CoStar Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the COSTAR full year and fourth quarter 2020 group earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. I would now like to turn the call over to your speaker today, Mr. Bill Warmington. Please go ahead, sir.

Thank you, Angela. Good evening, and thank you all for joining us to discuss the fourth quarter and year-end 2020 results of the CoStar Group. Before I turn the call over to Andy Florence, CoStar's CEO and founder, and Scott Wheeler, our CFO, I would like to review our safe harbor statement. Certainly, certain portions of the discussion today may contain forward-looking statements, including the company's outlook and expectations for the first quarter and full year 2021. Forward-looking statements involve many risks, uncertainties, assumptions, estimates, and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include but are not limited to those stated in COSTAR's press release issued earlier today and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q under the heading risk factors. All forward-looking statements are based on information available to COSTAR on the date of this call. COSTAR assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise. Reconciliation to the most directly comparable GAAP measures of the non-GAAP financial measures discussed on this call, including EBITDA, adjusted EBITDA, non-GAAP, net income, and forward-looking non-GAAP guidance, are shown in detail in our press release issued today, along with definitions for those terms. The press release is available on our website, located at costargroup.com, under Press Room. As a reminder, today's conference call is being webcast, and the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call. And with that, I would like to turn the call over to our founder and CEO, Andy Florence.

Thank you. Well done, Bill. You really did that preamble beautifully. And I have to say, I'm reflecting that In your career, you've probably listened to easily 10,000 earning calls, and now you're actually reading the preamble. So, you know, hang in there. This is a big day for you. Okay. Well, good evening, everyone else, and thank you for joining us for CoStar Group's fourth quarter and full year 2020 earnings call. And I just assume all of you are as excited as I am to be here tonight. So welcome. Welcome. total revenues for the full year 2020 were 1.66 billion which is a 19 year-over-year growth rate and 9 million ahead of the top end of our guidance range given in late october quarterly sales bookings were a solid 49 million with second half bookings rebounding 24 percent versus the first half of 2020. our profit performance was equally strong delivering full-year 2020 adjusted EBITDA of $553 million, an increase of 9% year over year, and $23 million above the high end of our guidance given in October. What I believe is even more impressive, despite the severe disruption of our customers and our teams caused by the pandemic in March, is that our financial results are either in line with or exceed the initial full-year guidance forecast we provided in February of last year. CoStar Group is absolutely a resilient business. In addition to the strong financial performance of our businesses in 2020, over the course of the year, we raised $1.7 billion in equity and launched our initial $1 billion bond offering with an investment grade credit rating. Our marketplace businesses, particularly apartments.com network, hit record highs across all of our metrics. We also closed three important acquisitions in 2020, 10X, Imports, and HomeSnap. 10X positions us with nearly perfectly counter-cyclical business and an opportunity to leverage digital marketplaces into greater commercial real estate liquidity. Imports extends our reach with content on hundreds of thousands of properties around the world. With the addition of HomeSnap in December, we expanded our addressable market beyond commercial real estate into residential. Overall, 2020 was clearly a transformative year, and as we look ahead to 2021, our strong balance sheet and acquisition track record position us to successfully pursue multiple large growth opportunities through organic investment and M&A. Before we get further into our results, I want to briefly address where we stand with our recently announced offer to acquire CoreLogic. One week ago today, we delivered a letter to the Board of Directors of CoreLogic setting forth the terms of a superior proposal to acquire CoreLogic. Under the terms of the proposal, CoreLogic shareholders would receive 0.1019 shares of CoStar Group common stock in exchange for each share of CoreLogic common stock representing a value of approximately $95.76 per share based on CoStar Group's closing share price on February 12th, 2021. As I describe the CoreLogic offer, I'll be using that closing share price and all the share prices relative to that day. The CoStar proposal implies pro forma diluted ownership of approximately 16.2% in the combined entity for current CoreLogic stockholders. CoStar Group's offer is clearly superior to offer to the CoreLogic shareholders in immediate value. Our all-stock merger with CoreLogic improves the value of their pending transaction with StonePoint by 20% based on the date of the offer. More importantly, we believe that with hundreds of millions of dollars of identified synergies, which I will discuss in a bit more detail, the implied ownership of our proposal provide substantial value upside, which we believe would deliver value in excess of $105 per share to CoreLogic stockholders over time. CoStar's group stock is a solid currency and has performed exceptionally well through the decades, driven by solid fundamentals, such as our compound annual revenue growth of 21% over the past 20 years, similarly 21% over the last 10 years, and 19% over the last five years. With consistent growth and a huge addressable market, CoStar Group share price has appreciated 496% over the past five years, 1,491% over the past 10 years, 3,640% over the past 20 years, and 10,342% since our IPO. CoStar stock has consistently proven equally as valuable as cash. In addition to our all-stock offer, we plan to invest approximately $2 billion to pay down CoreLogic's existing debt and another $500 million to $1 billion to unlock the value of the company's assets. We believe the combination will create long-term growth opportunities that will help support double-digit revenue growth for the combined company for many years to come. This combination would triple CoStar Group's total addressable market, by combining the global leader in digitizing commercial property with a global leader in digitizing residential real estate. We estimate that globally, commercial properties have an aggregate value of $66 trillion, and residential properties have an aggregate value of $114 trillion. Combined, these companies will be very well positioned for growth, meeting the information analysis and marketing needs of the $180 trillion global real estate industry. The global value of real estate is twice the value of all public companies combined. We believe that we can significantly accelerate CoreLogic's organic growth rate. CoStar Group has a well-established track record of acquiring slow-growth companies constrained with single-digit organic growth rates and have managed them to become fast-growth companies with double-digit organic growth rates. In the three years prior to CoStar Group acquiring LoopNet, revenues on average were negative 2.3% a year. In the past two years, LoopNet has grown almost 20% a year, and already we have grown LoopNet's revenue more than fourfold since acquisition. In the three years prior to acquiring Apartments.com, revenue grew at 7.7% a year on average, In the past three years, Apartments.com has grown almost 30% a year on average. Already we have grown Apartments.com's revenue by more than 6.5 times. We believe that with product enhancements, new products, more direct selling, cross-selling, selling to new audiences and segments, and integrated product offerings, there's a similar opportunity to significantly increase CoreLogic's organic growth rate. CoStar Group is the perfect strategic partner for CoreLogic, and together we can drive transformative innovation. CoStar Group provides commercial real estate solutions, and CoreLogic provides distinct residential real estate solutions to brokerage firms and real estate agents, banks, lenders, local, state, and federal agencies, property owners, developers, investors, appraisers, and firms, selling solutions to the people and companies that use real estate. A very large percentage of these organizations have an interest in both residential and commercial, but today have to purchase different solutions from CoStar Group and CoreLogic to meet their complete real estate needs. Using disparate point solutions is inconvenient and reduces the value of the respective offerings. This is a strategic acquisition that will provide our combined clients with integrated solutions across all the relevant real estate sectors. The The combined company expects to eliminate the artificial difference between commercial and residential real estate digital solutions. We believe that these integrated solutions will create massive cross-selling opportunities, significantly increasing product uptake, sales, and hundreds of millions in revenue synergies. CoreLogic has approximately 150 professionals in its sales organization, and CoStar Group has... 1,600, 1,060, I'm sorry. There's 1,060 in CoStar Group, 150 in CoreLogic. In combination, when you put these companies together, we have the resources necessary to realize the potential cross-selling opportunity. We believe that many of the solutions CoStar Group so successfully offers today, which are only delivered to commercial real estate, can be extended into residential real estate, Marketplaces like Apartments.com and LoopNet are just two examples of these sorts of opportunities. Conversely, many of the products CoreLogic only offers to residential audiences today could also be offered to commercial real estate audiences. Property tax solutions, appraisal management, simbility, flood data solutions, and building cost data are just a few examples of these sorts of opportunities. We believe that by leveraging existing technology assets into new segments of real estate, the combined company can create additional significant new cross-selling revenue synergies. Further, we believe that we can achieve all these synergies while significantly reducing the volatility of CoreLogic's revenue, which has historically experienced exposure to market cycles. Much of CoreLogic's revenues are reoccurring, but that's very different from being subscription revenue. Reoccurring revenue is volatile, while subscription revenue is much less so and has greater visibility, which allows CFOs to sleep better at night. CoStar Group has a track record of acquiring businesses with seasonal or cyclical revenue variances associated with reoccurring revenue and converting these businesses to predictable and stable subscription revenue. 80% of CoStar's revenue is subscription-based, up from 67% five years ago. LoopNet, Apartments.com, 4Rent, and Apartment Finder were all businesses with only reoccurring revenue. In aggregate, we have now converted the vast majority of the revenue in those products to predictable subscription revenue. We sell our information services to banks for commercial loans, origination, and surveillance on a subscription basis. while CoreLogic sells on an on-demand basis or on a recurring revenue basis. We believe there is a clear opportunity to convert that revenue and other CoreLogic revenue into more predictable subscription revenue. Since CoStar Group and CoreLogic serve very different industry segments with cycles that are generally not correlated, combining the companies will further diversify the revenue sources and create a more stable combined revenue stream. In addition to these attractive growth and revenue synergies, there are significant cost synergies in this combination because there are probably hundreds of millions of dollars in duplicative costs. CoStar Group provides commercial real estate solutions and CoreLogic provides residential solutions. And while the solutions that CoStar Group and CoreLogic provide are completely different, both companies invest heavily in very similar underlying technology processes that collect and create real estate information including property data, photographs, drone imagery, maps, aerials, market analytics, and analytic models. The basic technology required to search for listings and display data and photos on a map are the same, whether the properties are office buildings or houses for sale. CoStar Group and CoreLogic combined will have nearly 10,000 personnel, software developers, researchers, and photographers, all collecting similarly structured, distinct, but related real estate content. In combination, there's vast potential to duplicate processes and achieve significant cost synergies. Considering both revenue growth and cost synergies, a combination of the existing CoStar business with CoreLogic would result in 150 million to 250 million annual run rate EBITDA synergies. These synergies alone are worth over several billion dollars of value, for our stockholders. Throughout this process, CoreLogic's advisors, our advisors, analysts, reports, and major CoreLogic shareholders who have done the analysis have agreed that there's little antitrust risk in this combination. CoStar Group provides commercial property listings and analytics to commercial real estate brokers and owners and internet marketplaces for lead generation for commercial properties for lease and sale. CoreLogic, on the other hand, aggregates publicly available property tax assessment data, publicly reported sales and mortgage transactions to provide various solutions needed in residential real estate. In addition, CoreLogic provides multiple listing services and the software and hosting services they need to manage residential listings. Our respective companies are in completely different markets. CoStar and CoreLogic do not compete with one another in any way. No client or prospect ever chooses between buying a CoreLogic solution versus buying a CoStar Group solution. They cannot because our products are completely different. Given the presence of multiple providers of the publicly available data CoreLogic resells, there are simply no meaningful antitrust concerns in our view. We believe that our February 16th proposal to CoreLogic would provide great value to the stockholders of both companies. We're very excited, and we believe that the staff of both companies are very excited to have the opportunity to unlock the amazing possibilities this potential combination could create. The next steps involve CoreLogic's board making the determination that CoStar's offer is the superior office. Let's try that again. The next step involves CoreLogic's board making the determination that and I hope they do soon, that CoStar's offer is the superior offer. After that, StonePoint, I believe, will have the opportunity to improve their offer. We sincerely hope we can move forward without delay, as I am confident that we could complete a deal rapidly, and we expect the transaction could close within four to 12 months. At the end of this call, we look forward to taking your questions on our results that we're announcing today. but we will not be taking any questions on CoreLogic, the offer, or the possible transaction. I hope you can understand that the process we're engaged in at this point is very sensitive, and open Q&A is not appropriate at this time in this forum. Thank you for your understanding on that. Now let's get on to the rest of our earnings call. Despite all the dislocation and anguish of the pandemic, 2020 was a record year for our marketplaces and especially for Apartments.com. People need a home in a pandemic more than ever. Virtual shopping and Apartments.com provide a safe alternative to touring apartments in person. More renters than ever are looking for a new apartment and more research is taking place from home, with renters taking advantage of the innovative virtual search tools available on Apartments.com and our network of websites. Renters took a breathtaking 170 million virtual tours on our site in 2020, twice as many as the year before. As you're aware, Apartments.com has turned in strong performance several years in a row, and in 2020, we significantly increased our marketing spend to a record $221 million, up 44% versus 2019. We will not be increasing it again this year. In fact, it's down a touch. The increased spend was clearly exceptionally effective, resulting in record site traffic of 1 billion network visits, according to Google Analytics, a 20% year-on-year. This extraordinary milestone reflects the company's unmatched growth and investment, garnering over 160 million more visits than last year, strengthening our position as the nation's leading network with more visitors than all other competitors. In total, visitors to apartments.com viewed nearly 10 billion property pages in 2020. When we look at the ComScore stats, which allow us to compare against peers, the apartments.com network had annual site traffic growth of 17%. In comparison, RentPath grew its total network site visits by 9%. I've heard others quote stronger growth, but those must be internal numbers, let's say, because we're not able to collaborate them externally. For apartments.com, our record traffic translated to record annual net new sales that was up 35% versus 2019, and a full year record 2020 revenue of $599 million, a gain of 22% year on year, and an addition of $120 million on a Q4 run rate basis. We expand the number of advertising properties by 10% year over year, adding over 5,000 new advertisers. Clearly, all of our initiatives are paying off from our expanded sales force of the mid-market to our efforts to better serve the independent owner market. Just one year after launching our online rental tools, Apartments.com is processing nearly $18 million in monthly new rental payments and over $355 million in monthly rent in combination with our cozy platform rental payments, which we are migrating into Apartments.com in the near future. That is $5.4 billion in annual rent payments now, which is a great start to build from in the years ahead. We were disappointed that we were not able to close our proposed acquisition of RentPath, but believe our time and money was ultimately very well spent in the process. We in RentPath recognized going into the proposed acquisition that the antitrust hurdle could be significant since we were clearly competitors. The fact that RentPath was bankrupt made the failing firm's defense a possible viable path. The inflection point first came down to our learning of a non-public rumor that a household named Internet Giant shared their plans to launch a marketing solution that would be more directly competitive with both us and RentPath. While the Giant intended to partner with us, they would clearly provide a potential competitive alternative. We felt that in the face of the giant entering this space, it was unlikely that the FTC would find that Renpath standalone represent any material or significant competitive impact. Hence, we felt the deal was likely to clear. However, during the process, the giant drew significant antitrust scrutiny of their own, and we have reason to believe that in conversations with the government, the giant pledged not to enter our space. As a result, three things happened. One, the giant did not enter our space, which is really good news. Secondly, the antitrust analysis and acquisition of RentPath shifted out of our favor, which was bad news. Third, in the FTC's opinion, they stated that their investigation concluded that Zillow was not an effective competitor to Apartments.com, which we enjoyed. So as a reward for the nearly a year we spent on RentPath, we had four of the five best-selling quarters in the history of Apartments.com, sold an all-time high of $37.5 million of new sales in the second quarter of 2020, and added over 5,000 new advertisers to our platform to the year end at $57,828, and had over one-third of the properties that began the year advertising exclusively on RentPath decide to switch their marketing to Apartments.com. So I think you'll agree that all in all, including with a break fee, it was not such a bad outcome for the process. CoStar Suite enjoyed a strong finish to the year, recovering nicely after a brief pause earlier this year when we entered the pandemic. From a low base in Q2, CoStar Suite has doubled its net new sales for the second quarter in a row, demonstrating the resilience and mission-critical nature of the product. A number of important CoStar product enhancements we invested in during 2020 are coming to fruition, and we're just now beginning to roll out some groundbreaking new functionalities. We just launched the integration of a wealth of commercial mortgage-backed security, CMBS information, into CoStar. This continually updated CMBS information provides valuable insights into more than $1 trillion of outstanding commercial loans made to 100,000 commercial properties. This adds very valuable information on 90,000 of some of the largest commercial leases or tenants. It enables our customers to gain additional visibility into lease expirations and actual rental rates. Clients can use this information to attract new clients and influence their pricing or leasing decisions. The new information also prevents regularly updated detailed building operating cost statements on 40,000 large properties. This information is very valuable to investors, tenants, brokers, and developers who need to understand what like operating costs might be in a new property or or as a performance cost comparison for properties that are already owned, leased, or managed. Another important new value we're now bringing to our clients is new visibility into the distress in thousands of properties. This visibility gives brokers, investors, and even our own 10X salespeople insights into who may be pushed into divesting a property soon, or who may not have the ability to fund necessary tenant improvements, or who might be able to pay leasing commissions in a deal. This information is enhanced by the high frequency market data CoStar provides on new leases and vacancies that are leading indicators as to whether or not the credit on certain loans is improving or deteriorating. This newly integrated CMBS data gives our lender and mortgage banking clients great data on maturing loans, refilling opportunities for them to originate new loans. All this information adds additional value to our market economic analysis tools. With future releases, clients will be able to monitor over time geography and property type, overall new origination trends, default trends, expense trends, rental rate trends, and a lot more. I'd like to give a big shout out to John Vacchione and his team for the great work they've done here. Another 2020 development initiative has been to integrate the STR data into CoStar Suite. We've moved very quickly on that acquisition. Before I describe that, let me just say that in the year which has brought the hospitality industry to a complete standstill, the performance of STR has been nothing short of miraculous. Client retention was 97%, and subscription revenue in Q4 actually grew 5% year over year, despite hotels seeing occupancy rates fall about 80% during the dark days of the first half of 2020. So again, STR, like the rest of CoStar Group, is resilient and appears to be almost counter-cyclical, but certainly downwardly resistant. In the first quarter of 2021, we'll be launching the hospitality data embedded into CoStar Suite, which we believe will be of significant interest to the 4,000 customers and 11,000 prospects we have that are exposed to the hospitality industry. Combining the CMBS tool with STR data also creates a powerful tool for distressed assets So the timing of our product launches is ideal. Our significant product enhancements include 250 new hospitality-specific fields such as occupancy, average daily rate, and rev far, 90,000 new and enhanced hospitality property records, 50,000 new hotel sales comps enhanced with relevant data including brand, parent company, and operator, and 22,000 new architectural quality hotel photos. The most valuable aspect of this integration of unique high-frequency STR, fully anonymized hospitality data, I'm sorry, hospitality performance benchmarking data, is the trend in market analysis value it will bring to our clients. For the first time anywhere, ever, our clients will be able to see aggregated hospitality performance by geography and profit class through time. This is daily reliable trend information on occupancy and occupancy and rental rates, and all that stuff is super valuable to investors, lenders, and operators who need to understand the risks and opportunities in these asset classes. There will be another major STR upgrade and integration to CoStar later this year that will allow our benchmarking clients to access their information in CoStar in a dramatically more powerful and valuable way. We think that our new hospitality clients will value seeing their performance in a much broader context of a wealth of hotel inventory, sales comps, market analysis, and forecasts. And also, the new product will have portfolio-level analysis for our clients. I feel our STR team is doing some very inspired work in this area, and I'm confident that our STR clients will feel that we have delivered beyond expectations and our promise to enhance the STR technology platforms. Finally, an update on the launch of our international product. Later this quarter, we expect to launch a new international polyglot multi-currency and imperial metric version of CoStar. We plan to open up the commercial real estate information our clients see from being domestic only to international. A client who as to now has only seen London data will now open up CoStar and see news, information, and analytics in the U.S., Canada, Europe, and the rest of the world. Much of the institutional capital flow in commercial real estate is cross-border. In fact, the majority of it. But until now, the information systems have been largely local. We think this change to our product will have a profound impact in the long term on the value we can deliver to investors, tenants, and brokers that work across borders. As the pandemic travel restrictions ease in the future, we intend to initially further expand the breadth of information we provide on 15 additional European markets. The integration of the global and poorest data is going very well, with 195,000 properties now loaded into CoStar Suite. The international data sets and a number of our enhanced features are only available to our CoStar Suite customers and are not available to those customers that only subscribe to our CoStar comps, tenant, and property modules. Over the course of the next 12 to 18 months, we're going to focus intently on reaching out to the thousands of firms that only subscribe to a subset of the CoStar product and upsell them to the full capabilities of the full CoStar suite product. We believe this upsell effort will be a significant revenue accelerator for CoStar. Ultimately, because we can provide our clients more value, more cost effectively by only producing the one suite product, we intend to sunset selling the individual modules of CoStar. All of these new features and future releases we're currently working on give tens of thousands of prospective CoStar clients One more reason why they really should subscribe to CoStar. Strong Q4 performance capped a breakout year for LoopNet that demonstrated the business's growing traction in counter-cyclical characteristics. I believe the single most effective way to market commercial real estate today is online using the LoopNet marketplace and its massive audience of millions of engaged tenants and investors. In 2020, we saw strong growth across all levels of our LoopNet advertising solutions. We have achieved strong success and high penetration with our standard advertising levels, and we are increasingly focused on driving revenue by selling differentiated ads to our clients that deliver more reach, frequency, and branding benefit than our standard ad levels. On average, our top level of diamond ad receives 170 times more exposure than does a standard ad. In addition, it receives nearly twice the frequency or repeat exposure of a standard listing. With our new investments in retargeting, we identify the most engaged prospects viewing Diamond ads, and we, on average, achieve a remarkable repeat frequency with them of 172 times on a monthly basis. That is excellent marketing saturation for our clients. Our top-tier ads, Diamonds, Platins, and Golds, provide unrivaled benefits, such as professional photo shoots, 3D virtual tours, drone photography, and individualized retargeting. Revenue for our higher-tier diamond, platinum, and gold advertising products grew 48% from $24 million in 2019 to $36 million in 2020, and net sales bookings of higher-tier advertising levels doubled. In comparison, premium listers, which are bundles of silver ads, the basic level or standard level, which are our original advertising option, grew 17% year-over-year from $120 million in 2019 to $140 million in 2020. Property owners saw increasing value in our higher-tier advertising solutions with Q4 average revenue per listings up 94% from $481 to $936 per month per ad, with some of them moving into $5,000, $6,000, $7,000 a month. Overall, LoopNet Marketplace revenue grew 20% year-over-year in 4Q. Traffic showed strong growth with 37% year-over-year growth in monthly unique visitors, reaching a record average of approximately 8.9 million unique monthly visitors. We believe that the evidence shows that we're picking up speed with our LoopNet strategy, and the total addressable market is in the billions of dollars. We can interpolate revenue results in a relative GDP basis from a similar marketplace to LoopNet based in Australia and see clear evidence of a multi-billion dollar TAM opportunity. The current commercial real estate market economics are also ideal for LoopNet. With sharply rising availabilities across almost every U.S. market, there's more demand than normal for advertising solutions to generate prospects to help owners and brokers convert their vacancies back into revenue. When we accelerated our marketing investment into Apartments.com based on its outperformance, we believe that we are able to look back and demonstrate a very attractive ROI on that investment. Because we believe we have a similar excellent investment opportunity to invest in LoopNet growth, we intend to significantly increase our Salesforce headcount, SEM investment, digital and broad-based media investments going into 2021. As we've discussed previously, we're building a dedicated LoopNet Salesforce alongside our co-starters CoStar sales team. In Q4, we added 40 new dedicated LubeNet salespeople. These new dedicated reps in the CoStar suite sales force continue to aggressively market and sell LubeNet products. To complement our investments in product and sales, this year we're increasing our marketing program for LubeNet, targeting all of our constituent networks, property owners, their brokers, tenants, and investors. We're launching our first media campaign this quarter across digital channels. This Are You in the Loop campaign, which launches this week, is focused on evaluating the Loop, I'm sorry, elevating the LoopNet brand to brokers, owners across digital channels, specifically in larger metropolitan areas. These marketing efforts will supplement our growing sales force by increasing both awareness and our best-in-class marketing solutions. We plan to release a broader media campaign a little bit later this spring announcing LoopNet as the place for all spaces. This campaign will be broadcast across TV and other broad-based media outlets in an effort to generate mainstream awareness of the LoopNet brand. By reaching tenants and investors and becoming a more colloquial brand, LoopNet plans to replicate some of the successes Apartments.com has seen over the past few years. In addition, we continue to intelligently invest in search engine marketing for relevant keywords. LoopNet already enjoys a considerable advantage for both organic and paid search rankings. I'm proud to say that LoopNet now ranks number one for 125,000 relevant commercial keywords on Google. And our SEM spend is supporting that with a fourfold increase in investment since 2019. We will combine investments in SEM and with retargeting programs for increased reach and frequency. LoopNet's retargeting strategy taps into our extensive database of broker, owner, investor tenant contacts and matches them with hyper-relevant property ads that match their search criteria, increasing the reach of our property ads and placing our ads across the web on high-quality sites, including Santa and Yahoo, Business Now, et cetera, et cetera, Biz Now, et cetera, et cetera. We also take into account unique data regarding which market tenants tend to relocate to or from to ensure we match them with the properties that have a higher likelihood that they're going to lease into. Keep in mind these investments made in LoopNet also will benefit 10X given the cross-pollination of traffic between those sister properties. And we view using, we view this rising tide as lifting both of these sites. Our LoopNet marketing investment in the first half of 2020 was $10 million. and we expect that investment to triple to $31 million in the first half of 2021. Overall, our LoopNet marketing investment is expected to be around $66 million for the year, which is double the $32 million we invested in 2020. While we're still in the early stages, we're excited about the progress we're seeing at LoopNet and think this is the time to increase investment in sales and marketing to help accelerate the conversion of that TAM into costar revenue. And we're nearing the end of my brief remarks, just about 20 minutes to go. I'm very happy with the initial results we're seeing as we combine the strengths of CoStar, LoopNet, and 10X. The 10X revenue grew 14% Q4 2020 over Q4 2019, well ahead of our expectations. And 10X even generated a small profit in the quarter, the first time that's happened in many years. We've already made a number of improvements and investments to the business since we closed the acquisition in June, and those improvements are already delivering results. We're focused on driving a series of improvements to both the demand side and the supply side of 10X. We need to drive improvement in both areas in order to drive meaningful adoption and revenue growth. Improving the demand side means improving the number of qualified bidders that show up at our online auction events ready to bid. Improving the supply side means increasing the number of owners bringing valuable properties to the site with realistic pricing expectations. When you increase the demand side dramatically, it makes it much easier to attract more sellers for the supply side. Our first efforts have therefore focused on the demand side, and I'm very happy with the results. And more importantly, I think and know our clients are very happy with those results. We're leveraging the massive audience of CoStar and LoopNet and promoting the 10X auction properties, one of the most prominent advertising placements on both of these sites. These internal ads are bringing thousands of new bidders to 10X. Properties for auction are now visible in both CoStar and LoopNet with rolling counters appearing on the properties for auction counting down to the time of sale. In addition, we've dramatically increased our investment in 10X-related keyword marketing on Google. We've also used our massive database of active investment sales brokers, buyers, and owners, and have begun aggressively recharging it with them with display advertising across the internet for specific relevant 10X auction properties. As a result, the exposure of auction properties on the 10X site has increased significantly, with unique visitors doubling from Q3 to Q4, which is quite amazing. Our efforts and investments are paying off, and we can see clear improvements in the demand side. The average number of fully approved bidders on an auction increased 153%, from 4.2% in Q4 of 2019 to 10.7% in Q4 of 2020. The number of those watching bidders that engaged and placed a bid increased 66% from 2.2 in Q4 2019 to 3.6 in Q4 2020 on a per-property basis. This increase in demand had the result we wanted, which is the percentage of properties that came to auction and successfully sold increased 42.6%, going from 43.8% in Q4 2019 to 63%. in Q4 of 2020. This is the so-called trade rate, and it's now approaching double the industry average offline trade rate. Since we're only paid when the property trades, this increase in trade rate resulted in an increase in our revenue. Moving forward into 2021, we're planning to continue focusing on investing increase in the demand side, but we'll begin to make significant investments in increasing the supply side. Success on both sides could have a very positive revenue growth impact. The original pricing strategy for 10X was just a port from the offline auction world to the online auction world. I do not think it really made a whole lot of sense to do that, but, you know, moving on. The dynamics now are completely different. If NASDAQ had simply stuck with the OTC pricing model, none of us would probably have ever heard of NASDAQ. The 10X has historically charged the buyer a 5% fee. On the larger properties, that's more than the broker's commission. Tenex has historically offered consistent rebates and discounts, which means their stickers price could scare people off, but their effective price was much less. Looking at the gross margin per sale, there's plenty of room to reduce price with an eye to increasing volume and more than making up for the reductions in the volume of a vibrant marketplace we believe it will create. We expect this pricing simplification will create a modest near-term revenue headwind, but ultimately will increase total platform volume, especially volume from first users of the platform. We're expanding the sales force. 10X currently has only 25 salespeople, and we plan to grow that number significantly in 21. In addition, we plan to leverage our team of over 1,000 co-star market researchers whose daily contact with property owners and managers provides a great opportunity to source new properties for sale for 10X. We're making a very significant investment in marketing in 21 to drive demand and supply to 10X. We have developed a broad campaign for TV, digital media, retargeting, and increased SEM. The tagline these campaigns will use is don't just sell it, 10X it. This tagline focuses our prospects on the fact that a property is much more likely to sell online with 10X than it is offline and is much likely to sell faster as well. We plan to use a battle-the-bid gamification campaign to drive visibility, traffic, and traction with the broader real estate community in 21. Hundreds of thousands of Siri investors, owners, and brokers will be invited to a number of 10X auctions where they'll be able to guess what 10 properties will ultimately sell for in the auction. The more accurate the guess, the more likely they'll win. It'll be a lot of fun, a lot of prizes, a lot of money. We think a lot of folks will show up and play. So, we're increasing our investment 10X marketing by 400% from $9 million in 2020 to potentially $36 million in 21, a fourfold increase. We have made great progress on our 10X integration plans in 20, and now is the right time to accelerate our investments to be ready to take full advantage of the expected increase in distressed assets coming to market. While it's difficult to quantify the amount of timing and expected increase in distressed assets, Current CMBS foreclosure rates are trending upwards and are now above the level seen at this stage in the last recession of 08-09. Our estimates indicate potentially hundreds of billions of dollars of distressed properties will materialize over the next three to five years, implying potential for hundreds of millions of dollars in revenue for 10x. Now I'm going to skip the economy update section of my script and start moving closer to the CFO section. The challenges of 2020 highlighted the strengths of CoStar's business model. Our mission-critical subscription-based products combined with disciplined investments in the business enabled us to deliver outstanding financial results. In 2021, we expect to deliver double-digit organic revenue growth and margin expansion while simultaneously investing very aggressively in LoopNet and 10X, and we believe in those investments. We're going to use our strong balance sheet and successful acquisition track record to pursue multiple large growth opportunities. At this point, I'm now going to turn the call over to our distinguished but still youthful CFO, Scott Wheeler.