CoStar Group, Inc. (CSGP) Earnings Call Transcript & Summary

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.