iPhone as the capture device. We actually feel that the professional user of Matterport, the real estate agent, the leasing company, the architectural engineering construction company, is the biggest part of the market, and they want speed of capture, quality of capture. So we are refocusing folks towards a more aggressive price point on the Matterport Pro3 camera and then a higher SaaS subscription price for regular users. So we're pulling the hardware down and focusing more on the SaaS subscription side and the sort of a razor and razor blade strategy. We are working aggressively on the Matterport Pro4 camera. I know there's an engineering team meeting right now in Mountain View on reviewing the final specs on that.

So there, it's -- you're going to have more SaaS revenue, slightly higher price points, lower hardware revenue. And then the pricing is reflected in across the board in the subscription rates or advertising rates with LoopNet apartments, homes and land. In terms of competitive differentiation, very excited about that. I mean, I described the X-ray function. It doesn't do it justice. The ability to do what our team is -- our brilliant team is doing, which has produced these [ Gausia plates ] that make an exterior model that allows you to see the neighborhood fly around the house. And then as you approach the house, the walls disappear and you move into the house or as you approach that -- as you fly synthetic drone, a virtual drone towards the house the ability to take off the roof and look into the second floor, pull it up and look into the first floor, the ability to do the side-by-side comparisons in AEC. We have a very robust product road map right now that will continue to differentiate.

And so we don't feel that there's anyone really keeping up with our innovation pace or development pace. And the earnings call sounded a little bit like a Matterport earnings call because it sort of came up in every other thing I said. But to the credit of the development team and the leadership team at Matterport, they're leaning into facilitating success in all of our products with that differentiating technology. It's good stuff.

Thank you. I would now like to turn the call back over to Andy Florance for any closing remarks.

Oh my gosh. Well, I'd like to thank everyone for joining us on this first quarter earnings call, and I look forward to reporting our progress in the second quarter earnings call. Thank you very much for joining us.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q4 and year-end 2025 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Hello, and thank you for joining us to discuss the full year and fourth quarter 2025 results of CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our CFO, I'd 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, full year 2026 and beyond. These statements are based on current beliefs and assumptions and forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that could 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 annual report on Form 10-K and quarterly reports on Form 10-Q included under the heading Risk Factors in these filings as well as other filings with the SEC available on the SEC's website.

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, except as required by applicable law. Reconciliation to the most directly comparable GAAP measure or of any non-GAAP financial measure discussed on this call as shown in detail in our press release issued today, along with the definitions of those terms. Press release is available on our website located at costargroup.com under Press Room.

Please refer to the press release on how to access the replay of this call. So remember, it's one question during the Q&A session, so make it a good one. Be good.

And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance.

I think today, we're going to do 2 questions. Nice. Good afternoon, everybody. Revenue for the fourth quarter rose 27% year-over-year to $900 million. That's an increase of $191 million from $709 million of revenue in the fourth quarter of '24. Revenue for '25 was $3.2 billion, up 19% from $2.7 billion in 2024. This is our 59th consecutive quarter of double-digit revenue growth.

Adjusted EBITDA of 2025 was $442 million, up 83% from $241 million in 2024. This result positions us well to achieve our guidance range of $740 million to $800 million full year adjusted EBITDA in 2026.

With the heavy lifting of Homes.com national brand launch behind us, we are entering a phase of significant EBITDA expansion. We delivered our strongest year ever for annualized net new sales bookings in 2025, reaching $308 million, up 23% from 2024. Fourth quarter net new bookings were up 42% year-over-year. We consider CoStar, LoopNet, Real Estate Manager, Ten-X, BizBuySell and elements of Matterport as commercial real estate-related businesses and their operations are connected and related.

These commercial businesses as a group grew 20% year-over-year and generated $471 million of revenue in the fourth quarter of '25. For the full year, the commercial business grew 18% to reach $1.79 billion for the full year of 2025. The U.S. commercial real estate market is showing good recovery from the extraordinary headwinds that experienced in the COVID years. After years of massive negative absorption of office space, it has now turned positive in the past 2 quarters, and -- it's been positive for the past 2 quarters and vacancies are clearly dropping. After the ultra-low COVID vacancy rates, industrial vacancy rates are normalizing.

With the leasing fundamentals stabilizing, commercial sales volumes have climbed 30% year-over-year and in fact, now are above long-term averages. This year economy is shifting from headwind to tailwind.

For our disclosures moving forward, we have combined CoStar with what we've previously referred to as Information Services. Any reference to CoStar now includes our Information Services products. As the CRE economy improves and we continue to expand the product offering, CoStar Group has -- CoStar has generated 7 consecutive quarters of accelerating growth. Net new bookings in Q4 '25 were up 54% year-over-year. CoStar revenues grew 10% year-over-year, generating $325 million in the fourth quarter of '25.

We have grown the CoStar sales team 20% year-over-year to 492 reps and believe that will support further revenue acceleration. We ended 2025 with our NPS at an all-time high of 70, and our quarterly renewal rate rose to 94%. CoStar now has more than 300,000 subscribers up 26% year-over-year in Q4. Total searches in CoStar climbed 14% year-over-year to 422 million.

CoStar Canada is solidly profitable and revenues grew 21% year-over-year. Canadian CoStar is French-English bilingual. CoStar U.K. is solidly profitable, is enjoying a 92% renewal rate and has gained significant competitive share in 2025. A primary U.K. competitor, EG Radius, shut down their operations in December 2025. We have onboarded 166 of their reported 150 clients. So I think we got most of them with 75% of them on 3-year deals. EG Radius has passed between various ownership groups through time, but it descends from Estates Gazette which was the clear major market leader in the U.K. when we entered that market 21 years ago.

We have built out the software and data sets for CoStar France, and expect to release in the second quarter and expect to have similar successes there. We are now well underway in staffing our CoStar research and photography capabilities in Australia with over 50 people already in place. These teams are instrumental in generating a depth of proprietary data and visual assets that's not currently available in Australia.

In just over 6 weeks, we've added thousands of listings, and we expect to release CoStar for Australia in late '26. In a typical year, there are about 1 million new single-family homes and condos built in the U.S. with a combined value of just under $0.5 trillion.

The developers and lenders behind these projects need reliable information on supply absorption, prices, land comps and model mixes because 300-plus developers are feeding us data to market their new homes for sale on Homes.com, we can release a new homes information module in CoStar in the third quarter of '26. With the wealth of residential land valuation analytic information already in CoStar, we can build a very competitive offering.

We expect demand for new homes information is a $200 million to $300 million revenue opportunity for CoStar. In December, we launched our coverage of nearly 4,000 data centers worldwide. For each property, we have data on capacity, redundancy and resilience attributes and how well it fits in the broader build-out of the power grid infrastructure. The product also provides visibility into substation locations, transmission lines, their peak capacity, and retail utility providers.

Our data set includes over 1,600 individual center with sales value exceeding $43 billion and over 29 gigawatts of power capacity, an increasingly AI-centric global economy, our rapidly growing data set will prove an invaluable day-to-day tool for center developers, operators and owners.

As discussed on previous earnings calls, we're developing a rent benchmark product, which we expect to deliver in Q2. Built upon the industry's largest collection of lease deals, CoStar rent benchmark uses AI to extract starting rents, TI allowances, rent concessions, escalations and more from the actual legal leasing document. After abstraction, leases are anonymized and aggregated to deliver the industry's only net effective rent product, allowing the user to understand the true cost of occupancy.

Corporate occupiers, owners and brokers alike will reap tremendous value from being able to tap into the largest source of verified lease information to inform their leasing decisions and more effectively manage their real estate portfolios.

In January 2026, we added more than 110 million residential parcels into our CoStar information product, providing our users with public record information across every parcel in America. For STR, Q4 capped off a record-breaking 2025, delivering the highest net new revenue in the company's history there. 25% of that net new revenue came from owner and management companies. Q4 also marked the completion of a major client migration, ultimately bringing 98,000 new users into the CoStar platform with the STR Benchmark feature serving as their entry point. Q4 was equally pivotal from a product development perspective, culminating in a major release this week.

Yesterday, STR announced the launch of a profitability benchmarking giving hotel owners and operators a fully integrated view of top line and bottom line performance. With this release, CoStar with STR Benchmark, becomes the only hotel benchmarking solution to integrate revenue, expenses, profits and full property life cycle insights into one place.

We have rebranded our lender product to CoStar Debt Solutions to better reflect the breadth of customers we serve, including banks, credit unions, private lenders, insurers, agency lenders and debt funds, CMBS investors and regulators. CoStar Debt Solutions has surpassed $100 million in annual run rate revenue, and we see a clear path to $1 billion plus opportunity as we expand our debt product with benchmarking, loan origination and residential solutions.

We expect to launch debt benchmarking in the second half of this year with loan origination in the first quarter of 2027. Having had a chance to look at some of the features of the debt benchmarking, it's really remarkable, and I think it will be an incredibly strong product.

CoStar Real Estate Manager had an exceptionally strong fourth quarter with net new bookings in the quarter, up 48% year-over-year and up 211% quarter-over-quarter. Revenues now exceed $120 million. We extended our reach into the Fortune 50 in 2025 with a new client win that's our largest initial contract ever for Real Estate Manager.

We also won business from 1 of the top 3 real estate service providers in our industry who will sunset their legacy in-house lease management technology in favor of outsourcing the Real Estate Manager. I'm pleased with the progress we're making on our product road map to consolidate Real Estate Manager, Visual Lease, CoStar and our Transaction Manager into one best-in-class corporate real estate solution. In combination with AI-powered lease abstraction benchmarking, I believe we can take very significant share in this category over the next several years.

LoopNet had an outstanding 2025, generating $312 million in revenue. Q4 '25 was the fastest growth at LoopNet since 2021, ending at 17% year-over-year. All of this was driven by a record in net new sales, which tripled for the full year of '25 compared to '24. We intend to build on these extremely valuable games by rapidly expanding the LoopNet sales team. We ended '25 with 177 sales reps, and we plan to hire 80 more reps in '26, a 43% increase.

Over '22 to '24, LoopNet had over-indexed on depth advertising expense of coverage and to some extent, to the expense of a predictable advertiser ROI. I'm pleased that our focus has changed that 93% of this record net new bookings in 2025 came from silver listings, which tend to have consistent higher renewal rates. Consequently, paid listings increased by 9% in the U.S., 42% in Canada and 156% in the U.K. In fact, LoopNet offers more listings and therefore, more searcher choice now in 90% of the U.S. markets versus last year, including every top 10 market in the U.S.

In addition, our asset price -- our asset-based pricing tests now have thousands of transactions across multiple U.S. markets and the results are in. The strategy of looking price to the value of space being advertised is working. We intend to launch this new pricing model broadly across the U.S. market and expect that it will continue to deliver material incremental growth in 2026. We're building out the first and only global commercial real estate marketplace with LoopNet.

At the beginning of '25, LoopNet was only present in Canada, the U.S. and U.K. During the year, we launched in Spain and France, increasing the number of listings in Europe 4x to over 130,000. In 2026, we will continue expanding LoopNet coverage by launching in Australia and then Germany. As we grow, the network effects of LoopNet are increasing. In 2026, we delivered over 400,000 leads and inquiries and 633 million total listing impressions.

We are investing in Matterport sales force in '26, growing the team from 30 to 90 over the course of the year. This will enable us to expand our customer base to accelerate revenue growth in a wide range of segments, including residential, commercial, architecture, construction, insurance and manufacturing. We eliminated approximately $120 million in cash and equity costs from the business in '25, mostly from duplicative public company costs.

The market-leading Pro3 camera has been the workhorse for our customers for the past few years. It's a wonderful camera. We will make it more accessible going forward for a wide range of customers by introducing a subscription-based pricing model in the future, which is a little bit more of a razor blade model. We're currently hard at work on developing the next-generation camera, the Pro4, which we expect will launch next year.

The very popular Defurnish feature launched last year, which allows customers to remove objects such as furniture and clutter from spaces. We are developing the furnish feature, which uses generative AI to virtually stage or imagine different uses for rooms. One result of this development is that we're gaining better semantic understanding of the space. We glean property data from this process that we can include in our centralized source of truth that could be leveraged across all CoStar products.

As part of Matterport Exteriors, we're developing X-ray functionality that will allow users to remove elements of the building such as the roof or an entire floor to better understand the space in the context of the surroundings. We are integrating these capabilities into a seamless fly-through experience. This high fidelity transition from exterior to interior creates a sophisticated narrative for the property, significantly elevating its market appeal and utility.

BizBuySell generated $36 million revenue in 2025 and growing EBITDA 19% over '24, while delivering a 37% EBITDA margin. More than $143 billion in businesses for sale assets were marked on the platform during the year, including $34 billion in commercial real estate.

We are also steadily expanding the value of the platform through business comp, data and workflow automation. Edge subscription revenue grew 35% in '25 as customers increasingly rely on our benchmarks to price with greater confidence. At the same time, we are introducing features to streamline deal execution through deal accelerator. Adoption of deal accelerator continues to build with 14% of broker members now using the product by year-end, capturing 10,000 qualified buyer profiles.

CoStar Group's residential businesses aggregate consumer demand from homes for rent or sale or apartments from rent or sale and we sell in market -- and sell marketing and leads to the agents owners, landlords, property management companies that need to market these properties to those consumers we aggregate. CoStar's residential business includes Apartments.com, Homes.com, Domain Residential, OnTheMarket and Land.com.

CoStar's Group's residential revenue was $429 million in the fourth quarter of '25, up 35% year-over-year. For the full year 2025, revenue was $1.46 billion, up 20% year-over-year. Our residential business is projected to be profitable in 2026 and we believe that it will eventually reach 50% margins. Apartments.com generated $308 million of revenue in the fourth quarter for an 11% increase year-over-year. Full year '25 revenue was $1.25 billion.

Apartments.com delivered 841 million renter visits during the year and those renters took 152 million Matterport 3D tours. They viewed over 16 billion photos, drove 16 million clicks directly to our customer community websites, and they submitted over 1 million applications directly from Apartments.com, 1 million applications. That's good. Apartment owners and managers realize that Apartments.com is the #1 site recognized by apartment seekers with our 67% brand awareness in December, up 4 points from Q3 '25, while in contrast, the second rental competitor fell 5 points to 36%.

We were thus able to accelerate our paying property count significantly in '25 by adding almost 14,000 properties to our network to end the year at 89,275 properties. That's the largest number of properties we've ever added in a year. We won many of these new properties from Rent.com after Redfin "sold those clients to Zillow." We estimate that Redfin had about 4,500 apartment properties, marketing on their platform that were not already on Apartments.com. We signed approximately 1,200 of them to apartments at just over about $1,000 a month, and we didn't have to acquire anything or end up with a legal thing.

This increase in properties, coupled with our 99% monthly renewal rate and 92 NPS confirms that property owners and managers understand the value of the Apartments.com site built specifically for the apartment industry. This is further reinforced by our #1 ranking 82% of the time for the core 10,000 multifamily SEO keywords and the most comprehensive SEM program in the industry.

In 2025, our marketing campaign delivered over 12 billion media impressions, reaching 90% of U.S. households. As you saw in our Super Bowl ad, we've begun to co-brand apartments with Homes.com, a place to find a place. The campaign featuring Jeff Goldblum and Heidi Gardner, who have excellent chemistry together kicked off with the Super Bowl, which had a total audience of 125 million and the highest peak viewership in U.S. media history.

According to comScore, visits to Apartments.com network were up 14% year-over-year in January. Our growth is in contrast with comScore's data that showed that Zillow's rental traffic was down 48% year-over-year, and Zillow's partner Redfin rentals was down 46% year-over-year. Zillow's expanded rental network, Zillow Realtor Redfin was down 29% year-over-year in January. Zillow's rental revenue fell sequentially in the fourth quarter compared to the third quarter as the rental traffic was falling.

With traffic falling, our closest competitor is now doing something called shotgunning leads. That's encouraging potential renters to contact not just the person you intend to contact but all the competitors' properties. And while this increases and distorts the number of pure leads, it significantly lowers the quality of the leads and therefore, hurts ROI and lead to lease conversion rate. Poor leads create more work for the apartment community as they sort through these leads to ultimately produce less leases. This behavior by our closest competitor, their drop in brand awareness, coupled with our traffic having declines and in site year-over-year every single month in '25 according to comScore, makes us feel that our position within the multifamily industry is very solid.

We currently have the largest and most active sales force in the industry. We had over 100 field and mid-market sales reps in '25 and ended the year with 522 total sales reps. These reps conducted 750,000 quality meetings in '25 with over 350,000 of them in person.

Our newer sales reps will continue to contribute more as our experience has been that the reps that have been with us for a year, add more net new revenue for us each year of experience they gain until those reps with 5 years of experience are contributing 2 to 3x what they did in year 1. We will continue to grow this sales team in '26 as the opportunity in front of us is indeed massive.

We still have approximately 460,000 prospects, 5 units or larger and 22 million prospects under 5 units to sell to with a total TAM of $10 billion. Apartment owners and managers need us now more than ever. They're operating in a macro environment with overall vacancy rates still rising in the fourth quarter to 8.5%, while vacancy in 4- or 5-star buildings were close to 12% and new supply, while lower in '24 -- than in '24 continued to exceed demand. The use of concessions continues to climb. In January, we saw almost half of all apartment buildings offering some type of concession, and that's up from 13% a year earlier.

In just 2 years, Homes.com has become the fastest-growing residential portal in the U.S. In '25, the Homes.com network had over 2.1 billion views and 100 million average monthly unique visitors to the network. Our January '26 organic traffic increased 134% year-over-year and 21% month-over-month hitting an all-time high. We feel we have achieved a good balance between SEM, SEO and direct traffic. This allows us to optimize SEM for quality traffic and leads, not just pure quantity.

Average session duration rose from 3 minutes and 36 seconds in January '25 to 4 minutes 33 seconds in January '26. Our page sessions rose from 3.4 to 6.9 in the same year-over-year time period. Our bounce rate fell from 63% in January '25 to 41% in January '26. Lead volume rose 48% from January '25 to January '26. Member lead volume rose 187% from January '25 to January '26. Rental lead volume rose 54% from January '25 to January '26.

Homes.com subscribers paid to promote 216,000 active listings, representing 9.4% of 2.3 million homes for sale in the U.S. in Q4 '25. We now have over 31,000 agent subscribers generating $100 million in annualized revenue run rate with 76% of them on annual contracts. For CoStar, this group -- this is the fastest organic revenue build we've ever had for a new product, and we've achieved this revenue level faster than our U.S. competitors, years faster. We have built a dedicated sales force of 600 sales reps to reach the top 750,000 agents in the business.

We've achieved and climbed to an excellent NPS score of 42 in less than 2 years and it's still improving. Our Your Listing, Your Lead principle and our Market the Home and Win More listings model is now clearly resonating with agents. Homes.com is the only real estate portal in the United States whose core business model is to use the power of the Internet to help real estate agents market their listings to potential homebuyers.

The Homes.com business model is the global best practice for real estate portals, and it's utilized by REA Group, idealista, Rightmove, Scout24, Hemnet, Domain and many, many others. If you normalize these portals financials from their home countries to the U.S. on a GDP basis, they would be generating $4 billion to $21 billion in revenue in the U.S. and $1.5 billion to $11 billion of EBITDA in the U.S. which is orders of magnitude more than anyone's ever that generated in the United States.

We believe we can generate $4.75 billion of revenue and $2.85 billion of EBITDA with Homes.com inside the next 13 years. Apartments.com has a very similar business model to Homes.com and grew revenue initially at a measured pace, but now over 13 years has reached $1.2 billion of revenue run rate with very high margins. The growth of apartments and homes looks very similar at this point.

Apartment real estate in the U.S. is worth $6 trillion, while single-family homes and condos are worth almost 10x as much at $56 trillion, so $6 trillion for apartments, $56 trillion for homes. In that context, it's very credible to believe that Homes.com can generate $5 billion of revenue over the next dedicate or so. Homes has a clear empirical potential for a very high IRR similar to high IRRs ranging from 17% to 53%, we've generated on our other major investments like CoStar Apartments, LoopNet Real Estate Manager, Land, BizBuySell and STR.

We have a clear path to accelerate top line growth and drive profitability. Thus, we've reduced our net investment in Homes.com by $300 million in '26 over '25 and continued -- to continue reducing the investment each year with discipline until we reach run rate profitability in '29 and full year profitability in 2030.

Competing U.S. real estate portals suffer from a lack of profitability and low growth, not because there's MLS in the U.S. but because they have chosen an inferior business model. In contrast to Homes.com our U.S. competitors primary business model is to sell lower value buyer agency leads to a much smaller audience rather than marketing the valuable homes. Selling buyer agency leads became their primary business model when their iBuying businesses -- iBuying business models failed spectacularly.

Last week, we launched the game-changing Homes AI, which we believe is the best-in-class and first fully integrated proprietary vertical real estate application built upon the best strengths of the leading LLMs. One of the unique aspects of this product is that the UX is completely aware of the AI, and the AI is completely aware of the UI and they work together seamlessly and beautifully. We strongly believe Homes AI will drive higher engagement, support significant growth in organic traffic and contribute to a meaningful increase in agent subscriptions.

Homes AI is either conversational or text interface with a highly artificial -- with a highly intelligent artificial intelligence real estate expert that guides the homebuyer through the search exploration, comparison of homes, communities and valuations. Homes AI is like having a conversation with a knowledgeable real estate adviser who knows everything about all the properties rather than spending your time doom scrolling through a static website searching with filters. It's the perfect example of extraordinary discontinuous innovation.

The most common reaction we get from people who see it for the first time is, wow, a Homes.com member named Kim Owen said, that's amazing. "I'm just fabricated." I think this is probably the one of the best investments we've ever made. [ Stephanie Collinauf ], another Homes.com member said "freaking amazing. Seriously, thank you. I love it. I could totally see my clients chosing on this, and I think it's great for us as well. Like it's really easier than searching MLS seriously. It's really terrific." Yet another Homes.com member, [ Susan Rare ] gushed, "you have just absolutely floored me. I cannot believe this. I mean truly, this is -- what? What did you call it? Homes AI."

In the first week post release, Homes AI is having a huge impact on user engagement. Site visitors that hit the AI mode are on the site for 16 minutes, 50 seconds as opposed to 4 minutes, 24 seconds for nonusers. AI users do nearly 4x as many searches, favorite 7x as many properties, look at 4x as many properties and submit 7x as many e-mail leads. This transformative home search experience is powered by Microsoft Azure OpenAI advanced AI models, integrated with several other large and small models including some models from AWS as well as our own proprietary AI model.

Using multiple models gives us tremendous flexibility and keeps token costs down. Using dynamic example injection queries that originally consumed 2,000 tokens have been optimized to just 20 tokens. Unlike other AI implementations, Homes AI data remains entirely within the Homes.com proprietary ecosystem and is never used to train or find external AI models, giving us a real advantage as we build out the best-in-class real estate AI.

While we're launching the capability of Homes.com we plan to deploy it to Apartments.com, CoStar LoopNet, Land, BizBuySell as soon as possible. I believe that our deployment of this advanced AI software will result in substantial competitive advantage for CoStar Group for years to come. Homes.com is already and will become an even more important strategic part of Apartments.com's strategic success.

While the Apartments.com brand is optimized to institutional rentals, Homes.com is optimized to single-family home and rental condos. With tens of millions of single-family rentals in the U.S., we believe that it represents at least half of the rental market in the U.S., and it's a $5 billion TAM. Homes.com is our essential gateway to reach the single-family rental market. In addition, just over half of all renters begin their home shopping journey open to renting or buying.

Apartments.com needs Homes.com in order to bring those considering buying into the top of the rental funnel on one of our platforms. Our Homes.com's rentals traffic, which grew 25% year-over-year, is robust and important and Homes.com is second only to Apartments.com as the top rentals traffic contributed to our network of 10 rental brands. In Q4 '25, Homes.com rentals traffic already accounted for 10% of the apartments network traffic, and we anticipate that it will grow very significantly.

Our residential business achieved a record of 642,000 paid single-family rental listings in '25, up 49% over the prior year. 400,000 new independent owners used our rental tools in '25, we made the processing of over $5.5 billion in rents faster, allowing independent owners to receive 60% of their rent payments faster through Express Pay. In '26, we will complete the process of offering all of the tools for the individual owner trying to manage rentals that you find on Apartments.com, it will be available on Homes.com allowing those owners to rent their house, condo, townhouse on either platform.

We began selling enhanced exposure on Homes.com to new homebuilders in August of '25. In Q3, we delivered 524,000 annualized net new bookings for new construction. In Q4, we generated $1.2 million in annualized net new bookings a 125% quarter-over-quarter increase. In just 4 months, this resulted in a total of $1.7 million in annualized net new bookings. Our domain residential platform in Australia. In Q4, our residential marketplace domain had revenue of USD 73 million, which was well ahead of our expectations.

Domain residential marketplace is profitable, delivering approximately 28% margins in '25. Domain will become a part of Homes.com within a year to 18 months. In the fourth quarter, we had exceptional audience momentum resulting in Domain's strongest audience quarter on record with an average of 8 million monthly unique audience. In October, Domain delivered a record residential audience of 9 million, up from 6.6 million in July, the month prior to our acquisition.

Domain added 6x more audience volume than its nearest competitor in Q4 '25 compared to Q3 '25. We did this through strategic increases in marketing investment, improved media mix and leveraging Homes.com technology capabilities to deliver improvements in product speed, latency and user experience. These results highlight our ability to realize global synergies that deliver a competitive advantage. As our audience grew, quality remains a key advantage, inquiry volumes grew 21% year-over-year.

Last week, we announced the planned divestment of a number of noncore nonstrategic products at Domain so that we can sharpen our focus on the marketplace core businesses, which operate at excellent margin. This will temporarily eliminate some revenue but will have a positive impact on profitability and will allow the business to be more strongly focused on the key opportunities we see in commercial and residential in Australia.

We are actively working on integrating the Domain residential platform into Homes.com and the Homes AI software platform. Doing so is essential to improving margins by limiting duplicative development efforts and creating a cost-efficient competitive edge in Australia.

In U.K., we had an excellent year on the market. We ended '25 with our 20th consecutive month of positive net new bookings. We now have about the same number of listings as the #2 player in the United Kingdom, and we have new -- more new home listings than the #1 player, continuing to gain share there.

We have achieved huge growth since our acquisition 2 years ago, growing sales leads by 94%, properties on site by 47%, increasing brand awareness by 54% and increasing time on site by 77%. Importing best practices from Homes.com on the market has dramatically improved the consumer experience with list and map view along with rich map layers, property alerts that become our largest source of leads.

We plan to integrate OnTheMarket into Homes.com software platform environment in '27 after we've completed migrating domain into Homes.com.

Our land business maximizes listings and brand exposure for American's top farm and lifestyle ranch brokerages. This is a $4.4 trillion asset class, and they're essentially homes. In '25, we had almost 9,000 member agents promoting 144,000 listings. Our addition to more agricultural-focused AcreValue strengthened our offering with aggregated nationwide farmland data such as soil surveys, flood hazards, crop productivity and sales.

This powers Farmer Mac's Farmland Price Index and has created powerful automated valuation tools for use by lenders. CoStar Group is emerging as a clear winner in the artificial intelligence era. We're positioned to take transformative share with the advantage Homes AI gives us. We are using AI to cut significant costs and improve our product offerings and quality. We're launching new transformative products that would not have been feasible without our AI innovation.

Finally, LLMs do not create information from thin air. Effective LLMs require massive amounts of accurate, accessible data, and no one has more proprietary real estate information than CoStar Group. CoStar information products are protected by strong authentication. We've accumulated over 2.4 trillion fields of data. Only about 25% of our data is available on CoStar Group marketing portals. That means that the CoStar Group information content is not available to LLM AI crawlers. LLMs do not have the rights and cannot display CSGP imagery, including Matterport photos and videos.

Over 35 years, we've collected nearly 700,000 Matterports and billions of proprietary images. The agentic tagging of our photographs creates hundreds of billions of new searchable, displayable and model-ready data fields. We have massive proprietary information on 150 million properties. We receive direct leads of information from our clients that don't appear on the open Internet. Over 94,000 hotels provide us confidential performance data. More than 500 financial institutions provide us with detailed confidential loan data.

Over 2,000 corporations, including half of the Fortune 500 provide us with millions of confidential lease documents. Hundreds of thousands of real estate brokers -- brokerages feed us millions of listings digitally, many of which do not appear on the open Internet. 280 homebuilders -- it's actually 300 homebuilders feed us details digitally on their communities and nearly 85,000 apartment managers give us direct digital access to extensive details about their properties.

While there's a lot of accessible real estate data open to LLM crawlers, only CoStar has the massive, very difficult to replicate volumes of high-quality system of record proprietary real estate data. We believe that we will be competitively advantaged in building the most transformative AI-powered real estate solutions.

So let me close with this. The results in the plan you heard today reflect what CoStar has always done, build durable platforms on proprietary data, run them with discipline and compound long-term shareholder value. We've strengthened our governance and capital allocation oversight, and we're matching strategy with clear financial priorities, profitable growth, expanding adjusted EBITDA and returns of capital.

We're scaling Homes.com because it strengthens our entire real estate ecosystem globally and the completeness of our data. And we're doing it with a clear investment glide path. And on AI, we're not conceiving the future. We're productizing our proprietary information with experiences like you see in Homes AI, while driving efficiency across the company. So thank you for your trust and partnership.

And I'll turn the call over to Mr. Chris Lown, our CFO.

Thank you, Andy. For the full year of 2025, revenue was $3.2 billion, a 19% year-over-year increase over 2024. This was ahead of consensus and above the high end of our full year revenue guidance range. Our revenue outperformance primarily came from higher-than-expected contributions from CoStar, Matterport and Domain. Full year adjusted EBITDA in 2025 also came in above expectations at $442 million, posting a 14% adjusted EBITDA margin.

This also exceeded consensus in the high end of our guidance range. The combination of our revenue beat and lower-than-anticipated personnel costs drove the adjusted EBITDA beat for the year. As Andy mentioned in his remarks, we have revised our reporting segments into a Commercial segment and a Residential segment. The new presentation aligns with how we view and manage the business, and we believe it provides shareholders with the best understanding and representation of our financial performance.

On this call, I will address our results under both our historical and new disclosure methodologies. Going forward, I will discuss business performance and expectations using our new segment and disaggregated revenue disclosures. Revenue from our Commercial segment totaled $1.79 billion, an 18% year-over-year increase from $1.52 billion in 2024. Our Commercial segment is comprised of what we previously disclosed to CoStar -- previously disclosed as CoStar and LoopNet, which also includes Domain's Commercial Marketplace, Information Services, Ten-X, BizBuySell and Matterport. Ten-X, BizBuySell and Matterport were previously included in other revenue.

The 2025 acquisitions of Matterport and Domain contributed around 10 percentage points of this 18% revenue growth. Revenue from our Residential segment totaled $1.46 billion, a 20% increase year-over-year with an organic growth rate of 12%. The Residential segment includes Apartments.com, Homes.com, OnTheMarket, Land.com and the residential revenue from Domain.

Here's a breakdown of our revenue by product that is consistent with our prior guidance. Apartments.com revenue grew 11% for both the fourth quarter and full year of 2025, in line with our expectations. We continue to see significant opportunity across all the Apartments.com TAMs and saw a year-over-year rooftop growth of 18% to 89,275 at year-end 2025. We continue to invest in Apartments.com and expect to add an additional 50 salespeople in 2026 after adding nearly 100 in 2025.

Residential revenue was $108 million in the fourth quarter and $218 million for the full year of 2025, above the high end of our guidance estimate. As a reminder, this revenue grouping included Homes, OnTheMarket and Domain Residential. Revenue in 2025 included a $95 million contribution from Domain's residential revenue with Homes.com delivering an impressive 63% year-over-year growth rate.

CoStar revenue grew 9% for the fourth quarter and 7% for the full year of 2025. This was at the high end of our guidance and a fantastic result as we are emerging from the worst commercial real estate crisis in recent memory. CoStar rep productivity increased every quarter in 2025 as this team delivered its highest sales year since 2022. At 94%, CoStar also saw its highest renewal rate since Q4 2022 with CoStar Debt Solutions and STR posting strong year-over-year growth.

We are extremely excited about CoStar's pending product launches as we look to expand CoStar Debt Solutions capabilities into origination workflow solutions, expand STR's financial reporting modules and launch the groundbreaking lease benchmarking product.

LoopNet revenue increased 17% in the fourth quarter and 11% for the full year of 2025, also at the high end of our guidance. Excluding the impact from the acquired Domain Commercial Marketplace revenue, LoopNet grew 11% for the quarter and 9% for the year. LoopNet delivered its highest ever sales year in 2025, and we expect to continue that momentum throughout 2026 as we create the only pan-European CRE market solution and launch LoopNet in Australia.

Revenue from Information Services increased 15% for the fourth quarter and 19% for 2025, in line with our guidance. We are excited about the combination of Visual Lease and Real Estate Manager as we drive synergies across the combined platform, launch new products in 2026 and integrate these businesses into CoStar's unified tech platform, combining market data and analytics with applications for occupiers of real estate.

Importantly, AI will feature prominently as we use it to extract rents, lease terms and other data from leases to create benchmark solutions, and we will also provide this functionality to our customers for automated lease abstraction and audit purposes. As you can see in the disaggregated revenue tables in the earnings release, the Information Services revenue has now been incorporated into CoStar revenue as we migrate these businesses into the CoStar platform as we successfully did with STR.

Other revenue was $75 million for the fourth quarter and $272 million for the full year of 2025, above the high end of our guidance. This positive result reflects better-than-expected performance from Matterport, camera sales and capture services revenue. Company-wide, we delivered $7 million of net income in 2025, which is $25 million above the high end of our guidance range.

Our full year adjusted EBITDA of $442 million also exceeded the high end of our guidance by $17 million. Our sales force at year-end was 2,175 people, which increased by nearly 800 in 2025, including the addition of 185 reps from our 2025 acquisitions. The majority of the increase was concentrated in our Homes.com residential business, which increased by more than 400 reps in the year. We expect to continue growing most of our sales forces in 2026 with a particular emphasis on growing the LoopNet and Matterport teams.

Our contract renewal rate was 89% in the fourth quarter of 2025, and customers who have been subscribers for 5 years or longer have a 95% renewal rate. Subscription revenue on annual contracts was 71% for the fourth quarter of 2025. Domain does not operate using annual subscriptions, which has reduced this metric by 7 percentage points. Our other brands have remained relatively consistent with their subscription metrics.

For full year 2025, we delivered $308 million of net new bookings, a record for CoStar and 23% higher than 2024. Net new bookings for the fourth quarter were $75 million, a 42% year-over-year increase. During 2025, we completed our $500 million share buyback program announced in February 2025 and repurchased 7.1 million shares. We also recently announced that our Board has authorized a new $1.5 billion share repurchase program. We expect to repurchase a total of $700 million worth of shares in 2026 and plan to execute an accelerated share repurchase this quarter to repurchase $500 million worth of shares, followed by $200 million of open market repurchases throughout the rest of 2026.

For 2026, we are affirming the guidance we provided on January 7. Specifically, we expect revenue of $3.78 billion to $3.82 billion, implying an annual growth rate of 16% to 18%. First quarter 2026 revenue is expected to range from $890 million to $900 million, representing an increase of 22% to 23% year-over-year at the midpoint. We are also affirming our 2026 full year adjusted EBITDA guidance range of $740 million to $800 million, reflecting an adjusted EBITDA margin of 20% to 21%.

First quarter 2026 adjusted EBITDA is expected to range from $95 million to $115 million. Our adjusted EBITDA margins are expected to increase by roughly 5 percentage points each quarter throughout 2026. I want to say that again. Our adjusted EBITDA margins are expected to increase by roughly 5 percentage points each quarter throughout 2026. This margin expansion during the year reflects the timing of our marketing campaigns, which are heavily weighted to the first half of the year as well as the seasonality of revenue from Domain.

As an aside, I would suggest you review 2024 and 2025 quarterly adjusted EBITDA numbers and margins, where you will see a similar seasonality pattern of rising margins throughout the year. For additional context on first quarter guidance, our marketing expenses tend to be the highest in the first and second quarters of the year and 2026 should follow that same pattern. Events such as the Super Bowl, Winter Olympics and the successful launch of Homes AI drive spend earlier in 2026.

Additionally, Domain revenue is seasonally lower in the first quarter as Domain comes off its high selling season. As a point of reference, based on current exchange rates, revenue for Domain has dropped an average of USD 14 million sequentially from Q4 to Q1 over the past 2 years. Broken down by segment, we expect commercial revenue in 2026 of $1.955 billion to $1.975 billion, a 10% increase at its midpoint from 2025's revenue of $1.79 billion. For the first quarter, we expect commercial revenue of $470 million to $475 million, an increase of 16% at the midpoint from Q1 2025.

Residential revenue is expected to range from $1.825 billion to $1.845 billion in 2026, a 26% increase year-over-year at the midpoint of the range. First quarter residential revenue is expected to range from $420 million to $425 million, an increase of 31% year-over-year at the midpoint of the range. We expect adjusted EBITDA margins for 2026 of 33% to 34% as we make a number of significant investments in the Commercial segment to drive future growth. These investments include building CoStar Australia and expanding in Europe, CoStar Debt Solutions origination workflow modules, the integration of Real Estate Manager and Visual Lease into CoStar, the revolutionary lease benchmarking product, a new homes information product, STR profitability modules, AI across our businesses, new Matterport technology and additional salespeople.

For the Residential segment, we expect adjusted EBITDA margins of 5% to 7%. Our level of CapEx is expected to range from $175 million to $225 million in 2026 as we complete the build-out of our Richmond campus, which should be finished in the second quarter. In summary, I'm extremely proud of our 2025 results delivered during a year complicated by high interest rates, inflation and economic volatility. We remain focused on delivering on our strategic investments in the commercial and residential markets for our shareholders while producing record profit levels in our established businesses as we drive revenue and margin expansion in the coming years.

I'll now turn the call back over to the operator for questions.

[Operator Instructions] And our first question comes from Stephen Sheldon with William Blair.

I think the 4Q bookings were a touch lighter than some had been expecting. So can you maybe talk some about the puts and takes in the quarter by business? And then secondarily, it sounds like you're planning to continue growing sales headcount. So I just wanted to ask what you're seeing in the productivity ramp for those added in 2025 and whether that ramp has looked any different than what you've seen historically for added sales headcount?

So I'll answer the second part of the question first, and I'll let Chris answer the first part. So in terms of sales ramp, we obviously are growing the sales force dramatically. And when you first bring people on, as we've done, as we brought a lot of people on in 2025, they're not at maximum productivity.

So they're in line with what we've historically seen. But I think I commented during the call that they become 2 to 3x more productive in the fifth year than they were in the first year. So we manage them closely on a 9 box and make sure they're on trajectory, but we're seeing good initial results, but it is a large addition of salespeople.

Yes. And with regard to your first question, I'd point you into the investor deck, which we put on our website. Our Q4 net new was the second highest Q4 in our company's history. I repeat, it was the second highest Q4 in history, and I go back and look at it. So we feel great about our outcome. And as far as puts and takes, I think that the number speaks for itself.

Our next question comes from Ryan Tomasello with KBW.

Just following up on Apartments.com. If you can just help us understand how you're thinking about the growth for that business this year. And then with respect to the other half of residential with Homes.com, obviously, there's been a lot of upheaval lately in the industry regarding the role of the MLS and listing ownership. So just curious, maybe how you're thinking about managing the home strategy around that fluid evolution of the industry and what opportunities that might unlock.

So the -- I guess there's 2 parts to that question. I'll handle the second part as usual. The -- yes, there is upheaval and there is some instabilities. I believe that the CEO of the largest brokerage firm made some statements to his staff in an all-hands call talking about the fact that if his agents did not want to belong to the major association, they wouldn't have to within 2 years.

I think that reflects dissatisfaction with the industry with having their listings go into a system that then syndicates them out to real estate portals that divert the leads from their own listings to their competitors, and that's not in the interest of the homeowner. It's not in the interest of the listing agent. It's not even in the interest of the buyer. So I believe that, that instability does create opportunities for a platform that is resonant with the brokerages, the agents and the home seller. So it's difficult to see exactly how that will break, but I believe that would break in our favor.

Yes. And on your first question, I would just point you to the guidance we gave on the residential side. We feel -- you heard the stats that Andy talked about. We feel great about our position in Apartments.com and just point to the guidance we gave on the Residential segment.

Our next question comes from Brett Huff with Stephens.

Two quick questions for me. Can you talk again about the commercial EBITDA guidance? You all kind of articulated some of the things you're investing in. There was a long list, but I wonder if you could sort of give us the top few maybe that seem the biggest priority. And then the other question I had was, Andy, you mentioned some reductions in Matterport, and I didn't get the number, but it sounded like a large number. And can you just talk a little bit about that for us?

Sure. So again, answering the second part of the question first and then try the first question, Scott. I'm sorry, not Scott. We have a new CFO. He's only been here for 2 or 3 years, Chris, I'm sorry, Chris. Can you forgive me.

So yes, so in -- after we merged with Matterport, we eliminated a number of duplicative public company costs generally in the C-suite, and it was about $120 million of executive comp, both in cash and equity, some HR finance-related duplicative areas and made great progress towards improving the profitability of Matterport. And then we're focused on growing revenue at Matterport through adding salespeople and reaching more of our potential market. So yes, it's about $120 million duplicative public company costs.

Yes. And on the commercial adjusted EBITDA margin, I want to make sure also people remember the Commercial segment does not have Apartments.com and that's obviously in the Residential segment. But then if we look at the primary investments that we're making in 2026, we have a de novo build to CoStar Australia. Obviously, we have the software and the technology. So we just have to fill in the data and information, and that team is well on its way and they're very excited. So that's a great result.

But again, there's 200-ish-plus people that we sent -- that we hired down there to help us drive that information. In addition, we're expanding further in Europe. So that's an ongoing effort. Obviously, the business has been very successful, as Andy mentioned, in Canada and the U.K. We look forward to getting to those same success levels in Spain and France and Germany, et cetera, and Australia.

As I mentioned, we're building out an origination workflow module for CoStar Debt Solutions. This has actually been driven by our clients who said, if you could give us workflows for originations, we'd love to tie it all together, and that creates a huge amount of proprietary data and information, which we're excited about. So we're moving aggressively on that.

We also talked about integrating Real Estate Manager and Visual Lease into CoStar. So just so people fully understand, we are -- just like we did with STR, we're actually taking Real Estate Manager and Visual Lease, rewriting all the code into CoStar as we do with everything, creating a brand-new better platform embedded within CoStar, which also will have all the data and information around it. So that will be a fantastic and revolutionary capability.

Alongside that will be the lease benchmarking product. That will be a first-time product that has never existed before. So we're investing on that. We have a new homes information product that we've launched and is already generating revenue, which is fantastic. We actually just launched, I believe, STR profitability modules. So that just -- those just came out, and that gives our customers an ability to understand their profitability on a gross profit basis, not on a per unit basis.

So they're excited about that. As you've seen, we launched Homes AI very successfully, and it's been a great couple of weeks. We are going to take that capability across all our businesses, first in Apartments.com, but then quickly across all other businesses. So that is really exciting for us. Our Matterport team, is the long ones, and it's all getting done. Our Matterport team is really excited about building a new camera. So there's work going on around building the new camera plus enhancing the technology they have.

Andy talked about the furnish function, which is a real technology feed when they get it done, but also building a new camera, which is faster, better, et cetera. And finally, additional salespeople. So as you see, a meaningful amount of investment going into our commercial business, all great opportunities to grow revenue, to grow TAM, to grow margins. And so -- but that inevitably will have a minor impact in 2026.

Clearly, paying attention to and investing in the core.

Our next question comes from Pete Christiansen with Citi.

Andy, sorry, another AI disruption question. This time, a little bit more second order, the CRE broker space has kind of been under fire lately for concerns on disruption there. And I guess if we were to think if the CRE broker space were to see a reduction, do you think CoStar would have the ability to change its pricing around? Do you see this as a potential disruption to the CoStar Suite business?

Sure. I have, gosh, spent 40 years working with commercial real estate brokers. And I think that it is missing some of the personal relationship sales nature of a commercial real estate broker. And so these are really relationship people. And so I'm somewhat puzzled at the level of AI fear in that sector. For sure, there are high volumes of people in some of those commercial real estate service companies, which will -- who will be disintermediated by AI, but they're not the revenue driver relationship people. I don't think they're going to go anywhere. And those are the core audience for our CoStar product.

The 500 people building models in the background, they may disappear, but they're typically not our -- the property managers doing accounting and all the stuff, they're typically not the people buying seats. If I think that there is the ability to retain comparable prices with seat reduction, we've done that in the past successfully during downturns. So certainly, over the last 5 years, you saw a significant reduction in the number of people doing commercial real estate, yet we continue to grow revenues. So I do think that there's resilience there. And then remember that brokers only represent at this point, about 30%, 33% of our revenue. The majority of our revenue is banks and owners and institutions and CMBSs and government agencies, many of whom are not on a seat license basis.

Well, I'd also add to that, all the investment we're making is actually more geared towards those exact customers. And so we should expect to continue to see that percentage decrease as those investments bear fruit.

But who will tomorrow's AI fear be?

Our next question comes from Curtis Nagle with Bank of America.

Chris, maybe just one for you. I wanted to follow up just I guess trying to gather EBITDA guide for commercial, I think a slight decline on a dollar basis at the midpoint. Talk about some of the investments. I think the other thing, though, we'd love to get some help with this, I guess, could you disaggregate how much of that is due to the replatforming of shared costs right from Homes.com over the past few years? I think some of that's going back to commercial. Any commentary there to kind of help bridge that would be helpful or anything else might have missed?

Yes. No, it's a great question. So obviously, again, first thing, and again, we're sort of apples to oranges a little bit about the old commercial. There was -- taking out apartments. Apartments was a very attractive margin business, that's a; b, we brought into this business inorganic companies in Matterport and Domain, and those have an impact on that margin, which we expect will grow back after we get through '26, but then is first -- in their first full year will have an impact. From an organic perspective -- margin perspective, when we look at this, the margin is roughly similar as with '25. Even with all this investment, it's roughly flat. And so what you really see is a little bit more of the inorganic side having the biggest impact on that margin in that period of time.

Our next question comes from Andrew Boone with Citizens.

Andy, I'd love to hear about early results from Homes AI. Can you help connect this, though, in terms of the model? Like what are you expecting in terms of retention or driving more traffic? How do you do that within the context of marketing spend in a newer product where you have to drive awareness?

Okay. So in terms of marketing spend, we're shifting from top-of-funnel brand awareness to much more specific product feature marketing. Over the next week or 2, you'll see all that shifting to product functionality. The product functionality is so remarkable and so compelling that we want to basically simplify the marketing and highlight what it actually does because when people see it and use it, it's compelling.

We are shifting some of our marketing budget closer to lower funnel, things like SEM just because at this point, with the number of clients we've got, we want to deliver lead results. And you're seeing that with 187% year-over-year lead growth with members subscribe -- Homes members. The biggest impact here is engagement. As I mentioned, the engagement with the product goes up 4 to 7x when you're using the Homes AI interface. I believe that it's going to be something that a year from now, people are not going to be able to imagine the old way of interfacing with the website.

It shifts a lot more time and attention in the search process from offline to online. And it has dramatic appeal even when you're out physically in the market. So when you're driving around and you can ask questions about the neighborhood and like are there any houses that are sold right around here and where are they? And the phone actually guides you to and you can drive over or I was talking to a commercial -- a residential broker the other day. And he said, yes, I was on the way to a listing presentation, which I had not prepared for.

And as I was driving over to the listing presentation, I got my whole briefing and my CMA and everything from Homes.com talking as I was on my way. So it's a tool that's going to be adopted or is being adopted by both the agents and by the consumers, it's a much deeper experience than a filter and a result.

One of the things I thought was kind of interesting, we have -- I think we've had -- we've reached out to 18,000 of our clients over the last week or so with Homes AI. And we use artificial intelligence to sort of map what the conversations are and what we're hearing. I think an odd element of this is that it is extracting agents from relying on the MLS as their primary information tool. We're getting a lot of folks saying, gosh, this is a lot easier to use than the MLS. But I hope that answers the question.

If I may add 2 additional points. Remember that AI agent will remember who you are, what school zone you want to be in, how many kids you have, if you like a house that's in the sunshine more than -- or has a view. So the learning of it and the results that you will get as a user are just going to exponentially get better, and it will know you as well as you know yourself or your spouse knows you. So I think that's a really important point.

It's not like you go every time and it's a clean slate. It's building its knowledge and understanding to help you on your journey and provide you even better results, which, by the way, ends up being a much better lead for our subscribers, right? And that handoff, they have -- will have a lot more information. So I think that's really important.

Now we also take that into Apartments.com. Say you own a building, you have people working in your building who are leasing agents or people who help. You are now going to have hundreds of AI leasing agents who are going to be following these customers, understanding they may spend more time on a 2-bedroom versus a 1 bedroom. So they're really more interest in 2-bedroom. They really want a view of the pool. They really want to be on the corner, on the outside, et cetera.

So again, this -- the learning and the capability is going to be hugely beneficial and important to our customers, which is going to be almost irreplaceable. So I think it's just this multitude of growth. And once people realize that -- once our subscribers and our customers get that and understand that, it's just going to make such a better relationship with our customers and a better experience for them.

And the plan is to integrate all the platforms on this. So when Chris talks about the fact that we remember what the -- who the consumer is, what the shopper is or what their interests are, and where they work and where they play and what their needs are for education. That is persistent across Apartments.com, across CoStar and will even be persistent across Illumina and eventually Homes and BizBuySell. So it's really quite powerful.

And then our goal -- our plan is to have the interface back to the lister, whether they be a property manager, real estate owner, real estate agent that's consistent. You'll have one sort of lead dashboard listing management tool in AI that has much higher quality leads across all these platforms. And as someone who manages billions of these visits across many, many sites, many, many hundreds of thousands, millions of leads, agents really struggle with managing the leads they get off these sites.

I mean the best of them respond to 50%, 60% of the leads in a timely fashion. The tools we're going to build here or building here will dramatically change that equation and make it much more efficient for them to be able to handle these. But I think we're far, far away from your original question, so I'll shut up.

Our next question comes from Scott Wurtzel with Wolfe Research.

Just wanted to follow up from the bookings question at the beginning. I'm wondering if you can give any kind of commentary around Apartments and Homes.com bookings from the quarter, if it's -- not numbers, any sort of directional qualitative commentary relative to last quarter would be great.

Yes. We get a lot of requests for a lot of different information, et cetera. And I think what we feel is we provided new disclosure with new segments, and we've given you, again, the second highest net new bookings number in the company since 2015. And so the guidance is, like I said, I think Homes.com and Apartments.com, we still feel very -- we feel great about the businesses and the trajectory we're on. I'm going to leave it at that.

Our next question comes from Craig Huber with Huber Research Partners.

I wanted to ask about Apartments.com. It sounds like you think given the metrics you talked about that Apartments.com revenue this new year will accelerate. Maybe talk a little bit more about that, if that's the case? And what are you expecting for margins for Apartments.com for this year, flat or down slightly, maybe some extra marketing expenses? How should we think about how margins will play out there?

Yes. So we're not giving specific margins for any business, et cetera. I think what you could hold stock in is Andy's comments around how our business is performing versus what we can see publicly versus our #2 competitor, which is significantly behind ours. We're excited about what we're seeing in the opportunity. We're excited about bringing AI. Like I said, it was one of our -- was and continues to be one of our most attractive businesses. Andy has talked historically, there's been a little more invested in marketing, but that's just because we had sweated that equity down over a period of time. And so there was a little bit more marketing, but this isn't a meaningful amount. So we feel as good today about Apartments.com as we have been in the recent past.

I do not see any increase in marketing in Apartments.com that I'm aware of. It's basically predictable as it has been in the past. And what I was trying to communicate is I do believe there's a little bit of smoke and mirrors occurring in the industry with the apartment space and that we actually are in a much stronger position than the market realizes. So there's been some acquisition activity, and competitors are going to create some tough comparables year-over-year, and it's going to be tough to retain some of the acquired revenue, I believe.

And you can already see that in our ability to take significant share from some of the folks that have been picked up or synthetically acquired. And in a way, to me, this is Groundhog Day. We've competed against -- so many times against some of the same players who fail repeatedly and recapitalize and then we compete again very successfully. So I just wanted to communicate in my remarks that I believe that Apartments.com is an incredibly strong franchise with continued strength that will become clearer and clearer over the quarters to come.

Our next question comes from Jeff Silber with BMO Capital Markets.

You talk a lot about the investments that you're doing in the different businesses, and I think we get that. Beyond that, can you just remind us what your capital allocation priorities are? And I'm specifically interested if you're going to continue to do M&A, what you think you're missing in the portfolio, either from a product or geographic segment?

Well, so listen, I think from a capital allocation, we obviously went through a capital allocation process. I think we all -- it was a great experience. Obviously, what came out of that was a buyback program. We looked at buybacks as a percentage of free cash flow and how to think about that going forward. I'll let Andy opine on sort of what he may see as opportunities for us within an M&A perspective. But I would say our ability to acquire companies and generate not only significant synergies from expense savings and also accelerating growth is really incredible in this company. And -- but I'll give it to Andy if he sees what opportunities he thinks about.

Yes. So from a capital allocation perspective, I love the concept that we are pursuing having fewer shares today than we did 2 years ago and retiring shares and having good capital discipline there. And I like the fact that we did the Matterport acquisition with a little bit of share dilution, but we actually retired those shares at a more favorable cost point in hopefully going forward. And -- but I hope you get the sense that we have an incredible amount of innovation going on here.

We have a lot of intellectual firepower building really transformative products across the board, both in the commercial and the residential side. So we have a lot on our plate right now, and we want to focus on the things we've got on our plate. Now having said that, there are a lot of interesting acquisition opportunities, but we have so much going on organically right now that, that is a priority. And the business generates a lot of cash, we believe will generate a lot of cash and give us the ability to approach what we want to approach the time we want to approach it. We're not going to comment on any specific things, but there are dozens, if not 100 opportunities out there.

Yes. And just to add a finer point to that cash generation. With the completion of the Richmond campus and also our building in Arlington, you're actually going to see real acceleration of cash flow in '27 and really into '28. I'd also highlight one thing that we've talked about historically, don't forget, we built the Richmond campus and we acquired the Arlington building, and they're on our balance sheet. And when -- and we expect this to happen when rates come down and cap rates come down, there is a release of capital that we would expect to see. So an additional increase as a result of those sale-leaseback processes for those 2 buildings. So we're excited about the cash generation we're going to accelerate over the next 3 years.

Our next question comes from Jason Haas with Wells Fargo.

This is [indiscernible] on for Jason Haas. You guys are guiding to negative $45 million of EBITDA in 1Q for the resi segment and positive $105 million for the full year at the midpoint. I just want to better understand the timing of the profitability improvement through the year for resi as well as the key drivers behind it.

Well, we talked about the marketing aspect, which is really front-loaded in the first quarter and to a less extent, the second quarter. So that is a meaningful part of that acceleration and the underlying growth in revenue, both -- across both businesses, apartments and homes, both on a relatively fixed cost basis. And so that drives that acceleration over the 2026 period.

Our next question comes from George Tong with Goldman Sachs.

You mentioned Domain revenue came well ahead of expectations in 4Q and Matterport is also contributing inorganically. Can you outline what M&A contributions you expect for 2026? And what organic growth rates for commercial and residential are being embedded in the full year guide?

George, I don't have those numbers in front of me, but let me come back to you. I know what you're saying, let me come back to you. As far as additional M&A, we have -- all you really affect is the full year impact of the acquisitions we made in '25 into '26, right, that impact. But we obviously aren't in the midst of any M&A activity or closing anything that we're aware of.

Our next question comes from Nick Jones with BNP Paribas.

I guess maybe going back to CoStar Suite and the moats you have there. I guess, can you speak to maybe how you're using AI to maybe enhance the moats or build out stronger data sets? And I guess, how confident are you that some of these maybe AI-driven solutions that are maybe coming in from the legal side can't maybe start to rapidly replicate a similar data set. Any clarity, I guess, on the threat and maybe what you guys are doing to basically take new technology and enhance the moat further?

Sure. So we are definitely creating new data sets from proprietary content at an accelerated pace, facilitated by AI. So what -- if you take a look at the corporate leases, which are not available to the general public, they're proprietary, and they require careful treatment, protecting confidentiality on the behalf of clients. That -- abstracting those leases pre our AI abstraction tools would have taken hundreds and hundreds of people, years and years and years to do. Now we can do it in a matter of weeks at a cost of less than a couple of hundred thousand dollars.

So that is just one proof point of how we're actually growing our proprietary data sets much more rapidly than we could have in a non-AI world. I'm going to stress again that AI cannot create data from nothing. If it doesn't know something, it can't create something it does not know. That's a fact, right? And so it's not mythical magical. It's just a reality. So much of the data in our data moat is proprietary. And so like you're seeing with Homes AI, we are quite capable of building very powerful innovative products that -- where we have more data to put into our models than another player.

And just a simple stand-alone AI can abstract some data sets off the Internet, but we can't -- we have more. We have significantly more, and we'll leverage that more. And we believe that the information begets information. That's been the nature of our business since the beginning of time. Because we have data, we can draw clients who give us more data and more data and more data. So it's a race, and it's a data begets data race, if I -- and you can see that's what STR is. That's what Real Estate Manager is doing. That's what Debt Solutions is doing. And that's 3 of them in just a matter of a couple of years that are these proprietary data generators that you can't get at the data unless you have the keys, and we have the keys.

And our last question comes from Ashish Sabadra with RBC Capital Markets.

I was just -- just wanted to follow up on the earlier question on Commercial segment margins. I understand the investment in '26, but how should we think about the commercial margins over your midterm targets?

Yes, you should -- I mean you should see the segment grow from '26 to -- actually '27 to '30, right? You get through this investment phase in '26 and then you should expect them to grow '27 to '30. The full impact of the investments is happening as we speak, right? All those -- amazingly, all those investments are basically happening at the same time. And so we should -- a lot of them should be finalized by -- in 2026.

I think with that, we're going to wrap up the call. Thank you, everyone, for joining us on the call. We appreciate your time and attention and the opportunity to be working for you guys. And I guess you guys are going to catch the city. We actually have a great view of the capital here from where we sit and are doing this call. So I guess that's the next thing tonight.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good morning. My name is Brett Huff. I'm one of the tech analyst here at Stephens. Last day of the conference, we're running it in. Thanks for being here. We hope you've had good meetings. We hope you had some good hot chicken while you're here. We had a few PBRs at some of the honky-tonks. You can't leave without doing that. But I do hope you have had some good meetings. We appreciate you being here and the partnerships with all of you.

I also want to say thanks to Rich, who's the head of IR at CoStar, and Chris, who's the CFO, further to my left, also thanks for the partnership and for being here. We know you guys are busy. And so appreciate the time. There's lots of good stuff going on, lots of interesting things going on with CoStar. Before we kind of dive into the meat of this, do you guys want to do introductions and say hello and do any background for folks just to introduce yourselves.

Sure. Chris Lown, the CFO of CoStar. I've been at the company about almost 1.5 years now.

Rich?

Rich Simonelli. I've been back about 1.5 years, but I spent almost 10 years from 2011 to 2020 in IR and have a long relationship with the guys at Stephens. Brett was the guy who dragged me to places like Minneapolis and Kansas City. And so these are really good places to get long-term investors. And even to this day, from those first meetings we went out in 2011, 2012, 2013, we still have many of those investors. So lots of thanks to him and we appreciate the opportunity to spend time with you today.

Sure. Thanks. So we're going to -- the key questions we've been getting on CoStar kind of apartments, AI, home. So we'll start with those and we've got lots of other content. But I want to start with those because I think that's what most investors are interested in. I'm sure you guys have been talking about it a lot.

So on apartments, can you guys talk about where we are in the evolution of that? It's been an amazing business. It's grown incredibly market dominance, like low teens growth in 3Q. Growth drivers are many and varied. We've got some high-end stuff where you guys are high -- have a lot of share. You're moving down market. Some of that -- it takes time. There's a different customer base, et cetera. Can you talk about how that strategy is going to work over time, how that should impact bookings, pricing kind of near term and long term as you see growth?

Yes, we remain extremely excited about our position with the apartments business. I mean this business for 13 consecutive quarters has had double-digit revenue growth. Go back when we bought the company over 10 years ago, there are 7 competitors. Basically, they are basic ILS platforms that just had a photograph and place to contact somebody. And what we did and how we became by far the market leader in the industry is by bringing a lot of technology, better consumer experience to the market, and that resulted in the company growing from a $50-plus million revenue base to over $1.2 billion today.

So we are by far the market leader. It's really boiled down. There's really boiled down to 2 players in the market. There are some others out there, but really 2 players, and we're twice as big as the second player. We know we have margins that are in excess of theirs. And there's a reason why it's because we bring renewed technology and we focus very much on the technology, the consumer experience. For instance, we just launched the Matterport Plus program, which brings Matterport into the Apartments.com capability. It serves a multitude of purposes for the owners. It gives a higher -- lower bounce rates, much more time on site.

People are actually signing contracts without ever going to the apartments. We obviously brought much better customer experience and technology over time or integrated into their back end. So we can give people real line of sight on expenses and fees to get into the apartments. And so there's a huge opportunity set still out there. We think the TAM is over $9 billion collectively between us and Zillow. We have $1.7 billion-ish of revenue. So huge TAM, huge opportunity, but still a lot more technology to bring, a lot more capabilities. AI will really help transform the industry as well, and we're along that path, which will bring again, better customer experience, better search capability, which will also increase time on site, which will lower bounce rates, et cetera, increase leads. So we're excited about where we are, and there's still a huge runway ahead of us.

Yes. The other thing I would add is that the amount of original content that is on this site. This isn't just a listing site that says there's an apartment available. Matterports have been a very big part of our business proposition for apartments. Clearly, we're bringing that over to both LoopNet and the Homes.com. We shot a lot of video that's original millions of actual copyrighted photographs that sometimes people borrow. But that's all -- those are all things that are differentiators.

And I think it's one of the things that Andy realized on the industry, we first got there, people were putting up a listing with a postage size stamp of a photo and running banner ads and skyscraper ads and calling it an Internet site. And he said, no, there's an opportunity with the Internet to put tons of original content and make it differentiated and make it a destination site. And so if it was nothing but a listing site, right, nothing added value, but there's a ton of added value here that we're doing.

That's helpful. As you guys think about how the competition is going to play out, you guys rolled up a bunch of them and did the operational effectiveness and technology injection that you guys usually do when you make acquisitions. How do you think about competition, not just with Zillow, there's 3 or 4 other smaller players. How does the differentiation between the sites happen? My view is that you guys are better at the bigger buildings that they tend to focus on the lower sizes just because of where they started in single family, that maybe the next battleground is in the middle. How do you all view that both near term and long term and not just with Zillow, but how people interact with the sites over time and where that value proposition goes?

Yes. So I actually -- there's so much TAM and there's so much opportunity, right? You're 15% to 20% penetrated in an industry that should be 70%, 80% penetrated. I mean, why if you have real estate that you need to let and you're not digitizing it. It just seems at this point where we're on the technology cycle that's odd. So I think that there's huge amount of opportunity. I think technology clearly is going to win the day. I think the connectivity and the back ends and understanding how these companies work and ensure fee transparency is really important. But the next big wave to come through really the portals is really going to be AI. And then what that means is there's going to be conversational search, it's going to be table stakes. You're just going to get online and you're going to speak to your computer and you're going to speak to the portal and all the things you used to check and when you check the box, you're just going to talk to the -- you can do it today.

You're just going to talk to the computer and you're going to provide much more listings, you're going to have higher listings to view, you're going to have more interesting discussions. The information that the portal is going to have is going to be far greater, right, because you're going to be able to just ask things and things that you probably wouldn't have asked the portals before. So I think technology is going to be critical. Consumer experience is going to be critical. And those are all places we know we're market leaders in. So we feel good about that.

Got it. I'll do a couple more questions, then we'll pause and I know there may be questions in the audience before we move on from apartments. Staying with apartments, new sales staff -- the sales team has been incredibly successful, but had been not growing very much for the last few years, even though there's been a lot of TAM. So there's been a renewed focus on that. I think the number is roughly 20% higher kind of across a lot of your business lines, but particularly in apartments, given the TAM sort of why now? What's changing? How is the training going? How is the productivity and all that kind of stuff with these new folks?

Yes. Why now? Simply, I think the company got busy. We got busy on doing a lot of things and therefore, wasn't growing the sales force in the way that it should have, like looking at sort of the KPIs of those sales forces, making sure that they weren't overburdened and could tackle and aggressively go after new business. We run a very unified sales program. If you make a sale, you have to service that account and you think about this business, how much has grown. Well, our salespeople really had to deal with servicing the accounts they had and try to find new business. So we simply just realized that we had to be more programmatic about investing in the sales force.

So it is a little bit more of a catch-up. So we're catching up, and I think we'll do a better job of just managing that and trying to keep it going. But it really is just making sure that we can tackle the opportunity. I mean, as I said, we think the TAM is at least $9 billion. We're sure it's more than that. And there's a huge opportunity, and we have to have a sales force appropriately sized for that opportunity.

I think the stat on the last call, and I think it is quite right, but maybe there are 200,000 like actual meetings that happened and 100,000 of them were maybe in person. I mean, so the scale of that is pretty large. And is that -- can you talk a little bit about that in the sales channel. You guys are selling to the owners of these properties and they own -- can you talk about that sales process and maybe how that evolves?

Yes. Our sales team at Apartments.com is an incredibly efficient and dynamic operation. I mean, I've seen a number of sales organizations in my career and they are just very metrics-focused. Andy is adamant, you have to meet people in person. You can't run it out of just an office in one place and call people. I think that was one of the -- professionalizing and standardizing the sales call was probably one of the first big things that they did at Apartments.com. And so that just continues. We run a very aggressive 9-block system like in the sales force, you have to produce, you have to do your meetings, right? These things are programmatic. And so I think that they probably run the best sales outfit. They run one of the best sales outfits I've ever seen regardless of industry.

And then last question for me on this one, then we'll see if we'll check with the audience. Getting back to TAM a little bit, the world is divided up into sort of the 100 plus, the middle, however you define it, and then maybe the 20 units and below in the single family. How do you all think about prosecuting those? I mean is it right to think that you guys have been mostly focused on the bigger buildings that are now moving down? Is that the right way to think about it? And how does the sales structure or maybe value proposition or et cetera change as you do move down into those new markets?

Yes. I don't think it's moving down. I think that's the wrong way to put it. I mean, my view is that there's a $9 billion TAM. We need to penetrate it. Clearly, our -- out of the gate, our penetration was in the 50, 100-plus market. But even still in those markets, we're 30% to 50% penetrated, right. So that there's massive opportunities there. So it's really just saying there's this massive TAM. We have to make sure we have the sales force to go after it, and we should be in that position. The biggest TAM is in the 1 to 49 market. But that -- all these markets are very attractive. This is a fixed cost business, basically, right? So every incremental dollar that comes in from a revenue perspective is at a very high margin, right, talking 90%-plus on incremental dollars.

So inevitably, obviously, 100-unit plus market made a bigger sale, but there's just a different sales strategy as you go with the 1 to 49 or 50 to 99 markets. But inevitably, the margin profiles are relatively the same. Now absolute dollars are different, but margin profiles are the same. And we should be attacking the entire industry, right? And so that's the focus now just to be more holistic in our view of the entire Apartments.com business.

Yes. When you look at the apartments, the 1 to 49, we're less than 1% penetrated. And even 20% to 49%, we're just 7% penetrated. And surprisingly, 30% penetrated in 50 units and above. So there's a lot more to go and grow. And of course, I think it's kind of an unfair thing to call the whole thing multifamily because clearly, the needs of somebody that runs a quad versus 20 versus 100, it's a very different model. But one of the things in talking with Fred Saint and Paige Forrest who runs the business, sales force -- the other positive thing about getting more sales reps, it gives you the opportunity for in-person. And what we found is that in-person is a great way of doing business for CoStar, for LoopNet, for apartments. And so this gives you more opportunity to do that. We still have a great inside sales team, and that's very important. But clearly, part of it is to get more in-person meetings as we go along.

That's helpful. Let's pause there. I have a few more questions and apartments can only do that, but open it up to the audience. Is there any follow-up questions on that?

Yes. Can you talk about how you are protecting your content from your primary competitor? And then a kind of related question is, how do you ensure that consumers are coming to you as opposed to using other kind of front ends and I'm thinking about AI and chatbots in terms of whether they can actually scrape your data or not? Or how do you make sure that you're getting the consumer?

Yes. So it's a great question. One of the things Andy Florance is adamant about is protecting the IP of this company. We've invested over -- well over $5 billion into CoStar and protecting that IP is critical to him. And you actually saw recently, our biggest competitor has been using nearly 50,000 copyrighted images that are copyrighted images on their site and our legal team is always looking and reviewing the market to see who may be using our IP. And so as a result, we sued. We think it's a massive copyright infringement case. It's probably one of the biggest that's ever been filed.

And what's also happened is our competitor automatically started taking them down, right? I mean they started removing those because there was a realization that they should have been using our copyright materials. So I think what you'd see is we are hyper-focused on protecting our IP. That's one instance. And we don't let APIs into our ecosystem. It's something that gets asked often. But again, Andy is very adamant about making sure that we protect our IP. Scraping is technically illegal, right? And so we would obviously go after -- if we saw that, we would pursue those avenues. And then this AI question has come up around the world changing, what -- how we should think about it. And we believe we are absolutely AI winners across all of our businesses. And not a single business where we see internally that we have a real threat today from AI. In fact, we think they're accelerators, they will improve and enhance our platforms. And so what we're really talking about is the top of the funnel. And at the top of the funnel is shifting, we're agnostic to that. If it means we have to pay Google less than we have to pay one of the AI companies more because they're delivering top of funnel, that's fine. I mean that's -- we don't see that as an issue. And in fact, I'd ask you all, why don't you experiment and go on one of the AI platforms and search for real estate and see what you get, see where you get compared to our products, see what you get to other products. I mean, it is not even close.

And it wouldn't make sense for these companies to try to go down market and attack our businesses, really the money has remained at the top of the funnel, right? That's how you monetize. And so these businesses will start to monetize. Today, they represent a very, very low percentage of the top of the funnel. But again, we're agnostic to paying in the top of the funnel we do today. It just may -- we may shift our allocation of who we offer money to.

I think clearly on content protection, AI agent cannot go out and Matterport a property. They can't go out and take video on their own. I mean, they still have to go find that data someplace. So if all of a sudden someone's taking Matterport and putting them up on their website, that's a problem no matter how they're getting there. So I think that Andy has been maniacal about getting original content all over our sites to make it unique and different. It's not just a -- let me cleanse the data that's out there and put it up on my website, like taking MLS data and just putting it on our site. We easily could have just done that on Homes.com, but instead, we've added Matterports, videos, customer reviews all kinds of information about neighborhoods and things. And people say, well, why the hell are you spending all the money on that? Like that's crazy. No, that's the differentiator that keeps you different from everybody else. If all you're doing is putting MLS data up, you're not winning at the hearts of minds of anyone's. And so you have to believe that the copyright laws of the country still matter.

You have to believe that you can't scrape. And the other thing you have to know is that internally, we're using AI to build new ways to save money, to build new features on our websites. We're actively working with a lot of AI companies. And so -- it's not a PR stunt to just go out there and say, hey, I partnered with these guys and now my app is up on the Internet. It's much more serious than that. And those are the things that we're doing inside the company. So it's integrating very significantly with the AI companies out there and making our products better and saving us money.

The value of our Matterport application is going to really come through over the coming years because we can't comprehend and I really can't comprehend is how much data is embedded in the Matterport, right? You're not only talking about the dimensions of every room but you're also now picking up the models of the appliances in the kitchen and the bathrooms, et cetera, and all that stuff is going to be able to be recognized. And that's going to be an incredibly differentiated capability for us, for new products, but also for homeowners, for sellers, for apartment renters as people go in to look at what they're looking to rent. So I think you'll see that -- again, we see ourselves as huge winners because the data and the capabilities embedded within that will really be able to be brought out as AI is more utilized.

So what are you doing specifically to drive penetration on Matterport especially in the apartments business and [indiscernible]? Is there a way to be more aggressive?

Well, we've launched the Matterport Plus program for the apartments, and we've sold over 500 packages. And so we think that will continue. We think I actually believe it just becomes a requirement. If you're trying to rent an apartment, you're going to need a Matterport because people are willing today to rent an apartment without going to see it. And then if you have a Matterport, people will rent it. They'll sign the docs. They'll do the payment all through our platform. So I think that's a big accelerator. And from an -- what we have to do and what we've done already with apartments, we need to integrate Matterport directly into all of our products to make sure we have that capability, and they become synonymous with our products, but also we're now building out the commercial application, which is a huge TAM.

We sort of -- we bought a company that had incredible technology but it was really lost from a strategy perspective. And so what we've been doing over the last 6, 7 months is realigning the strategy, realigning their TAMs, ensuring that we integrate the core capability into our core businesses. But then making sure we also build out this great commercial application, which is a global application and Matterport is a clear leader in that space.

Would you give it away? [indiscernible]

I don't think we need to give it away. I think it's incredibly valuable. But we clearly are integrating into our platforms and there are synergies in that integration. There's huge value. It's a great business. The storage and the analytics and models in the cloud is a great margin business. And the sale, the front-end sale is a great business. We just need to accelerate the integration and the growth of the business, and we think we have an opportunity to do that.

Incredibly sticky on all the sites, too. You see it on homes that if you have a Matterport on there, people are going to click on it, number one.

9 out of 10 people, who see the Matterport, click on it.

It's a big deal. And I always talk about my wife, who's a resi agent and Homes.com proud user. But more importantly, what she used it for another agents is that it's not only a 24/7 way of doing an open house, but it also demonstrates to the client that you're doing something similar to a lot of other businesses, it's hard when you don't have data to support the efforts that you're doing on marketing. And what Matterport does clearly on apartments, we see it all the time, but now we're also sitting on Homes.com is it demonstrates that I'm getting people to look at your house, even if they're not showing up in the physical open houses. And that's helping agents demonstrating them still marketing your property along the way.

The other final thing on the Matterport, I think the prior owners really focused on a B2C format on Matterport. And realistically, we're building a whole B2B capability here. You heard both Chris and Andy talk about this on the calls, but we want to build up that Matterport sales force from a B2B perspective. We shouldn't be selling a camera to a single photographer in Chicago to shoot the Hilton Hotel there. We should be selling Matterport to Hilton, the company. And I think that, that's going to be a major shift on how we get Matterports out.

Just a little detail on Matterport. Can you just talk a little bit about the different strategies or methods that you're using now to roll out across those? Because it's a little bit different depending on the business.

Well, like I said, we're integrating into our product. So if it's in homes, it's much more integrated into apartments. It will be in LoopNet and then there'll be commercial applications, actually may end up being CoStar too, right? It will be part of that package as well. So it will integrate completely, and then it will have its own avenue.

Okay. Any other questions on apartments. Great. So a little bit more on AI. We talked a little about it already, but one of the things that always strikes me about CoStar is that you have organized a bunch of the public data that theoretically anybody can go get, but it's sort of brain damage to get it all right and tag it on, et cetera. But it's also the proprietary data that you all have. And then it's not only that, but it's the bringing together of those 2 things that provide sort of the full view. To me, that's one of the AI defensibilities that you all have. Is that how you view the world? Or is it -- how does that work?

Yes. Obviously, AI has become a big topic. And all we see is ourselves of being winners for a number of reasons and just what you talked about, I mean, one, we have over 2.4 trillion records in our databases, most of it proprietary. Yes, we do take some public data, but cleansing and organizing and put it in a way that people can consume it, obviously, is very important. But it also interacts with very large banks, real estate portfolios that interacts with leases and interacts with hospitality incomes and bookings. And I mean, there's just a huge amount of data within that database that doesn't exist outside of our SOC-compliant infrastructure. And so bringing that all together is clearly highly valuable to our customers, and they rely and depend upon it.

Our researchers are calling people directly and getting information that isn't in the public markets. Those people are actually going on to our site and actually putting the information. And so we're actually sort of a give-get model as well. So we think it's not only highly defensible, but we think we can generate huge opportunities with AI going forward. In fact, you're seeing it already happen. When we bought Visual Lease a year ago, the business plan was to create at least benchmarking capability that we could roll out across the country, and we're in the process of doing that. But when we did it, we thought we're going to have to hire hundreds and hundreds of people to go through those leases, open the [ PDFs ], go through leases to extract information. Well, over the last 9 months, we've been using AI agent training models to pull that data out and the accuracy levels and how quickly they can go through them is massively different than what a human can do.

So what was a 300, 400-person business plan is a 100-person business plan today, right? So cost down, efficiency up accuracy way up. We can do a lease in minutes versus hours. So we just think our ability to monetize our data and information, deliver new products, especially deliver new value to our customers is exponential, and you'll see that happen. Also here, you have to see Smart Search on Homes.com where you basically just go on and you talk to the computer, tell me what you want, what you're interested in. Well, that will accelerate massively in 2026, and that will be in apartments, et cetera, and LoopNet. So this will all be across all of our platforms. It's not specifically focused on just one product.

And I think you said just as a level of commitment, I think you said 50% or so of the homes engineering effort is now going to be mostly on AI, not new, but sort of reshuffled. Is that -- that's at Homes. Have you talked about the level of spend at the other business units? Or is it...

Yes. Well, IT capacity is IT capacity. We're not increasing our IT capacity, right? And clearly, we will be decreasing our IT capacity at Homes.com and deploying that in other places. There's no doubt. But AI will be a clear focus in '26 and going forward, just monetizing and utilizing all these tools. We're already working with a huge number of partners and models, Microsoft, et cetera, to integrate into our platform to use in our platform. So we're already well down this path. And again, it will be ubiquitous across all of our companies.

That's helpful. Any AI questions? Just can ask whatever you want, but moving on. So moving on to Homes. We talked about it a few times. One of the -- to us, one of the key insights that you all have had is that there's actually not just one residential portal market, there's at least a couple, maybe one buy-side focused and one sell-side focused. Can you talk about that insight and how that rolls into the strategy of Homes and the SEM and that kind of retargeting?

Yes. Well, we're the only platform that's a platform that helps a listing agent or a home seller sell their apartment, right, or their house, that's what we do. It's digital advertising and digital capabilities for that market. That is a much bigger market than a buyer agency market, which the U.S. portals have been built upon. So we're excited about that. We have -- today, we have over 26,000 subscribers. Over 130,000 homes are now paid listings on our site, but we are the only portal doing that. And so people like to talk about Zillow, they talked about Redfin. They talked about realtor.com. We just have different models. They are trying to capture 5% of the market for buyer agency in a lead diversion model to sell those leads. That's fine. That's their model, but we are trying to work with listing agents and with home sellers to actually help them advertise, retarget, sell their listing to improve their outcomes.

And any additional anecdotes that you guys hear from -- as you guys roll out and the value prop, you're looking for the right value prop. Clearly, you found it. As you talk to folks, are there anecdotes that kind of help demonstrate either from the consumer's point of view or even from the agent's point of view, hey, this is how it's working for me. This is how it's making my life easier or better. I mean, can you give us just a little...

Yes, We hear a lot of things. They love the retargeting. They love the fact when they go to a pitch for a listing pitch, they can show, look, I'm working with this company, and you get all these, you get tens and tens of thousands of views versus the other platforms where you get views in the hundreds, they're retargeting you. I'm advertised when a lead comes. You may not believe this, but on the other platforms, it goes somewhere else, but the lead comes to me, so I can help monetize, track it, use it to your advantage. They love the Matterport capability.

So we hear all very positive things and the business in the last year, it's really started to get on a flywheel and grow. And like I said, we have 26,000 agent subscribers today and 130,000 paid listings, which in this model clearly makes us the market leader.

As you guys have honed the value proposition, talk a little bit about the retention and sort of getting through the wave of the cancellations as you guys honed in on the value prop. It seems like we're past that even I think 1Q was the last tough quarter, 2Q and then 3Q was much better. Talk about kind of that retention and how that's trending?

Yes. Retention is something we focus on. Every month, I look at the retention number. And every month for the last, I don't know I want to say 9 -- must be 9 or 10 months, every month retention has been coming in percentage points every single month. So it's clearly going in the right direction. The NPS on the product is now 43. I mean a 43 NPS when you look at the scale makes it a really good -- it's a really good NPS score and a highly attractive product. And so we moved it. It was negative 1.5 years ago. So clearly, the agents see the value in it.

So we're just kind of moving through that time line. And with the dedicated sales force, we're still pretty immature, but obviously, every day are growing in their knowledge and the capability. We'll just continue to have more strength as we go down this road and develop it over the next couple of years.

And then just thinking more longer term, we get a lot of questions on sort of what does the business look like long term? Is it bigger than LoopNet? Is it smaller than -- so have you guys thought about that when you project out in the future? And Andy, I think mentioned he was -- he thinks that this could be a 40-ish percent margin business. But taking that into consideration over time, how do we think -- the TAM is big. You all can exist with other folks, other portals in the world. So how do you think about that dividing up that TAM?

Yes. I think, obviously, we believe because you see our investment in it, this is a multibillion-dollar revenue opportunity at margins that are -- just have to look around the world, margins that are 50% plus. And we don't think this market is any different than any market around the world once people understand the value proposition and adopt the business model. People confuse the MLS with digital marketing and digital advertising. It's not the same. I think there's a much different capability and technology that brought to bear. So we look to the broader international markets as a guide, but if the U.S. is the largest residential property market in the world, meaningfully larger. And so we believe that is the opportunity set.

I have a couple of more questions just on homes, but I want to talk one question about platform. It seems like homes or resi was one of the few asset classes that CoStar hadn't addressed yet, right? There's a finite number of them, and this was one of the final pieces. As you all think about the flywheel of the platform and the old CoStar thing of exhaust from one business is monetized in another one, it's a wonderful thing. Can you talk a little bit about how that works within CoStar with homes and how that works with some of the other international competitors that we -- or companies that we've seen do for years and years and years. How does that -- what does that final piece kind of bring?

Yes, it's a great question. First, I'd argue that we probably enter residential apartments, obviously, in a different way, but we clearly were entering residential with the Apartments.com business. But the genius that Andy built over the last 40 years is exactly what you talked about. And it's not even the exhaust of one system going to the other, it's sort of the integration of all of these products and businesses all feeding each other and providing data and information for each other. And I'll just sort of give you a framework.

First, let's look at our lender.com platform, right? Lender -- financial institutions load their loan portfolios into our SOC-compliant database. Why people want to do that is for two reasons. One, there's great models. We have great models and capabilities that have been tested over time with the best data and information. So as they do their stress testing, they do the regulatory requirements, et cetera, as they do their own risk analytics, it's the best place to do it. But two, the information from LoopNet and from Apartments.com is feeding back into that to provide best-in-class just-in-time information to help them determine their mark levels and if they're right, they should be thinking about it differently.

So it's the marketplace is feeding the information businesses and the financial information business is feeding in the marketplaces. It's this great symbiotic relationship and the whole ecosystem works on it. And by the way, the whole thing is built on one technology platform. Now people say that and what they often talk about is there's some front end that's unified, and then there's a lot of spaghetti behind it. That's not what CoStar is. CoStar is one technology platform. If we buy a business that's not on that technology platform, over time, we rewrite the whole thing into our technology platform. So that capability to share information and work across the platform is real and it happens every day.

I'll pause here for a minute. I have a couple more questions, but questions from the audience on homes or related. Okay. On pricing, you guys have experimented with the pricing along with the value proposition a little up, a little down, et cetera. How do we think about pricing relative to the value that both the consumer on Boost, if you want to talk about that, but also the resi agent that's selling, how do they think about that value prop relative to the pricing? One of the great things on CoStar, we used to talk about in Suite is, if you sell half another commercial real estate building, you pay for CoStar for the whole office kind of thing. How do we think -- how do residential agents think about that pricing?

Yes. So over the last year, as we've accelerated the buildout of the sales force and we've continued to expand the capabilities of the platform, Andy has been sort of moving the dials on building the business and that sort of price penetration, right, are kind of 2 big things to think about. And clearly, penetration is really critical. More agents begets a flywheel where I think actually it becomes a point where you have to subscribe, right? If all of your competitors are subscribing and they're going with their pitches, saying, we have all these capabilities and you don't have it. You inevitably have to become a participant. And one of the things I always talk to people about is we're not asking them to spend more money. It's actually just shifting some of the spend they already have. Like an agent is already spending tens of thousand dollars on marketing. So it's just changing their spend to digital marketing.

And so we've been adjusting the pricing model. Obviously, you've seen penetration increase. We're now at 26,000 agents like I discussed. And so I think what you'll see over time is penetration increase and then pricing start to move up because pricing did come down over the last couple of months. We actually ended up being dialing it up and down. And so -- but when you have real penetration, then the most important thing you get is tiered advertising, right? And so you go out to the agents and you say like for x amount more dollars, you can be at a different level. You can always end up on the type of same thing we do with apartments, et cetera.

And so penetration will bring new products, more and more capabilities, drive more value to the platform and to the agents as well. So I think that's what we see happening over the next couple of years. But that's -- those 2 dials are the ones that have been adjusted over the last 6 months.

And the math is similar like what you see on office and just CoStar in general. If you win one listing as an agent, after you pay the brokerage firm, you're going to make about 2% on the property. So if I sell one $400,000 house or get one listing, I get $8,000, that's much more than what we're charging. So I think the value prop is there, and it's real. And as Chris mentioned, there's $10 billion to $15 billion of agents spending money on crazy stuff like squeezy balls and calendars and doing things like sending out post cards. And so this is not like I'm trying to go get tons of money from people out of the blue. It's shifting the budget from one thing that might not be working where you think you're doing something that's marketing into something you can actually get you and help you win more listings.

It sounds a lot like LoopNet.

Yes, exactly.

I'm going to keep going. Any questions, more questions on homes? I did want to revisit the Matterport thing. We talked a little bit about it. To us, it seems like a foundational technology, right? It's going to stand on its own, but it's going to be built in. Any other additional stats. I think the last stats you gave us were maybe 40x more listing views, deeper views that people are clicking through on a Matterport, 37% higher renewals for folks who are using Matterport. Are there any other anecdotes that you can give us that give us more of the sense of the power of that particular product?

9 out of 10 viewers when they click on to a product, they will click on it if there's a Matterport, so 9 out of 10, that's a massive number, right? So if you have -- if you're selling a house or an apartment or you're trying to rent one and you have a Matterport, 9 out of 10 people are to click on it, that's pretty impressive. But the bigger unsung hero is the AI capability that we're going to monetize over the coming years and organize and be able to do things like valuation tools to get people a better line of sight on what's actually in a house versus just a picture. So I think you'll see that come over the coming years as well.

Okay. The last big question that we've been asked is around capital use and planning, the new -- the capital committee, how you guys think about capital deployment. You still got a lot of cash on the balance sheet. We'll talk about that. And then I have some questions on Suite and LoopNet International, but I want to make sure we covered off on that. Can you just tell us about how you're all thinking about that? Things have changed a little bit. You still -- you've deployed some capital. You've always had a lot of capital. You're a highly capital-efficient business in terms of the M&A you've done. Can you just talk about how you're thinking about that, if it's different change, priorities, things like that?

Yes. So the Capital Allocation Committee has been fantastic. We've had great conversations. So you actually can see the charter. In April, we filed an 8-K. So we've had these discussions. They're coming up on making final recommendations for the Board. But one of the things I'd highlight is through these discussions over the last month or so, the capital allocation has made a decision. We've accelerated our buyback program. As you know, in February, we launched a $500 million buyback program. At the time, as the first step, we were doing it to really to neutralize stock-based compensation. While we now expect to complete that entire $500 million buyback program by the time the Capital Allocation Committee makes this new recommendations.

So that's a pretty meaningful change in how the company thinks about capital allocation. And I think capital allocation buybacks will be part of that recommendation that they're reviewing, and we'll recommend to the Board in December.

Capital allocation questions on more general. Okay. That's helpful. I want to talk a little bit about Suite, the original and not to be left behind an unsung hero. We get a lot of questions about the green shoots nature of where we are in commercial real estate office, and it seems patchy and it seems very early, but the people are finally starting to take marks on some of these buildings. It's sort of time to do it. Can you talk about where we are in that? I don't think we can oversell it a little -- I don't oversell it, but we are starting to see some unsticking. Is that what you all are seeing, too?

Yes. So I've been at the company, like I said, almost 1.5 years and actually in the last month, this is the first time I actually feel like I can say we're on the other side of this. We're not way off the other side, but running on the other side of it. I used to -- people had asked me this and the only thing I could really give them evidence was if you go to New York City and Class A real estate, it's like back it through, that's off the charts, right, it's back to where it was before. But there really weren't a lot of things to look at besides that.

Well, today, you have -- in the third quarter, you had a 54% increase in transactions, 54%, 56%, somewhere around that. That was across every single subsector in the commercial real estate market, right? So that's an incredible outcome. Absorption rates are doing better. It's not just New York, it's Dallas, even San Francisco, which was one of the most problem office markets is now because of what's going on in AI seeing a resurgence in commercial real estate. And so increase in transactions, higher rates, absorption, there's still no new ads, right? So building is -- there's still not a lot of starts, right? So inevitably, this flywheel will continue. Andy talks about this a lot and he said, what I'll say to you is like, I've seen this 3 or 4 times before, and it's going to unfold exactly the way it did last time. And it's exactly what's happening right now. It's unfolding exactly the same way.

People stop building. People going back to the office, absorption increases because there's no new building, transaction volumes going up, new market -- new money comes into the market, and we seem to be now a sort of stage 1 of that recovery.

Can you talk a little bit too about -- there are some additions in products and features in Suite. It's been a juggernaut for years. You talked a little bit about the bank lending business. Can you talk a little bit about hotels because there is an integration there. And you talked a little bit about leases, but we think lease is one of those unsung businesses that you guys bought Virtual Premise ages ago and now kind of added to it. It's much more software driven and is a big part of the user interface changes in Suite. Can you talk about how those businesses will help or change that business?

Well, as you said, the lease business is a great business. It was a SaaS platform really for lease accounting and for lease organization for companies. We have -- the original business we bought was very much at the higher end level, corporate level application. We bought a business a year ago. Like I said, we're integrating those businesses now. But most importantly, what we're doing is we now have a scale of leases that gives us the ability to create benchmark products across the country at a submarket level. So we'll be able to give the market information that it's never really had before. It's had pieces of it, but it's never really had a unified source of truth around it.

And so we will be providing that to the market early in the first quarter of next year. And then by the end of next year, we will have rewritten the entire application, the entire technology stack for that business. We will integrate that into CoStar Suite and that will now become just like STR, a product within CoStar Suite and just think about the capabilities and application that delivers for people who are managing their leases. You have all that information, the ability to look for new places, to be able to benchmark, to be able to compare it to run your leases through, et cetera. It will just revolutionize the market. So we're excited about that capability and opportunity. And like I said, that will be delivered next year.

We just have a couple more minutes. The last 2 questions I have. One, on LoopNet new pricing strategies, the portfolio stuff and asset-based pricing. And then number two, I would love to get a comment on international. We've just done domain. We've got some U.K. properties. We've invested lots of little things in Europe. So just starting a little bit of a new chapter there. Can you talk a little bit about LoopNet pricing and strategy and then a little bit on international?

Yes. LoopNet had a great year, right? And partially because we have -- we reorganized the management team and the sales team, partially because commercial real estate markets are coming back. And also partially, but probably more so towards we reoriented the business, the go-to-market strategy. What we really focused on -- what we're focused on is getting -- increasing the number of paid advertisers on the platform. And what we realized is we were underinvesting in getting people on silver packages and probably over-indexed towards getting people on platinum packages. And so what we're really trying to do is get more paid listings from portfolio owners on our platform and really giving -- telling them the advantages and the statistics around if you buy a silver, it's this time, it will lease us much quicker at these percentages, this much more exposure, et cetera. And so it's really -- so we're sort of -- we're in early mid-market and kind of making that change.

There's 2 really important things to note there. One, silver packages, retention rates are massively higher than platinum, which makes sense. If you're buying a more expensive platinum package, you're probably doing it to try to get something leased for a specific reason, specific period of time, you're willing to invest a lot in it. A silver package is more of an ongoing commitment just to get the exposure to make sure it's out there, people understand it. And so retention rates for platinums are in the teens, whereas retention rates for silver are in the high 80s, low 90s. And so as that business rolls forward, that means our sales force is going to have to fight less against cancels every month because there will be more retention. So that flywheel will increase going into the future. And that's really important.

The other positive thing is we were unsure how much of an impact it would have on platinum sales. Platinum sales haven't had that much of an impact, right? It's actually -- there's still people who want that advertising package. They want to be there. So we really haven't seen much change or decline. And so that business is well back on to a double-digit growth profile that is clearly the most global platform today. And so, in my view, it's clearly a $1 billion-plus revenue business. International, right? U.S., Canada, U.K., we'll put in Spain. We have it from France. In Europe, we have over 100,000 listings today. So I mean, that's already a huge penetration. We're really the only pan-European capability.

We will, in the first half of next year, introduce LoopNet into Australia. So we'll have the Australian market, which is a really attractive market, and we'll be able to bring really differentiated capabilities and technology there. So we're really excited about the growth path and the opportunity. Then finally, asset-based pricing. We've started a new paradigm to work on asset-based pricing to make sure our customers know the value proposition they're getting to try to align that with what they pay. It will take time. This is a multiyear process, but we've started down that path. So a lot of exciting things happening there, but back on to well into a double-digit growth profile.

We're just at time. Thank you for being here. We appreciate you guys. Thank you all for being here. I hope you have a good [indiscernible] conference.

Thank you all.

Good day, and thank you for standing by. Welcome to the Q3 2025 CoStar Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Rich Simonelli, Head of Investor Relations.

Thank you very much, operator, and hello, and thank you all for joining us to discuss the third quarter 2025 results of CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our Chief Financial Officer, I'd 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 fourth quarter and the rest of 2025 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 could 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 annual report on Form 10-K and quarterly reports on Form 10-Q included under the heading Risk Factors in these filings as well as other filings with the SEC available on the SEC's website.

All forward-looking statements are based on the information available to with 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, except as required by applicable law. Reconciliation to the most directly comparable GAAP measure of any non-GAAP financial measures discussed on this call are shown in detail in our press release issued today, along with the definitions for these terms. Press release is available on our website located at costargroup.com under Press Room. So please refer to today's press release on how to access the replay of this call. And remember one question during the Q&A session, so make it a good one.

And with that, I'd like to turn the call over to our Founder and CEO, Andy Florance. Andy?

Thank you for joining CoStar Group's Third Quarter 2025 Earnings Call. We achieved another excellent quarter for CoStar Group with third quarter 2025 revenue reaching $834 million, a 20% year-over-year increase. This is our 58th consecutive quarter of double-digit revenue growth and we're 1 quarter closer to potentially 100 sequential quarters of revenue, double-digit revenue growth. Stay tuned. .

Adjusted EBITDA in the third quarter rose to $115 million, up 51% over Q3 '24. Profit margin in our Commercial Information and Marketplace businesses increased to 47% for Q3 2025. Net new bookings totaled [ $84 million ], up 92% year-over-year. CoStar Group's residential real estate portals include Apartments.com, homes.com on the market and domain. These are all sites that help people find or market a residence. Assuming we own domain for the full third quarter, the revenue for the residential portals would now be $411 million in the quarter or $1.644 billion annualized.

Our residential portals revenues grew 22.7% quarter-over-quarter and 31.3% year-over-year. We expect synergies across these residential portals will continue to drive improvement in our margin profile and believe that long-term margins can operate at more than 40% adjusted EBITDA margins. Apartments.com delivered another strong quarter, surpassing $1.2 billion in annual run rate revenue and generating $303 million in Q3 revenue, an 11% increase year-over-year.

Apartments.com remains the preferred source for property managers and owners as reflected by a 99% monthly renewal rate, 99% monthly renewal rate and a 93 NPS score. Our high-quality proprietary content remains central to attracting consumers. Net new bookings rose 37% year-over-year in Q3. We added 4,200 new apartment communities in Q3. Our sales force has now grown to over 500 representatives, achieving our 2025 sales hiring target ahead of schedule.

In Q3, the team conducted 200,000 client and prospect interactions, with nearly half of them occurring in person, a 66% year-over-year increase in Q3. Our total multifamily property count now exceeds 87,000, an increase of 12,000 in 2025. Apartments.com network site visits totaled 223 million for the quarter, leads for specific models and units increased 64%, and our highest converting apply now leads rose 70% year-over-year in Q3.

In the single-family rental segment, we had 1.4 million availabilities and 260,000 paid rentals, up 51% year-over-year. Homes.com rental traffic grew 55%, underscoring the synergy between Apartments.com and Homes.com. Advertisers benefit from increased exposure across both platforms at no additional cost.

Turning to Homes.com. Homes.com is showing steadily accelerating revenue growth from an increasing number of revenue streams. Annualized net new bookings of Homes.com subscriptions rose to [ $16 million ] in the third quarter, up 53% year-over-year from [ $10 million ] in the second quarter of '25. That's actually quarter-over-quarter, up 53% quarter-over-quarter from [ $10 million ] in the second quarter of 2025, not year-over-year. Much more impressive what is Q-over-Q.

The net new annualized bookings in the third quarter represent 1,225% year-over-year increase. Revenue in Q3 increased 20% year-over-year. The number of net new subscribers add in the third quarter was 7,035, up 12% over the 6,280 net new subscribers added in the second quarter. In Q3, net new subscriber growth was 1,000% year-over-year. We now have over 26,000 subscribing agents. Just one of the many ways in which our business models appear to competing portals is our ability to provide service to a much larger number of agents than they can.

Competing portals in the United States business models of lead diversion limits them to selling to about roughly 5% of agents because they need to take leads from the other 95% of agents who are not clients so that they have something to sell to the 5% that our clients. In contrast, we can sell to well more than 50% of agents because we're not taking away leads from any agent. With LoopNet, CoStar and Apartments, we have shown that in many markets we're selling to well more than half of the players in that market. This is the advantage of creating a bigger TAM, but also creating more goodwill among agents.

In competing portal models, 95% of the agents are losing business because of the portal and 5% are gaining business. In our model, almost every agent can gain business because of our portal and that creates goodwill. Alignment with your clients build stronger and more durable brands. Sales of our Homes.com Boost product rose 136% quarter-over-quarter to $617,000 in the third quarter.

Homeowners are the primary buyers of Boost, paying on average $386 on a onetime basis to give their home for sale more exposure. At this point -- at this price point, the U.S. TAM for Boost sold to homeowners alone is already approximately $2 billion. When agents do buy a Boost for one of their listings, we see 25% of those agents convert to full Homes.com membership subscriptions.

We began selling enhanced exposure on Homes.com to new homebuilders on August 25. In the month of September alone, we sold net new annualized bookings for new homes of 498,000. In total, we've already sold 743,000 annualized buildings since August 25.

As Homes.com approaches our seventh quarter since launch, it is now the fastest-growing revenue product we've ever launched. So Apartments.com and CoStar now have more than $1 billion in revenue. They grew revenue at a much slower pace than Homes has in their first 7 quarters. Homes.com has now grown 50% more incremental revenue in its first 7 quarters than did Apartments.com in the same time period. We're continuing to increase the size of our Homes.com sales team. We now have 500 sales reps in production with another 150 in preproduction.

We've now added field sales, new home sales specialists and major accounts reps. We believe the highest and best function of a portal is to market real estate and that, that is the future of the industry. I do not believe that future revenue models for successful real estate portals will be based on either [ iBuying ] or lead diversion to buyer agents. Currently, as I mentioned, we have 26,000 subscribing agents and Boost clients, promoting 130,000 active listings on Homes.com, representing 6% of the active 2.2 million properties for sale in the U.S.

A recent analyst report from Citi say that they believe that a core product for Zillow going forward will be its showcase listing product and estimated in September '25 that Zillow had only 24,500 listings or approximately 1.1% of the active market. So we have 5x the number of listings marketed or Boosted on our site.

Citi further estimated that Zillow will have [ $13 million ] of revenue in the third quarter for showcase listings. So Homes.com is well ahead of Zillow in both revenue and listing count, which -- in what we believe is the primary sustainable revenue driver for successful residential real estate portals around the world. Our strategy is to grow the share of real estate agents and homeowners relying on us to bring more exposure to their homes for sale, and these numbers show that we're on the way to achieving that goal.

Our marketing campaign continues to build out audience and brand awareness. In August, unaided awareness was 42% and unaided intent was 28% that unaided awareness is up from about 4% we started. And as we -- and we are showing continued long-term upward trend in both categories. In the third quarter, the Homes.com network achieved 115 million unique monthly visitors. This led to 560 million total visits to the Homes.com network in Q3, up 7% compared to Q2.

According to comScore, unique visitor traffic to Homes.com rose 8.3% compared to a 6.5% decline at Zillow and a 0.7% decline at realtor.com. I'll just call that last part flat. comScore continues to rank the unique monthly visitors to the Homes.com network above either Realtor or Redfin. Our organic traffic in Q3 climbed 87% year-over-year. We continue to improve the quality and engagement of traffic to Homes.com achieving a low 24% bounce rate in Q3, which is a 64% year-over-year reduction in bounce rate.

Our average session duration increased to 4 minutes and 29 seconds in Q3, which is a 93% year-over-year increase. I believe that our efforts to put more than 70,000 Matterports on the sites is driving this deeper home, shopper engagement on our site. We are optimizing for quality of traffic from our [ SEM ] generating $112 million listing detailed page views from SEM in Q3 for a 374% year-over-year improvement. We achieved this improvement with essentially the same but a more efficient SEM spend. I believe we are about to see our products hyper accelerated by some of the most exciting facilitating AI technologies I could have ever imagined.

While we're already using AI throughout our organization, I am excited about the launch of AI SmartSearch on Homes.com and the future innovations at [ Four Shadows ]. Consumers can ask coms.com precisely what they're looking for in their own words. This allows for reasonably complex queries such as long conversational phrases with multiple geographies such as show me waterfront properties with a pool, with a balcony and a great view in Miami Beach and Fort Lauderdale starting at $1 million. This does away with having to deal with traditional filters and forms that are limiting.

If you're a coder, this is like giving people with no coding skills access to the power of full deep [indiscernible] queries against 10x the number of fields with just simple plain English questions. As a result, Smart Search is highly customizable, intuitive, fun and easy and more powerful. This is our own artificial intelligence capability we're engineering in, and we're doing it in partnership with Microsoft. In the third quarter, AI Smart Search has produced improved user engagement. So this new AI Smart Search is producing significant improvement in user engagement.

Users of AI Smart Search use 69% more search filters, viewed 37% more listing pages per session are 5x more likely return to the site within the following week. That's amazing and submitted 51% more leads after viewing a listing page. It's a more effective way to look -- find what you're looking for. We are now investing 50% of our Homes.com software development efforts in the fourth quarter and beyond towards building a range of AI-empowered features into Homes.com.

This is our single biggest commitment by far to any software development effort. This is an incredibly exciting time for Homes.com. All of our products have boundless new opportunities opened up by the enormous potential of generative AI. In the 4 decades that I've led CoStar product vision, a core principle of our success is leaning into new facilitating technologies to unlock their value for real estate. We were among the first to digitize real estate information, put real estate on a digital map, present digital real estate photos.

We're the first to incorporate DIGITAL twins at a scale. And we were actually the first to leverage the Internet for real estate. In fact, we actually bought CBRE, Cushman & Wakefield JLL, their first Internet accounts before there was even a Netscape or a Google around. AI offers transformative opportunities to unlock tremendous value in real estate. I believe few products are better positioned to cohesively capitalize on this opportunity than is Homes.com Apartments.com, LoopNet and CoStar. We have massive and proprietary real estate data resources. We have unmatched expertise in organizing and quality control in that information. We have leading expertise in how to make that information useful and relevant to real estate industry participants.

We believe that it will bring tremendous dislocation generally and open up huge new value opportunities, which we plan to exploit. While Homes.com is our initial priority for AI enhancement, we will apply the lessons learned to Apartments.com and all of our other products as quickly as possible. AI will impact top-of-funnel traffic acquisition. Real estate portals built on SEO foundations need to build strategies to acquire traffic from AEO, answer engine optimization and GEO generative engine optimization.

SEO remains the foundation of AEO and GEO though a portal's brand content context remain the key building blocks for success. Today, GEO is sub-1% of top-of-funnel acquisition. For example, 1 large U.S. real estate portal in the U.S. only draws 0.45% of its top-of-funnel traffic from ChatGPT. And another large portal in Australia only captures 0.15% of its top of funnel from ChatGPT. So brand traffic brand, direct traffic SEM, display, social e-mail, SEO and AEO remain 99.5% of top of funnel source.

These traffic sources remain important in generative AI future for sure and likely the majority, but GEO will become much bigger top of funnel traffic feed, and we will position our portals to capture that traffic. Many believe that traffic from GEO may be monetized the way Google monetized SEO with SEM. There's some huge AI GPU and energy bills to pay out there. I just spent a few days at the online marketplace conference in Madrid with dozens of real estate portal CEOs and digital real estate experts. All felt the competitive urgency to integrate the range of capabilities of generative AI into their portals.

But I did not find one person who thought that generative AI solutions would effectively meet the specialized needs of the real estate world. To be successful, there's a need to build specialized AI models around buyer personalization and profiles, data capture listing evaluation, computer vision, digital twin, searching, area valuation, lead management, advertising optimization, valuation and many other algorithms.

That is exactly the exciting work we are leaning into and embracing. There was a time when AOL, Yahoo! or eBay were ascendant and uniquely dominant and Microsoft and Google are still dominant though, perhaps, passed their zenith of dominance. All of these impressive general-purpose transformative technology innovations enthusiastically built real estate portals and tried to dominate digital real estate, all failed. They've now exited the space. Only eBay has anything left, and it's not much, which is a very [ physical ] thing.

Specialized solutions often leveraging these companies' capabilities repeatedly ultimately dominate the real estate vertical. I believe the past is prologue here. There are a number of incredible generative AI companies that are building in valuable tools. Those tools will be leveraged by specialized digital real estate companies to create specialized value. A specialized digital real estate company that does it best among them will unlock huge value for its investors.

CoStar Group is the largest digital real estate company in the world by market cap, is well positioned to win in an AI future. It's just a brief comment on AI. The Homes.com subscriber Net Promoter Score rose to 36 in the third quarter, rising 84% over Q2 '25. October to date, that NPS score continues to rise and is now at an outstanding 43. We're not done there. We'd like to get it up to apartments 93, but the progress is amazing.

It took less than 2 years for Homes.com to reach an MPS level that took CoStar about a decade or so to reach. As our NPS increases, so does our subscriber retention rate. In Q3 '25, our retention rate of subscribers we sold 6 months prior from Q1 to 2025 rose to 86%. The Q3 retention rate rose 7.5% from 81% retention in Q2 '25 and rose 39% year-over-year from 62% retention in Q3 '24 .

We are offering Homes.com subscribers the benefits of Matterports for their listings and agents tell us in focused groups that they really value that benefit. Member listings with Matterports captured nearly 40x listing detailed views of nonmember listings without matterports. That should be the objective of any real estate agent selling a home, get 40x as many people to inspect that home. In the quarter, subscribers who had a Matterport on a listing had a 37% higher renewal rate than those that did not.

It's working. We are enhancing our Matterport benefit to subscribers by offering a photorealistic 3D view with exterior of the house to complement the digital twin of the interior. This exciting new technology is called gaussian splatt and we capture it with a short drone flight around the house where legal. I would encourage you to view one live by looking up a home for sale at 5471 Country Club Parkway in San Jose, California, on Homes.com and view that Matterport 3D exterior. Eventually, the house will sell, and it won't be there anymore.

In recent focused groups, we are seeing success in raising real estate agent awareness that Homes.com is the only "your listing, your lead" portal. 51% of agents surveyed recognize "your listing, your lead" and overwhelmingly connected to the Homes.com brand. Agents dislike lead diversion expressed a strong preference for portal operating with "your listing, your lead" principle. As we continue to build that awareness, we believe that Homes.com will become the portal agents trust and most recommend to their clients.

Now I need to turn to an uncomfortable but important matter. Zillow is under siege facing an unprecedented wave of lawsuits. I'm not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instants, they collectively target the heart of Zillow's operations exposing alleged antitrust violations, widespread copyright theft and blatant consumer deception. With private plaintiffs and government regulators now alert to Zillow's misconduct, I predict even more aggressive legal and regulatory action in the months ahead.

There are 5 federal lawsuits filed against Zillow since June of 2025. First, Zillow threatened to permanently [indiscernible] that was publicly marketed but not put on the MLS within 24 hours. So if you put a sign for sale -- for sale sign in front yard and didn't put it on Zillow, within 24 hours, you're banned. You have a Facebook post, and don't put it in the Zillow in 24 hours, you're banned, pretty aggressive. It appeared that Zillow was targeting Compass. Zillow followed through and banned Compass listings that were not put on Zillow in 24 hours. On June 23, 2025, Compass sued Zillow exposing Zillow so-called Zillow ban for what it truly is a ruthless scheme to strangle competition, trap homesellers inside of Zillow's walled garden.

If Compass prevails and home sellers choose to -- where to list -- where and when to list their homes, Zillow could lose massive swaths of its inventory calling into question its lead diversion model. I believe that Zillow's actions pushed Compass in a defensively merging with Anywhere. When the Compass Anywhere merger is completed, the combined company will be, by far, the largest real estate brokerage in the U.S. as I understand, as many as 300,000 plus agents.

I'm pretty sure that Zillow just picked a fight it cannot win. Compass will have the most important listing content in real estate, and Zillow will need them a lot more than Compass need Zillow. We filed our lawsuit against Zillow on July 30, 2025 to put an end to Zillow's brazen theft and monetization of CoStar's intellectual property. Zillow undoubtedly has used content stolen from Apartments.com to unfairly build their rental business. The scale of this infringement is staggering. For context, in 2019, Xceligent was caught with 38,489 CoStar copyrighted photographs and the Federal Court awarded $0.5 billion in damages to us.

Zillow's conduct is even more egregious and we're determined to hold them fully accountable. Then in September, the Zillow was sued in a class action suite by a group of plaintiffs who allege that they were being deceived into overpaying hidden fees through Zillow's notorious Contact Agent Button. Don't push it. This case tears straight to the heart of Zillow's business model, laying bare a system built on deception. The complaint exposes Zillow's tactics saying Zillow actually directs the buyer away from the listing agent and directs the buyer to an unrelated buyer agent who lacks any specialized knowledge about the subject property.

And the [ follow-up ] isn't just limited to duped buyers, Zillow's lead diversion racket is bleeding home sellers by diverting their potential homebuyers to agents that may compete with their listing. Most recently, we're not done, hang with me, most recently, September 30, 2025, the United States Federal Trade Commission filed suit against Zillow Group and Redfin over a legal agreement to suppress competition. They state that the illegal deal stuns multifamily rental, advertising competition, harming American renters and property managers.

The FTC went on to say that the Zillow partnership with Redfin was nothing more than an [ end run ] around competition that insulates Zillow from head-to-head competition on the merits with Redfin for customers advertising multifamily buildings. The FTC is seeking injunctive relief meaning a potential unwinding of the deal. The lawsuit was followed up the next day by another lawsuit on behalf of bipartisan coalition of attorney generals from Virginia, Arizona, Connecticut, New York and Washington State.

You might assume that CoStar Group sees deals like this when they come up like the Redfin deal, my immediate and clear reaction would have been that, obviously, the FTC would not allow such an illegal deal in any effort to end run the FTC regulatory process would necessarily bring unnecessarily excruciating pain and damage to anyone foolish enough to try it. So we never would have pursued it. If Zillow is ordered by federal courts, the FTC or Attorney Generals of states [indiscernible] illegally gained apartment revenue and content, I believe, will seriously damage Zillow's reputation in the apartment industry.

These lawsuits will take years to resolve. The full extent of Zillow's contact as alleged in these complaints and the various remedies from these lawsuits is yet to be seen.

Moving to the United Kingdom. It was a strong quarter for -- on the market, our U.K. residential marketplace, with leads up 21% year-over-year in Q3 '25, we delivered significant ROI to our 16,000 subscribing customers there, bringing some Homes.com inspired features to on the market has resulted in positive changes to the site that are generating more consumer engagement. We are building an audience of serious property seekers with total page views up 24% year-over-year in Q3.

Average time on site per active user is up 79% year-over-year and lead to conversion -- lead to visit conversions are up 31% year-over-year. Net new bookings increased for the 17 months in a row and has delivered nearly $11 million of annualized net new bookings since its acquisition. We closed the acquisition of Domain in August. I'm excited to work with the Domain team and their customers to bring Homes.com, CoStar and LoopNet platforms to Australia. Domain's residential marketplace and commercial marketplace -- well, Domain's residential marketplace is very successful and generates more than 50% direct contribution margin.

Its commercial marketplace generates a 40% direct margin. Both marketplaces have long-term growth potential under the CoStar umbrella. The Domain brand is very well known in Australia, and there's significant potential to expand market share there, where homeowners invest significantly in digital real estate advertising. Domain has an excellent management team led by Jason Pellegrino, who knows the Australian market well, he used to be the MD for Google there and his vision for the business aligns with ours.

We have made fast progress since taking ownership of the Domain business on August 20, delivering 7.4 million unique users in September on Domain's residential platforms which was the largest number of unique users on Domain's owned platforms in its history. The quality of this increased audience was retained, delivering the highest consumer reviews per listing in Domain's history. We're on track to significantly beat those records in October. We have already delivered a 24% year-over-year increase in audiences on our commercial real estate platforms in Australia.

These strong audience results were driven by a mix of greater marketing investments supported by an improved mix of marketing investment across every step of the consumer journey, and rapid product improvement supported by a refocused product team and access to CoStar platforms, relationships and talent. Examples of product improvements already executed and planned with the first 60 days of ownership include improvements in platform speeds and latency, removal of all advertising interrupting the consumer experience and improvements in image quality.

A key highlight was the growth achieved in our audience metrics, where we saw domain apps average 138% increase year-over-year in downloads across iOS and Android allowing us to successfully overtake our main competitor in App Store rankings. Domain was previously constrained under its former media company owner. It received limited management focus, limited expertise and scarce resources, limited expertise in real estate marketplaces. It was operated with short-term EBITDA strategy, keeping it from competing effectively with a market leader, [ REA ].

We believe that with CoStar Group's technology and resources, Domain will compete more effectively and will achieve stronger, long-term profitability. A dozen members of my management team and I recently spent 2 weeks in Sydney for a deep dive into the Domain business and believe there are clear opportunities to make changes that will create value for our shareholders. Most of the significant software resources and products we offer, we believe, are compatible with the Australian market, and we can migrate Domain into them to create competitive advantage and cost efficiencies.

We hope to improve Domain's focus and profitability by rationalizing some of its product portfolio. Under prior ownership, Domain allocates significant resources to about 10 noncore initiatives at the expense of the highly profitable residential and commercial portals. I believe that most of the software development resources were allocated to products generating less than 20% of its revenue. We will refocus Domain's resources towards its successful scalable core and competing against its main competitor.

We expect to offer LoopNet Homes and CoStar in Australia within 18 months. There's currently, we believe, no equivalent to CoStar in Australia while Domain and REA Group offers products similar to LoopNet, I do not believe that they're on par with what LoopNet offers. This presents a significant opportunity for us to quickly establish a leading presence. The more I live with Matterport, the more impressed I am with this technology, how well it works and how useful it is to real estate.

Matterport creates a strategic advantage in both our residential and commercial product portfolios. Matterport Digital twins unlock value by bringing a new and important dimension of digitizing real estate in every product we offer. As part of CoStar Group, we see Matterport set on 2 pillars. On one pillar, Matterport is a stand-alone solution for industries such as insurance, construction, public safety, facilities management and similar, which we believe is by itself a multibillion-dollar revenue opportunity. In the second pillar, Matterport is brought to market as an integrated solution within our marketplaces and information solutions through our existing sales forces of 2,000-some people.

We believe that in the second pillar, Matterport can help CoStar compete and achieve more than $1 billion in incremental value. Integration of Matterport and the second pillar is well underway, and you can see deeper than ever integration of Matterport within our products. I believe that prior to merging with CoStar, Matterport was a world-class transformative technology held back by lack of focus on go-to-market strategy with an underscaled sales and marketing effort.

Matterport had fewer than 30 sales representatives globally, leaving many huge revenue opportunities untapped. We plan to expand the sales force by 200 by the end of '26 and drive accelerated revenue growth. Matterports Q3 revenue was 12% higher than our expectations, $44 million versus $40 million and our Q3 '25 net bookings were up 194% over Q3 last year. We emphasize new customer acquisition, which resulted in a 94% increase year-over-year in incremental new customer logos.

Our Matterport Max rollout for Apartments.com began at the NAA conference in June of this year. We've already sold over 530 Matterport Max subscriptions, which are adding upwards of 5,000 per year in annual subscription revenue per unit. We just completed a successful developer Summit and Hackathon with the Matterport team. Coming out of that, I'm very confident that we have an outstanding and innovative product road map that will delight our customers and for you all more importantly, our shareholders.

Turning to CoStar, CoStar generated $277 million in Q3 of '25 revenue, reflecting 8% year-over-year growth. Revenue growth has slightly improved in '25 as net new bookings remain strong. Per rep productivity in Q3 was at its highest since Q3 '23. Cancellation rates have declined over the past 2 quarters, and our renewal rate reached 93.3%, the highest since '23. Our subscriber count rose to 284,000 in the third quarter, up 20% year-over-year. Our lender business achieved a record quarter, closing $4.3 million annual net new bookings, with nearly almost just there $100 million in revenue and over 450 clients, including banks, credit unions, private lenders, regulators, insurers, CoStar for lenders has demonstrated strong success and has significant potential. Costar Lender has already uploaded over $1 trillion of loans into CoStar.

Clients' loan portfolios are securely upload to our SOC 2 compliant platform, unavailable to any AI scraper and integrated with CoStar's proprietary data analytics and credit modeling informed by our research and marketplace solutions. This comprehensive ecosystem delivers unmatched value for regulatory examines, asset examinations, asset allocation and responsible growth.

In '26, we plan to launch our benchmarking product and have begun developing a loan origination system, expanding our total addressable market. One of our core goals for all of our emerging businesses is to cross that so important $100 million revenue milestone. So congratulations to John Vecchione, [indiscernible] and the entire lender team, well done and dinner is on me.

LoopNet remains the world's largest and most active real estate marketplace, capturing 8.5x more searches than our nearest competitor. In the third quarter of '25, LoopNet achieved 10% revenue growth. Based on net new bookings from the last 3 quarters of '25, we expect the platform to deliver low double-digit growth next year. I firmly believe that LoopNet should and can return to 20%-plus growth -- annual growth rate soon. Our strategic focus has been on offering LoopNet advertising packages that enable clients to promote their entire property portfolios rather than just select assets.

The silver ads, their portfolio comprehensive design -- are designed to drive higher renewal rates, deliver strong ROI for clients, expand listing coverage and enhance both the consumer and customer experience. We are also continuing to roll out asset-based pricing for renewals aligning our service pricing with the value delivered to clients. International expansion remains a key pillar of LoopNet's growth. Many of the largest multinational companies in the world are heavy users of LoopNet, and we could provide them even more value if we are carried listings in more countries.

In August of '25, we integrated all French listings from Vera Loco into LoopNet, bringing the total number of European listings to 100,000 across France, Spain and the U.K. We could see major tenants like Amazon and many others, searching LoopNet for commercial real estate, not only in the U.S. but also in Canada, France, the U.K. and Spain. So they -- wherever we're going, they're searching. We will soon add Australia, as I mentioned, through our Domain acquisition, further growing our global reach. We believe that LoopNet can deliver more value to local advertisers if we're delivering a unique and valuable global audience with high buying power.

Our data consistently shows that properties listed on LoopNet sell and lease faster. For properties listed in January '24, 30% of those on LoopNet transacted while only 22% of those not listed on LoopNet transacted. For firms listing 90% to 100% of their listings on LoopNet, their 24-month close rate was 36%, while those not listed on LoopNet only had a 20% close rate. If a few hundred dollars invested in the LoopNet could increase your chance of transacting a commercial property by 80%, I believe that's a no-brainer.

Turning to CoStar Real Estate Manager and Visual Lease now support real estate lease management accounting, project management needs for 2,000 corporate clients, including more than half of the Fortune 500. Third quarter '25 revenue climbed 63% year-over-year to $30.6 million. The business is very profitable with growing margins. We are making good progress integrating CoStar Real Estate Manager with Visual lease and CoStar into one extremely valuable corporate real estate solution. We expect to launch lease benchmarking capabilities in mid-'26 creating a new level of transparency, helping investors, brokers, corporates and lenders gain a more accurate and timely understanding of CRE rents and potential income.

We expect to release an integrated product with real estate management CoStar Suite in '26, late '26, clients will be able to access comprehensive market data and gain visibility into previously unseen opportunities to optimize their real estate portfolios. This will allow them for a detailed analysis to make the most informed decisions that we believe will significantly drive significant ROI and cost savings for these clients. We shared our new product road map in our recent customer advisory meeting with major clients, which include real estate finance and accounting leaders, and we received very extremely positive feedback on the new product direction.

CoStar Group's European business continues to deliver record net new bookings reaching $5.7 million in Q3 '25 and $16.9 million year-to-date, representing a 51% year-over-year growth. The U.K. business achieved another record quarter with year-to-date net new bookings up 125% and revenue up 17% year-over-year. In France, our research team has curated over 260,000 buildings, 50,000 availabilities, 140,000 tenants and 60,000 sale and lease comps.

Business [indiscernible] now fully integrated into CoStar News reaches over 100,000 French CRE professionals monthly, and we're confident that CoStar will soon become the leading source for CRE data in France, connecting global and French investors. In closing, I believe that our results this quarter demonstrate that my colleagues here at CoStar Group are making great progress, continue to successfully grow our existing businesses while effectively investing into new real estate segments and new global markets.

With $350 trillion of real estate in the world, we believe we are creating value digitizing it with leading marketplaces and information solutions that can result in a $1 trillion addressable market with a deep moat, and we're busy building it one brick at a time. At this point, I'll turn the call over to our CFO, Chris.

Thank you, Andy. Good evening. I'm happy to report that CoStar has now posted its 58th consecutive quarter of double-digit revenue growth coming in at 20%. We achieved an impressive commercial information and Marketplaces brand margin of 47% in the third quarter versus 43% in 3Q '24. Net new bookings for the third quarter were $84 million representing a 92% increase year-over-year. Every major product contributed to this record as our growing dedicated sales force of over 2,000 people is delivering for CoStar. .

Revenue for the third quarter was $834 million, which included a $25 million contribution from the Domain acquisition. Revenue, excluding Domain of $808 million exceeded the high end of our guidance. Third quarter adjusted EBITDA came in at $115 million, also exceeding the high end of our guidance at a 14% margin. The outperformance in adjusted EBITDA was a result of continued expense discipline and better-than-expected revenue. Our CoStar products saw revenue grew 8% in the third quarter, ahead of our guidance. We are excited about this product's renewed growth, especially given continued volatility in the commercial real estate sector.

Net new bookings have steadily increased throughout 2025 and are now at the highest level seen since 2022. With this increasing momentum, we expect to see the CoStar product grow between 8% and 9% in the fourth quarter with full year growth firmly in the 7% range from our original guidance of 6% to 7%. Residential revenue was $55 million in the third quarter with $23 million coming from the Domain acquisition. The $32 million in organic revenue was consistent with last quarter's guidance.

With the addition of revenue from Domain, we now expect fourth quarter revenue of $100 million to $105 million with Domain contributing around $67 million. For full year 2025, we expect residential revenue to more than double to $210 million to $215 million from $101 million in 2024. Apartments.com's third quarter revenue growth came in at 11% year-over-year. Our Apartments.com sales reps are consistently the most productive of our large brands, and we have increased the size of this team by 20% year-to-date.

We now have more than 500 Apartments.com sales reps for the first time in its history. These reps will take time to ramp up their productivity but this investment puts us in a great position for longer-term growth. For 4Q '25, we expect 11% to 12% revenue growth, resulting in full year 2025 revenue growth of 11% to 12%. LoopNet revenue grew 12% in the third quarter with a 2 percentage point lift from the Domain acquisition.

LoopNet's organic performance was in line with last quarter's guidance. Our sales team is consistently outperforming prior productivity levels. And in conjunction with the demand contribution, we now expect 4Q revenue growth of between 15% to 17% and full year revenue growth of 10% to 11%. On an organic basis, 4Q revenue growth is expected to be 11%, its highest growth rate since 2023.

This acceleration throughout 2025 sets us up nicely for 2026. Revenue from information services was $41 million in the third quarter. We expect fourth quarter revenue to be consistent with the third quarter and full year revenue growth of between 18% to 20%. We are excited about launching our new rent analytics product in the first half of 2026 and our new lease platform in the fourth quarter of 2026. Other revenue was $78 million in the third quarter with Matterport contributing $44 million. For the fourth quarter, we expect other revenue to range between $70 million and $72 million. The fourth quarter is expected to be slightly impacted by revenue recognition timing for 10x and lower [ camera ] sales at Matterport as we sunset the Pro 2 camera.

As previously stated, adjusted EBITDA for the third quarter was $115 million, meaningfully above the high end of our $75 million to $85 million guidance. The favorable performance came from higher-than-projected revenue, higher-than-anticipated professional service -- I'm sorry, lower than anticipated professional service costs and greater-than-expected headcount savings as we remain laser focused on expenses.

Our contract renewal rate was 89% for the third quarter, with a renewal rate for customers who have been subscribers for 5 years or longer holding steady at 94%. Subscription revenue on annual contracts was 75% for the third quarter, the acquisitions of Matterport and Domain are the driving factors for the change in our subscription revenue metric.

Our September 30 balance sheet included $2 billion in cash, which earned net interest income of $26 million in the third quarter, a 4% rate of return. We repurchased 576,000 shares in the third quarter for $51 million, bringing our year-to-date total to 1.4 million shares repurchased for $115 million. We expect to purchase approximately $50 million of additional shares in the fourth quarter, bringing our 2025 total to approximately $165 million of the $500 million share repurchase authorization.

We closed on the Domain Group acquisition on August 27. The total consideration was USD 1.9 billion. Domain contributed $25 million of revenue for the stub period from August 28 to September 30. For context, around 90% of Domain's revenues is residential, while the remaining 10% is split between commercial marketplaces and information services.

With 9 months of 2025 in the books and with the closing of Domain, we now expect full year revenue of between $3.23 billion to $3.24 billion, broadly in line with our guidance, excluding Domain. Fourth quarter revenue is now expected to be between $885 million and $895 million. Full year adjusted EBITDA is now expected to range between $415 million and $425 million, with Domain contributing approximately $15 million. This $25 million increase in our guidance, excluding the impact from Domain is indicative of our strong third quarter performance. Fourth quarter adjusted EBITDA is expected to range between $150 million and $160 million. And with that, I will now turn the call back to our call operator to open the lines for questions.

[Operator Instructions]

Our first question comes from Pete Christiansen with Citi.

Nice results, guys. Good trends here. It's interesting. I was looking across the last 8 years and sequential change in bookings excluding COVID, until 2020 was roughly 15%. This quarter sequential change in bookings was 10% down. So clearly, the new sales force capacity is contributing and other things also contributing to some of that growth being above seasonality.

But just curious if you could point out any seasonal behaviors that you noticed maybe a special attention on the residential side. Are agents canceling now, planned to come back later? Are you seeing the same type of seasonality that you normally see in the apartments business. Just any deeper thoughts there would be helpful.

Sure. And I guess you got the first question because we source Citi during our script. But the Apartments.com does have seasonality. And as you know, the prior quarter, you have usually unusually large sales because of the NAA event where people, major property managers do their annual purchasing for the year to come. And we would expect some limited seasonality from residential agents as they get to year-end holidays and the like. Their peak season is the spring selling season. .

But what we're seeing right now, if I look at a line of our sales production at Homes.com, it is a very linear line and the only seasonality in that sales line is Saturday and Sunday. So it's a very smooth progression up right now, and we're not yet seeing seasonality. And maybe in the Christmas holidays that you might get something but not yet.

Our next question comes from Stephen Sheldon with William Blair.

Just wanted to follow up on that question. I guess, can you just give more detail on the sequential booking trends in the third quarter as we look at the core businesses, so looking at Suite, Apartments.com and LoopNet. And then just how are things shaping up in the seasonally important fourth quarter on bookings, especially with a bigger sales force and the ramp in productivity. So yes, just what are you -- how are you thinking about the bookings trajectory into 4Q.

Chris?

Yes. So I think as you...

I didn't [indiscernible]

I think what you see is you see our full year guidance, you see our sequential trends. We're very pleased with the bookings. And I think we're just getting started from the sales force expansion, all those sales force came in at the end of the first quarter, second quarter, et cetera. So productivity takes time to ramp. But seasonality and what we're modeling is pretty much in line with what we're expecting. And therefore, you saw the increase in our full year guidance and our expectations. And so I think we're on track from what we're expecting.

Yes. And I do want to point out that from -- remind everyone that from the bookings at Homes.com from Q2 to Q3 was up 53%. So as we're going into the third quarter, we're seeing a significant uptick in bookings at Homes.com. And again, because of the number of people, a very smooth upward growth trajectory.

Yes. And just to expand a little further at CoStar's trends very positive, where we're seeing reacceleration there, which we're very excited about. We talked about LoopNet and we talked about LoopNet and what's going on there. And on Apartments, as I said, the trends are as expecting as modeled. So I think we feel really good on the underlying trends and resulting in our change in guidance.

Our next question comes from Ryan Tomasello with KBW.

At Apartments.com, in terms of bookings, can you say how those performed sequentially versus, I think, $45 million in the second quarter. And looking at the guidance for the fourth quarter, Chris, I think you're calling for 11% to 12% on multifamily, which would be pretty unchanged growth from the third -- I'm sorry, from the -- yes, from the third quarter. Just curious what's driving that despite the ramp in the sales force and just generally how you're thinking about demand trends at Apartments.com heading into the end of the year.

What's important is what you saw across a number of funds. One, we continue to see rooftop expansion in Apartments.com. We're expanding the sales force. We've talked historically about the seasonality or what the contributions on a quarterly basis as we look at back historically, with the second quarter being the largest quarter, the third and fourth quarter as being relatively similar, although there can be an uptick in the fourth quarter. So I think we feel generally good about the trends, which has resulted in our numbers and our forecast. But obviously, solid growth, increased rooftop expansion. And then that's actually across all segments, 1 to 49, obviously had a pretty significant increase year-over-year and then both 50 to 99 and 100-plus also showing growth at or higher than what we've seen over the last 4 or 5 quarters.

And Ryan, did I mention that the FTC was suing our competitor.

Yes, I thank I caught that Andy.

I just want to make sure.

Our next question comes from Curtis Nagle with Bank of America.

I guess, Andy, I just wanted to go back to the point. So you're investing 50% of your software costs now into AI. I guess where are you directing those expenses from? And I guess, any thoughts you could give on how to think about total expenses for '26 for Homes.com?

I thought you'd never ask. The -- those -- the 50% of our software development going into AI features in Homes.com is an allocation of the existing resources. It does not reflect an increase in total spend. So as we go into any particular quarter or season, we're always looking at what are the headline investment initiatives going to be. We are most excited about the potential of these AI features and functions, which are just remarkable and awesome. And then we look at 2026, we anticipate, I would say, same or lower spend on Homes.com investment in '26. Do you agree with that, Chris, or are you going to go?

You're the CEO. I agree with whatever you say, Andy.

Okay. Great. . Yes. But we don't see any -- other than the increased sales force size that we've already baked in that roll over to '25, the costs are not materially going up in any way I see. .

Our next question comes from Brett Huff with Stephens.

Can you detail a little bit, unpack a little bit the bookings number that you gave us for Homes.com which we appreciate. Just in terms of rep productivity, are the newer folks getting more up to speed? Do we still have more of those folks get up to speed? Pricing sort of any of the numbers that go into that bookings number would be super helpful as we try and tweak our model.

Sure. So we are in a period of remarkable headcount growth at Homes.com. We've never seen anything like it, where you have classes of 100-and-some coming in at any given point. That is difficult to manage, you would fully expect you'd see a drop off in per person productivity as you bring that many people in. But we are seeing that consistent -- we're seeing consistent growth in those bookings. And what was the second part of the question?

Productivity.

Yes. So the productivity is still -- we're seeing a very positive ROI at each incremental salesperson added, but you are seeing the effects of so many people coming in, and we are slowing the growth or we believe sort of have capped the growth of salespeople to allow for training and onboarding to catch up.

Right? And we haven't made adjustments to pricing to improve....

Slight increase in pricing in this quarter over prior quarter, but we're focusing on penetration, as you can see. .

Our next question comes from [indiscernible] with Deutsche Bank. .

Yes. Andy, you mentioned in your opening remarks that you think that you can get to 40% profitability or margins on the residential business. I'm curious how you think about the time frame on that? And sort of what needs to happen for you to get there?

Yes. So the residential business, obviously, you have Domain in there you have -- on the market. You have Homes in there. You have Apartments.com. And [indiscernible], you see us adding components to it through time. But when you look at our business model that's uniform across all 4 of those platforms. It is around marketing the real estate. If I look around the world at all of the precedent models that use marketing real estate as their core business, it will be a Rightmove, or Idealista or SeLoger or REA Group and the like. They all operate up at margins that are typically around 50%, in some cases, high as 75%. .

so it's really continued blocking and tackling over the next number of years. I don't have a specific date for that. But when I look at our -- when I look at the margin numbers for the combined residential businesses, I like the progression of EBITDA margin that I see in that group of companies. You can combine all these things together this way or that way. But when you look at them, I think they're making good progress towards our intermediate to long-term margin goals.

Thank you. I would now like to turn the call back over to Andy Florance for any closing remarks.

Well, I think I think our participants on the call today have probably modeled good behavior in keeping it brief. I'll try to be brief in my next set of comments. But thank you guys for joining us. We're very excited about what's happening here at CoStar Group, and we look forward to updating you in 2026 for our next earnings call. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.