Q2 2024 CoStar Group Inc Earnings Call
Participants
Cyndi Eakin; Investor Relations; CoStar Group Inc
Andrew Florance; President, Chief Executive Officer, Founder, Director; CoStar Group Inc
Christian Lown; Chief Financial Officer; CoStar Group Inc
Peter Christiansen; Analyst; Citigroup Inc.
Alexei Mihaylovich Gogolev; Analyst; JPMorgan Chase & Co
George Tong; Analyst; Goldman Sachs & Co. LLC
Heather Balsky; Analyst; BofA Securities
Jeffrey Meuler; Analyst; Robert W. Baird & Co.
John Campbell; Analyst; Stephens Inc
Nick Jones; Analyst; Citizens JMP Securities, LLC
Presentation
Operator
Good day, everyone, and thank you for standing by. Welcome to this Q2 2024 CoStar Group earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand it over to the Head of Investor Relations, Cindy Eakin, please proceed.
Cyndi Eakin
Thank you, Carmen, good evening, and thank you all for joining us to discuss the second quarter 2024 result of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Chris Lown, our CFO, I would like to review our Safe Harbor statement. Certain portions of the discussion today may contain forward-looking statements, including the company's outlook and expectations for the third quarter and full year 2024 based on current beliefs and assumptions.
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 could cause actual results to differ include, that are not limited to those stated in CoStar Group's press release issued earlier today and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q under the heading Risk Factors.
All forward-looking statements are based on information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure of any non-GAAP financial measure discussed on this call are shown in detail in our press released issued today, along with the definitions for those terms. The press release is available on our website located at costargroup.com under press room.
As a reminder, today's conference call is being webcast and the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call.
And with that, I would like to turn the call over to our Founder and CEO, Andy Florance.
Andrew Florance
Thank you, Cindy. Cindy I would noted that was the most upbeat reading of the preamble for ever, which suggests to me that you are looking forward to turning over your duties.
So good evening, and thank you for joining us for CoStar Group's second quarter 2024 earnings call. Second quarter 2024 revenue was $678 million, a 12% increase year over year, coming in above the midpoint of our guidance range and in line with consensus estimates. Our $2 billion businesses continue to deliver double-digit year over year revenue growth with Apartments.com growing 18% and CoStar growing 10%.
Company, net new bookings were $67 million in the second quarter was 79% of our net new bookings coming from sales of our commercial real estate products and 21% from net new bookings of Homes.com memberships. Adjusted EBITDA was $41 million, which was well ahead of our guidance of $5 million to $10 million and consensus estimates of $10 million. Our commercial margins remained strong, delivering over 40% in the quarter and are expected to expand throughout the remainder of the year.
Our average monthly unique visitors to our global websites reach a record of 183 million in the second quarter according to Google Analytics, which is up 81% over the prior year. The Homes.com network delivered 148 million average monthly unique visitors for the second quarter according to Google Analytics, which was an increase of 73% over the same quarter last year.
Our Homes.com site alone delivered 99 million average monthly unique visitors for the quarter, an increase of 197% we'll make sure it is 197% over the same quarter a year ago, according to Google Analytics. We believe that a complete site-centric sense of style tool like Google Analytics is more accurate than user centric panel estimate counts generated by firms such as Comscore or Semrush. I believe tools like Google Analytics are like an election results were as a tool like Semrush or Comscore is more like an election poll.
If I have the election results, I choose to report those rather than the sample poll result. our leading competitors in the US residential portal space combined report traffic assay associated with home sales, home rentals, rural homes, land sales and apartment rentals, and their traffic numbers.
For that reason, I believe the most accurate and best apples to apples comparison is comparing the traffic from our homes network of sites to the reported traffic of these three leading competitors. Our Homes.com network includes our sites with home sales, home rentals, rural homes, land sales, apartment rentals. The most recent reported traffic numbers we have the leading residential portal competitors is from their first quarter results, so the comparisons not perfect.
Our report Homes.com network traffic of 148 million average monthly unique visitors for the second quarter is fast approaching Zillow's first quarter report traffic up 217 million average monthly unique visitors. The homes network now has solidly lapped realtors reported first quarter 70 million average monthly unique visitors and has thrice lapped Redfin's reported first quarter 49 million monthly unique visitors. The solid traffic numbers far exceed our traffic performance. Expectation for this were early in the development of the New Homes.com.
The second quarter was our first full quarter of selling Homes.com memberships. And since mid-February, we have sold over $55 million in net new bookings. The first four full months selling Homes.com far exceeds the launch sales pace of any of our prior product launches. By comparison, it took two years after launch of Apartments.com to accumulate the level of net new bookings that home has achieved in its first full four months of sales.
The solid bookings numbers are exceptional for this early in development of the new Homes.com. We now have 10,200 member agents in the platform and 86% around 12 month contracts. Marketing efforts continue to be successful, delivering almost 10 billion consumer impressions and 21,000 commercial placements since we launched the product. This across broadcast, cable TV, streaming audio and video, digital and social media and high profile sponsorships. Unaided brand awareness continues to increase is now at 27%, up from our prelaunch baseline of 4%.
Over the past month or so. I attended focus groups with agents and consumers in Atlanta, Chicago, Irvine and Nashville. Our growth and unaided awareness was clear. Agents reiterated that they prefer our business model of your listing, your lead, definitely your listing your lead. We have more work to do to make them aware that preferred business model, and we'll do that work.
In each session the moderator ask agents and consumers to spend a few minutes using the Homes.com site. The response was fantastic. The overwhelming majority of participants said that Homes.com is the better homes search site than competing sites. Common themes with the site is clean, it's beautiful, ad-free has more information than other sites have.
Has all the information you need in one spot and participants light that the listing agent is clearly visible, is not obscured. And then listing agent who knows the most about the property can be readily reach to ask a quick and simple questions of. Agents responded very well to our value proposition two agents really stood out to me is a real good about how much value they were getting from their Homes.com membership. They stated that they were using the advantages Homes.com membership offered to win more exclusive listings.
So I'd like to quote one Chicago participant named Laura. She said a couple of months ago, I became a premier age townHomes.com. My listings that are used to get 6,000, 7,000, 8,000, 9,000, 10,000 views. I now get like 2 million views on my listings and delisting tools she went on to say so that she can then say the seller well go up and look up Orland Park and I'll show up first. If I've got a listing there and so then she goes on to say, I say to the seller, my listing has 2 million views look at every other one after that. And they've got like 3,000, 4,000 views and I've got 2 million views. I'm like hash tag winning.
She goes on to say it's a listing total. So when a seller asks, what are you going to do differently than everyone else? Most people will be saying the same things. And I can say, Homes.com pull up a neighborhood and I show up first, Becca, an agent from California said something similar. She said Homes.com has been great for me as a listing agents. I've had I'm having calls directly on my listings.
I have a paid subscription or it puts my information in front of buyers who are calling me directly. In my actual listing presentation she goes on to say I do have marketing information about getting 60x more views on my listings since I'm a pro member on Homes.com. And I think that has helped me secure listings, this was the first platform she says that they had enough confidence in that I actually paid for it pro membership. Another agent from Columbia, South Carolina said within two days of signing up for my Homes.com membership, a secured a new listing that went under contract with less than a week.
Another agent from Spokane, Washington said since I've joined Homes.com have watched the amount of traffic on my listings increased 30 times to 40 times compared to us getting anywhere else. We built an analysis actually Jerry Rogers and team built analysis to understand the advantage member agents were having in winning new listings as compared to non-member agents.
We create cohorts of members based upon the city tier size there in the number of listings they have the beginning of the study period and the average list price of their listings. We compared members new listing wind count to nonmembers wins for each month from March through June. This create a total of 192 cohorts -- 192 cohorts on average members one, 51% more new listings than non-members. More importantly to me, in 95% of the 192 cohorts members outperformed non-member agents.
This is very important and the core point. Winning new listings is a primary objective for real estate agents, we believe the evidence is overwhelming that our product has been enabling agents to achieve that core goal. We believe that the potential ROI for member agents is phenomenal. The average age is getting 17 million annualized impressions for their listing and profile on Homes.com member listings get 46 times more exposure on average than non-member listings.
Another analysis, we ran indicated that on average member agents are 20% more likely to sell the home in the first 10 days than non-members, and members are getting on average $11,000 more for a home. Ad Second analysis will vary from time to time, but multiple analyses to each shown a benefit for members over non-members in selling homes.
So in summary, I believe the product is a winner. As of today, we've only demoed approximately 3.5% of residential agents building a dedicated Homes.com sales team is the key driver to future Homes.com revenue growth. We have 63 dedicated Homes.com salespeople in production that I can say. We have an additional 53 in training and another 30 hired. We have been borrowing resources from our Apartments.com, CoStar LoopNet and other sales teams to supplement the Homes.com sales team.
But those borrowed sales resources will inevitably returned to sell in their core products as they should growing the Homes.com sales force must be our top priority. On the market our UK residential real estate portal is making great progress. Listings on the platform are now up to 716,000, an increase of 41% from June of 2023.
Average monthly visits for the month of June worth 35 million, up 78% compared to June 2023. And average monthly unique visitors were up to 18 million in June or an increase of 118% over June 2023 according to Google Analytics. Lead counts are up 50% over the second quarter of last year. And the sales results are looking good.
A recent article from a site and publication called the negotiator said that a leading lead management platform has found that on the market has now overtaken Zoopla for engaged inquiries. Apartments.com continued its positive momentum with another strong quarter. Revenue was $264 million for the second quarter 2024, representing 18% growth over the same period a year ago.
We continue to add new customers with rentals of all sizes to our marketplace at a rapid pace and now have almost 76,000 paying communities on our network. In June, we had a record number of single family rental listings, representing increase of 108% over the prior year. Single family rental listings have boosted lead count by more than 4 times our Homes.com membership agents. Our mid-market efforts are contributing thousands of new properties growing paid subscribers by was 22% in the second quarter compared to the same quarter a year ago.
New construction is also contributing to subscriber growth with 75% of all new 100 plus unit communities advertising with Apartments.com. That's a great step. Our sales team continues to deliver exceptional results and extremely high engagement with our clients and prospects. During the quarter, Paige's team conducted over 187,000 quality meetings, which is an increase of 23% compared to the second quarter last year.
Our second quarter net promoter score of 94 continues to lead the industry or just about any industry, which is a testament to the quality of the sales team and their service. We continue to outperform our competitors in lead quality and conversion.
In the second quarter Market Connections, a third party market research firm conducted a survey of industry decision makers responsible for 18,000 communities with over 1.5 million units under management. Apartments.com continues to lead all the metrics that matter most to multifamily owners and property managers. We're number one in advertiser usage and deliver the highest quality leads.
We continue to have the highest lead to lease conversion rate, significantly outperforming our next closest competitor in every one of these three metrics. Our 2024 Apartments.com marketing campaign featuring Jeff Goldblum as Brad Bellflower, inventor the Apartminternet is in full swing again.
We are reaching renters across all media channels during peak rental season and generating over 2.1 billion media impressions. This year, we launched a dedicated landlord campaign to generate awareness with landlords owning one to four rental properties and have generated almost 500 million brand media impressions to date.
As a result of our continued investment in success, our unaided brand awareness, specifically attributed to apartments seekers, is now 74% compared to Zillow, which is only at 42%, 74% compared to 42%. Our average monthly unique visitors for the quarter grew 3% year over year to 48 million, significantly outperforming the overall market, which was down 3% year over year according to Google.
Economic conditions in the apartment industry continue to create a favorable advertising environment. Apartment vacancy rates on three, four, or five-star properties continue at elevated levels with a 9.3% vacancy rate at the end of the quarter and are forecasted to remain at or above 9% for the remainder of this year.
Unit level deliveries continue at all-time highs and expected to be 561,000 units in 2024. Supply will continue to outweigh demand in the foreseeable future. Apartments.com continues to deliver strong growth, and we expect to see Apartments.com revenue growth of 17% for the year in line with our guidance.
In the second quarter, CoStar continue to deliver double digit revenue growth with [$253 million] of revenue, a 10% increase over the prior year and in line with our guidance. Our lender product had the highest net new sales quarter ever with a 47% increase in revenue over the same period last year. We now have 298 banks in lending institutions and the platform, up 50% year over year with sales to several large institutions in the quarter.
We believe that our product is superior to the competition, which is something we continue to hear from our customers. Lenders at $300 million market opportunity with [3,000] more significant lending institutions to pursue. The STR sales team had another strong quarter with a 54% increase in net new sales year over year. Revenue from our benchmarking product and CoStar subscriptions to hospitality clients increased 28% in the second quarter. We are well positioned to penetrate this $300 million market opportunity with a best in class product.
Our consistent strong revenues and sales performance for CoStar is the result of a steady stream of product innovation that delivers expanded capabilities and increase customer value. Over the past few years, we've integrated the STR benchmarking product, enhanced our fund data, added hospitality and CMBS data, launched a new lender product, and opened international reach for our CoStar customers. At the end of Q2, we just released our newest feature called Owners.
The new Owners module of CoStar provides on paralyte insight into the underlying portfolios of the world's largest real estate developers and owners, their key tenants, acquisition and disposition trend, aggregate vacancies, and availabilities in key contacts. Our usage data continues to show these customers are engaging with the platform more despite the economic cycle. Our customers logged in 5 million times in the quarter and conducted 68 million property searches, up 8% over the same period a year ago. Renewal rates are up to 92% and our NPS scores are at 65%, which is the highest levels in our history for NPS for CoStar.
We've grown our subscriber base to 230,000 CoStar professional users, which is up 19% year over year. We have a proven track record of growth throughout economic cycles and even in the face of historically low [series transaction] levels, CoStar's delivering solid growth and continues to be the mission critical data and information product from brokers, owners, lenders, tenants, fund managers, and other participants in commercial property information markets.
LoopNet revenue was $70 million, up 77% year over year, exceeding the high end of our 5% to 6% guidance. International revenue grew 17% in the second quarter year over year. The LoopNet network remains the number one platform in the market with six times of traffic of our nearest competitor. Average monthly unique visitors for the second quarter were 13 million with direct and organic traffic at 75% of total traffic. Even considering the difficult commercial real estate market conditions, total detailed listing views are up 14% compared to the second quarter of last year. As the market normalizes over the coming years, LoopNet's poised to benefit significantly from that recovery.
We continue to enhance all aspects of sales and client service. As a result, our NPS scores have improved to [58] or up 87% since last year. We're growing our dedicated sales team, which will help us further penetrate this large and global market opportunity. Real Estate Manager revenue was up 9% year over year with renewal rates at 99%. Real Estate Manager continues to take market share from legacy competitors. Two-thirds of our customers are sharing their lease data for anonymized analysis, which will greatly enhance our analytics in the CoStar platform.
Land.com revenue grew 5% year over year. Signature Ads increased 9% in the second quarter, and diamond ad sales were up 10 fold in the last quarter. Land.com is exclusive sponsor of a new show in production Ranch Land, which will stream on Paramount+ and CBS, featuring aspirational ranches, that are listed for sale of land.com. Each episode will feature an aspirational ranch currently on the market and listed on Land.com and will feature a day in the life of the ranch owner. I know none of you are going to want to miss that exciting show.
BizBuy Sell revenue increased 6% year over year. The platform had a record $2 billion in enterprise value that transacted in the second quarter. Our franchise [direct leads] are up 25% and listing leads are up 16% over the same period last year. Providing these quality leads to our customers and having customer response rates in the mid-19%s, correlates directly to our NPS score, rising 15% to 55% this quarter.
Our Ten-X platform continues to outperform the market with a trade rate of 50%, more than double the offline trade rate of 23%. We brought 57% more assets to the platform in the second quarter compared to the first quarter of 2024. [Series transaction] volumes may be bottoming out with sales activity increasing slightly 6% year over year for the first time since the second quarter of 2022. To stress sales are beginning to surface, particularly for office and multifamily, but remain historically low, with lenders still preferring to extend loans.
CMBS delinquency rates remain elevated and office delinquencies have increased notably to 7.4%. This is significant opportunity as these properties will eventually need to change hands and Ten-X is the most efficient way to execute commercial real estate transactions. I believe that the results this quarter demonstrate the strength of our commercial real estate business with continued double digit growth and strong EBITDA margins in the face of economic headwinds.
I believe that this quarter Homes.com is coming into focus as a better product with a better business model than our competitors have. I think the Homes.com value proposition is emerging clearly. It's compelling and offers our future clients a huge potential ROI. Going forward, we need to focus on the blocking and tackling of building out our sales and marketing organization to realize the full revenue potential Homes.com.
At this point, I am pleased to welcome our new CFO, Chris Lown, and we'll turn the call over to him and here we go.
Christian Lown
Great. Thank you, Andy. Good evening. I'm excited to be here for my first of many CoStar earnings calls. I'm happy to report that CoStar has now reached its 53rd consecutive quarter of double digit revenue growth, coming in at 12%, and we achieved a commercial business margin of 41% in the second quarter. Looking first at our residential businesses, residential revenue came in at $26 million, up 40% sequentially.
In just 4.5 months, we have delivered cumulative net new bookings of $55 million, which is a great accomplishment. We are focused on hiring dedicated Homes.com sales reps over the next year who are more productive at selling homes memberships and will also allow many of our commercial sales teams to return to selling their core products full time.
As Andy mentioned, focus groups have bolstered our confidence in our Homes.com offering, and we are confident in our differentiated business model and our ability to capture this exciting long-term revenue and data opportunity. We now expect third quarter residential revenue to come in around $30 million, and we are revising our full year 2024 residential revenue guidance to $105 million to $110 million. For the full year, we continue to expect to execute on our Homes.com investment plans.
Apartments.com second quarter revenue growth came in at 11%. The Apartments.com team continued to perform well with the highest number of sales reps and the highest sales productivity of any brand in the company. We are on track to achieve the guidance we provided last quarter, resulting in 17% year over year revenue growth.
CoStar revenue grew 10% in the second quarter, in line with our guidance, and we are maintaining our previous full-year guidance of 10% growth. We expect growth in the third quarter to be broadly in line with the full year. Group net revenue grew 7% in the second quarter, slightly ahead of our 5% to 6% guidance range. We are maintaining our full year revenue outlook for LoopNet of mid-single digit growth.
Revenue from information services was flat sequentially and dropped 20% year over year due to the transition of STR into CoStar. We are reiterating our previously stated guidance of $130 million to $135 million for the full year and expect the third quarter to be consistent with the first two quarters of 2024. Other marketplaces revenue was $31 million in the second quarter, and we are maintaining our guidance for other marketplaces to be relatively flat in the third quarter and full year.
From a consolidated basis, adjusted EBITDA for the second quarter was $41 million at a 6% margin, meaningfully above the high end of our $5 million to $10 million second quarter guidance. The favorable performance relates primarily to slower than anticipated hiring as well as the timing of investment spend. We anticipate incurring some of the spend in the second half of the year.
Our sales force totaled some 1,240 people at quarter end, an increase of 7% year over year and around 30 salespeople higher sequentially. Most of the increase in the second quarter was in our Homes.com sales force. Our contract renewal rate was 90% for the second quarter, with the renewal rate for customers who have been subscribers for five years or longer at 95%.
Subscription revenue on annual contracts was 81% for the second quarter, consistent with the prior quarter and the second quarter of 2023. We continue to have a strong balance sheet with $4.9 billion in cash, which are net interest income of $53 million in the second quarter, a 5.1% rate of return.
Our full year 2024 revenue guidance is now in the $2.735 billion to $2.745 billion range, a 12% year over year increase at the midpoint. This range reflects our adjusted residential revenue for the second half of the year. The company expects third quarter revenue of $692 million to $697 million representing 11% year-over-year at the midpoint of the range. We are increasing the midpoint of our adjusted EBITDA guidance for the year with revised guidance of $195 million to $205 million. For the third quarter of 2024, adjusted EBITDA is expected to be in a range of $47 million to $52 million.
I will now turn the call back over to our call, operator, Carmen, to open the line for questions.
Question and Answer Session
Operator
Pete Christiansen, Citi.
Peter Christiansen
Thank you. Good evening. Welcome Chris. Great to have you. Congratulations Cyndi, shut out to Rich. Good evening, Andy. (technical difficulty). Anyway, Andy it sounds like (technical difficulty), however, the momentum in the new sales for the [residi] side seems to hit a bit of a speed bump. It sounds a bit more like blocking and tackling on the sales force.
Can you talk about adjusting the sales force to normally sell to institutional clients? How they're selling to residential agents? And I just need to follow up, there's a notion that there's been either refunds or canceled throughout the quarter. Is it a function of the agent, how they're just becoming more educated on what Homes.com provides and how it differs versus other portals? Thank you.
Andrew Florance
Sure. So I think that the broad sales force of 1,000 some people can comfortably sell the Homes.com product. However, they -- if you're an apartment salesperson or CoStar salesperson, you've been selling those products for many years and after the initial rush of selling a new product, you begin to migrate back to your existing product. And the type of thing that you can try to push them into the two products.
But realistically longer term, as you move into the second -- as we move forward towards the second full quarter, the third or fourth full quarter, we want to be relying more and more on a dedicated Homes.com selling to team because there's just a natural instinct for the broad sales force to go back into their core products.
The other thing is that the Homes.com team -- dedicated sales team does a better job with following up with the sales post sales and has higher net promoter scores, dramatically higher net promoter scores than do the salespeople that were borrowing from the other products and who were basically renting. If you ever treated rental car, not as well as you treat your own car, well that's a little bit the way these other non -- the core sales forces treat some of the Homes folks, Homes clients and not in a bad way.
It's just that the Homes.com dedicated team has a significantly higher NPS. So -- and you don't want to -- we have some great products there with apartments and homes and you don't really want to push too hard to move them into a sales area there that is not their long term focus.
So in terms of -- I am unaware of any refunds that we've put out there. We did have a -- going into the new product, we had a completely lenient canceled policy in the initial time period, so you could pretty much back out anytime you want.
It's my understanding that initially, one of the single biggest reasons for cancellation is the credit card didn't process, which is not to be --- which is not unusual given our residential agents with volumes down and commission to commission, 100% commission based pay.
Now there's a little bit of the ladder that you're talking about there, which is after two decades of agents being used to buying leads off of lead diversions sites in order to get buyer agency, there is definitely an education process. So if I am an agent who doesn't really do normal residential real estate listings, I don't normally -- when listings as an agent. And I've been buying leads from a lead diversions site like Realtor. Those sites are scraping the listing leads off of a 100% of the agents and following them down to a small group of people are just trying to work as buyer agency leads.
We do something very different. We don't do those sort of mass, great selling buyer agency leads. We focus on giving agents an advantage in selling their owner's home. And so we're giving them dramatically more exposure for their listings on our site. And that helps them win new -- sell listing leads or exclusive listings and it also helps them win buyer agency. It helps them win general branding and branding for the firm.
But if you evaluated through the lens of buyer agency, scrape lead generation, it won't really meet your needs. So there were a bunch of buyer agency, only folks who are looking for some things a little bit different upfront. And now we don't really focused on those folks. We really direct our energy into people who have listings. And the feedback is becoming better and better and better and better and is really quite good because folks who are using it -- using Homes.com are winning 51% more listings.
And if you think about what that means, it means everything. Winning a new listing is much more valuable than winning a buyer agency lead. A significant percentage of by our agency leads never transact. A super high percentage of listings, homes for sale will transact and transact quickly.
And with all the things going on in the world with the NAR, the lawsuit -- the end of the whole plaintiff lawsuits. The sale listing generation is a Safe Harbor in that storm. And so agents prefer that. So long short of it is yes, we had an incredibly just anytime you want to count. So which is not what we normally do. We're past that and we're redirecting and making sure that we're not -- we're educating people on this is not a lead stealing site, this is a promoting the home and allowing agents to win listings and generally build their brand and wind buyer agency leads. Pete, was that a long answer?
Peter Christiansen
Good color. I'm going to take that in. Very good. Thank you.
Operator
Alexei Gogolev, JP Morgan.
Alexei Mihaylovich Gogolev
Hi Andy. And hi Chris. And welcome to the new role. I wanted to ask a quick question about the new guidance for the [resi] business. So as I hear, you're now assuming roughly $4 million sequential increase of resi revenue in 3Q and then another $3 million or $5 million in the 4Q quarter, which is slightly different to the $10 million sequential increase that you were initially targeting. Just wondering what drove that decision to lower the guidance? And what's your feel around the membership additions that you're seeing at the moment?
Christian Lown
Sure. Thank you for the question. I think a couple of things. Obviously, this was the launch of a new product and there was a lot of brainpower going into trying to model out that analysis and what would happen. And the initial results were very strong and therefore, there was a reaction to that. I think what you're seeing now is more of a growing momentum that you'll see evolve over time. While we don't provide quarterly guidance, your numbers make broad sense to me.
And so I think what you're seeing is probably a more, appropriate build of the business, hopefully a conservative build of the business. And therefore I think it's just a better understanding. I would also highlight as a new launch, as Andy had mentioned, compared to Apartments.com launch, this is phenomenally more successful. And I think we feel good about that the model outlay. And so as Andy said, we are hyper focused on getting Homes.com salespeople in their seats, and that momentum will drive further growth as well.
Andrew Florance
And again, I would just add that the main issue is rotation of the core sales force back into their core products by their own choice largely. And then now you move into the more long term, as Chris says, into the long-term growth of the core sales group. And definitely a significant number, the original -- the other product sales groups will keep selling homes because they want to, but you'll be relying on the growth of that dedicated sales force now.
Alexei Mihaylovich Gogolev
Understood. Thank you, Andy. And Chris, just a quick follow-up on the exit rate EBITDA margin target. Would you mind confirming, is it still 15% to 16%?
Christian Lown
Within that range. Yes.
Alexei Mihaylovich Gogolev
Thank you.
Operator
George Tong, Goldman Sachs.
George Tong
Hi, thanks. Good afternoon. I'd also like to extend a welcome, Chris, and thanks to Cindy. So I want to stick with the residential business because it sounds like you're seeing good traction with respect to online traffic and bookings, yet you're reducing your full year residential revenue guide by about $20 million to $25 million. It sounds like some of that's better appreciation of the trajectory and perhaps some sales force productivity insights. But just wanted to elaborate if you can on what's changed? Is that a function of hiring capacity with respect to the salesforce? Is it a function of the productivity of the borrowed salespeople? Or is it a function of end market demand for your product?
Andrew Florance
Yeah. So I think the number one factor is human behavior and it is the borrowed sales force, a significant number of the borrowed sales force returning to their comfort zone of selling their core product. So if I have been selling Apartments.com for seven years and doing really quite well, at some point, I feel anxious about selling a new product I'm not going to be selling long term.
So it really -- the beginning, middle and end of it is really about building a dedicated sales team just like CoStar has, just like STR has, just like real estate manager has, just like LoopNet has We got to build that core sales team for Homes.com. So they can sell and service that product as their first priority.
And those folks doing well. I'm happy with the results of this relatively new sales force. We just need to keep growing. And that will be our priority. But it is -- as I look at where we are having the traffic that is phenomenal and having both the end users prefer the product over others in our studies and having the agents, significant value in what we're doing, if they're actually in real estate is really good and it gives -- and now it's just a question of building out that dedicated home sales team. And I'm reluctant to pressure high performing apartments or CoStar or real estate manager salespeople to move into homes when they're really quite good at their core products.
George Tong
Got it. That's helpful. Thank you.
Operator
Heather Balsky, Bank of America.
Heather Balsky
Hi, thank you for taking my question. You touched on apartment earlier on in the call. If you create your thoughts about how you see trends into next year., especially given supply dynamic. And also, I know there's been a lot of questions on competition is still gotten more into the apartment space and you touched on some of that earlier on the call as well. How you're thinking about keeping our leadership position as competition increases? And the differentiating factors between [your business as well]?
Andrew Florance
Yeah. So as you look at the economic environment we're operating in four Apartments.com, I do believe we are in the Goldilocks zone. So we don't want to see vacancy rates too high. People than aren't -- don't have liquidity to pay for the ads. And we don't want to see them too low because then the demand for the ads go down.
So in term, because of how we maintain our competitive advantage, we have a robust and broad product development line, Apartments.com. You can see the traffic contained to grow and you can see us consistently outpacing and lead to lease conversion into unaided awareness and traffic growth, Just all the different metrics we're doing quite well.
And really, it's sort of a broader playbook here where there's a lot of room in this space because most of the apartment units are in the smaller category and in the mom and pop individual units and houses. And so frankly, nobody has any real penetration there. I mean it is while we're growing down there, we're in the single digit penetration. So there's tons of room for us to grow in there. And you will see likely some other players to grow in there.
But that's because it's a big market and we're both developing a big market.
Heather Balsky
Thank you for that. And I am I could have missed it, but I'm just curious, have you shared your updated thoughts on commercial EBITDA margin for the year and our [expectation for the year] as they've been for the prior two quarters?
Andrew Florance
We did provide guidance to what we did in the second quarter of around 41% and we do expect those to slightly be roughly in the same area.
Heather Balsky
Okay. Thank you. You said 41%?
Andrew Florance
Correct.
Operator
[Philip Hum Von Slay], BPIT.
Good evening, everyone, and thanks for taking my questions. And Chris, welcome, Andy. I was hoping you could touch on some of the organic levers CoStar suite going forward. I think last quarter you talked about 220,000-odd subscribers, SPR, and [a lender] product being an opportunity. But I was wondering if you could maybe break that down further as we sort of think about the growth drivers of the business over the next two to three years? Thanks.
Andrew Florance
Sure. So continuing to develop products that are geared towards the corporate user, the owner, the lender institutions, that's a wide-open area with relatively low penetration rates. And as we add more and more people on those other sectors or segments, it creates more energy in the customer base, brokers are more likely to engage in the product, more corporate users are engaging in the product, owners are more likely to engage in the product, and corporate users are in the product.
So we're building a lot of vibrancy in the platform by going into those building features and functions to reach into those segments in which we have historically had had not been our first and second priorities, but are key growth areas also. We are continuing progress towards in it moving Germany, France, Spain, some other markets in the CoStar as well as our global hospitality functions. So I believe later this year, we'll be releasing the more full STR global functionality.
So global will be another driver. So I think that the main segments, we still have a lot of way to -- I mean, as crazy as it is all these years later, we still have a lot of brokers to sell to. And increasingly residential firms, over the last 10, 15 years, have been doing more commercial. So as we get into more and more into residential, we'll be providing more CoStar services to folks that you would have viewed as more historically residential.
I had a call today with the Head of Sales of CoStar with a major residential player trying to figure out how they could get access to CoStar LoopNet. And I don't think that call would have happened except for the fact that we're now on that CEOs radar because of Homes.com. So CoStar remains the product with -- as far as I can tell after 38 years perpetual growth opportunity.
Great. And if I could just follow up on our commercial bookings in the quarter, it looks like you did improve quarter over quarter but still down year over year. So any color that you could sort of provide there when do you think that could start getting moving again? (multiple speakers) Thank you.
Andrew Florance
Well, you see that in when you -- given a fixed number of hours in the day when those CoStar apartments, LoopNet salespeople shift over and start spending some amount of time selling Homes.com, which they did a lot in the period from February 12 into the second quarter, that comes at some substitution effect where they're selling in the core. So I think predominantly any reduction year over year is coming from that effort selling into Homes.com.
Got it. Thanks a lot.
Operator
Jeff Meuler, Baird.
Jeffrey Meuler
And maybe if you could just talk through kind of the key factors that are going to determine the budget for the Homes.com initiative over the next few years just with this stutter in the net bookings? And then what's the exit rate assumed for ARR for Homes.com in the revenue guidance, please? Thank you.
Andrew Florance
So I'll let Chris after I answer the first part, I'll let Chris answer the revenue guidance on exit ARR. So I think that big picture, we are look coming out with this Homes.com product offering and our first full quarter with a good result, which is more than -- when I look at the early stages of Apartments.com, I believe we're running more than double the sales we ran at Apartments.com. And it's a question of building it out. So it's a little early in the first full quarter of launch to call it a stutter because you don't really have a reference point.
So as we've said earlier, we do not anticipate growing the net investment in the product, but we do have high confidence that we are on the road to building the best site and creating substantial value, and we haven't changed our minds about this. So we're going to continue investing at that same level. But you can see in our solid EBITDA beat this quarter, you sort of hit the NADR of that reinvestment period. And then, Chris on the ARR question exit.
Christian Lown
Thanks. We have provided previous guidance in the range of $475 million to $500 million, and at the lower end of that range is where we still feel comfortable.
Operator
John Campbell, Stephens.
John Campbell
Thanks And Chris, welcome to the CFO seat and congrats. And looking forward to working Rich again. But for Homes.com, I know the unaided brand awareness metric, that's an important North Star for you guys. I think we're all trying to get a better grip on the rate of net reside investment spend in the years ahead. So maybe just a two part question here. So first, should we be thinking about Homes.com reaching that 50% level as the trigger point for spend relief?
And then secondly, you guys have obviously move that unaided awareness up quickly. I mean, basically next to nothing when you acquired it, I think 27% now to Apartments.com almost a decade to get to 50%. Obviously you're spinning multiple times more Homes.com. So Andy, rather than ask you an exact date for Homes.com, which I wouldn't expect, maybe just directionally if you -- should we be thinking about that 50% level coming in the quarters ahead, the years ahead, or should be looking at that past Apartments.com path as a guide?
Andrew Florance
Well, I do not believe it is on the same -- I believe it was going much faster and will continue to go much faster than Apartments.com. So we're constantly evolving the messaging just as we did with Apartment.com and fine tuning it. And shifting various value propositions out in the marketing. I would say that we anticipate similar to Apartments.com relatively constant investment as you build this out. And only really increasing investment as we did with Apartments.com in the event that you can see a revenue and EBITDA financial result, that's clearly attractive and can be communicated to the investors.
But in building out something as valuable as the number one residential portal platform, it doesn't happen in one quarter. It is likely -- it is a multi-year effort just like Apartments.com and CoStar. So it is the steady persistent, consistent, making progress down the road and don't anticipate radical changes anytime soon and don't anticipate increases that would slow EBITDA growth.
John Campbell
Okay, that's helpful. Thank you. Andy.
Operator
Nick Jones, Citizens JMP.
Nick Jones
Great. Thanks for taking my question. Two more on Home.com. You've done a great job driving traffic up meaningfully? Can you speak to kind of -- as you aim to get more leverage kind of a balance between maybe shifting focus of driving more app downloads or time on app in terms of getting kind of maybe cheaper forms of traffic behind kind of upper funnel advertising or social or things like that? And then a follow-up.
Andrew Florance
Sure. So on the app download side, we are focused first and foremost on web mobile because that is the fastest way to collect traffic. That's the most predominant platform. It reduces friction. People aren't downloading your app to adapt to new products. So as we're in here in the first couple of months of the new product, our design and development teams prioritize that.
I'm sure you've had the experience. If you'd to optimize everything around that web mobile platform, it's a great experience. And that's what we're hearing in the focus group from consumers is that hands down, they prefer it over app or web mobile of any of our competitors.
They describe it is clean. They describe it as fast. They describe it as offering a lot more information than any other platform. And they describe it as having the benefit of being able to ask for listing agent a quick question without being hard sold by someone to something you are looking to buy. So I'm sure you've been enjoyed before when you're trying to look at something in a web mobile app and up pops, the thing saying, okay, stop what you're doing and go into download an app, not very popular.
And when we look at numbers that our friends at Google has shared with us, they're pretty compelling and they show that competing sites are pulling de minimus traffic from their app downloads. And it's still everyone is predominantly competing in the web mobile environment. So we're doing the app side. And I get it if you can get everyone hooked on app, you are less dependent on buying SEM traffic or less dependent organic traffic. But for everyone in the industry it is overwhelmingly web mobile.
And so we're keeping up slightly behind the web mobile, we're keeping up app parallel functionality. But right now, we are basically about traffic attainment. And I am thrilled with the work our homes product team has done and the development team has done building a fantastic web mobile. And so while our snag and traffic from other folks, we're going on the fastest, most fluid platform, which is web mobile.
(multiple speakers) And social, we're marketing anywhere and everywhere we can pull people at the most cost effective price. So yeah, we're on -- if you can talk about digital marketing or streaming or anything social we're on virtually everything. I'm sure you see us everywhere.
Nick Jones
I sure do of. And then I guess maybe a bigger picture question. I think earlier you alluded to maybe buyer leads are not as valuable as getting listening [leads are] just make sense. But then I guess, philosophically how you balance the value of the platform to essentially home buyers, which I guess sounds like our viewer as less valuable than providing kind of upper funnel advertising for agents to go win more listings.
Because over time, if the marketplaces isn't balanced and you can't continue to draw home buyers, how do you continue to drive the ROIs if the focus is really in driving listing lead? You follow the question, it's a little whiny, but I kind of heard two different comments on the call today.
Andrew Florance
So I wouldn't hold you at fault for misinterpreting my bad formulation of the words apparently, but our first and foremost priority is to produce the best site possible for home buyers, which I believe we are doing. And so the home buyer comes first first, then first and second, third, and fourth, right? And so that's what we're doing.
What we're trying -- and then for sure, I firmly believe that the your listing your lead model is preferred by sellers because when they make that important decision to higher real estate agent to help them get the best result for selling their most important asset, their home, they want their real estate agent they hired to answer that first question from a potential lead. They don't want to go to someone who has never seen their home, knows nothing about their neighborhood. They want the seller -- they want the selling agent to get. And that's what your listing, your lead model we have has.
The agents like the your listing, your lead model because they want to get the leads off their listings, it's the biggest source of buyer agency leads actually comes from having listing. So when someone calls on your sale listing, you're generating buyer leads because 9 out of 10 times, they're not buying a house when they first call them.
But as an agent, you can get them as a buyer agent, show them other homes because you're an expert in the category in the neighborhood they're familiar with. You'll also get referral commissions and the leads you refer off your listings come back to you as referrals from other people's listings.
What we're not doing is stealing everybody's leads and reselling them to a handful of lower-end age. So that does not mean that we're not creating buyer agency and we're not focusing on buyers, it means doing it more intelligently, and we're doing it in a way that resonates with the industry long term.
And frankly, I'm really excited about the fact that I am becoming more and more confident that we have the vastly superior model. And I am seeing one of our competitors starting to figure that out and attempting to pivot their business, which requires cannibalization of their business. And I see the other competitor not having figured out where they are and what's happening, and that's wonderful.
So we're not saying we're stepping away from buyers or buyer agency. Far from it. We're just generating buyer agency more harmoniously with the way the industry has historically done it in a more sustainable advantage to a over the long term. But thank you for giving me a chance to clarify.
Nick Jones
Great. Thank you.
Operator
Thank you. And that's all the time we have for Q&A today. I will pass the call back to Andy Florance for final comments.
Andrew Florance
Well, thank everybody for joining us today for the call. And Chris, welcome aboard.
Christian Lown
Thank you.
Andrew Florance
No offense to Scott Wheeler, who I hope he's listening today with scotch in his hand. But Scott was good. Chris is clearly better. But so be it. And then Cindy thank you for all the calls you've done. Cindy will be rotating to focusing in her new role as Chief Accounting Officer. And then we've gone to the bullpen and we're bringing the ever famous Rich Simonelli back to sit in the investor relations seat. So next quarter, I hope you'll be joining us. We can update you, and we'll have Mr. Simonelli back, and we'll ask him to play a brief baile. We're going to ask him to set the preamble to music. Do you think you can do that, Rich.
Thank you all for joining us. Look forward to talking to you guys next quarter.
Operator
Thank you for participating. And you may now disconnect.