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CoStar Group, Inc. (NASDAQ:CSGP)
Q1 2020 Earnings Call
Apr 28, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 CoStar Group Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to your speaker today, Sarah Spray of Investor Relations. Please go ahead.

Sarah Spray -- Vice President, Investor Relations

Thank you very much. Good evening and thank you all for joining us to discuss the first quarter 2020 results of the CoStar Group.

Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Scott Wheeler, our CFO, I would like to review the Safe Harbor statement. Certain portions of the discussion today may contain forward-looking statements, including expectations for the second quarter of 2020. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, the duration and the impact of COVID-19, the pace of recovery, customer usage and purchasing decisions, changes in investment strategy or plans, timing and success of acquisitions, 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 quarterly report 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, further events or otherwise.

Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measure discussed on this call, including EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance, are shown in detail in our press release issued today, along with definitions for those terms.

The press release is available on our website located at costargroup.com, under Press Room. As a reminder, today's conference call is being webcast and the link is also available on our website under Investor Relations. Please refer to today's press release on how to access the replay of this call.

And with that, I would like to turn over to our Founder and CEO, Andy Florance.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Thank you, Sarah. That's a -- an unusual milestone to have a pandemic-enabled safe harbor statement. Hopefully, we could avoid that the rest of my life. So, good evening and thank you for joining us today for CoStar's first -- virtual first quarter 2020 earnings call or virtual food management team. The first quarter was really a composite quarter, with two normal months and one pandemic month. As with every business, the COVID-19 pandemic has upended normal operations. The pandemic operations in CoStar's -- the pandemic hit operations in CoStar's Beijing office first, giving us advance warning, and I'm sorry, I'm getting a bunch of beeps here. If we use teams, it beeps in my ears. So I'm sorry. The pandemic hit operations in CoStar's Beijing office first, giving us advance warning, and some time to prepare to transition a 100% of our North American and European operations to a digital dispersed remote workplace. Employee safety and continuity of operations for the sake of our investors, clients and our employees was our top priority.

Our systems teams responded promptly, working around the clock to execute our emergency contingency of our plans. We're very grateful for their diligent efforts. We believe that 95% of CoStar staff has successfully transitioned to working remotely over the past six weeks at 90% productivity. These are stressful and disorienting times for our employees and I'm also grateful to them for their resilience and continued focus on our professional responsibilities. And it's OK, if our employees' kids periodically duck their heads into our many video conference calls.

We're consistently keeping our customers and mission-critical needs front and center. At the same time, we continue to build and innovate for CoStar's and our clients' future after this disruption subsides. We believe that our products remain mission-critical to the vast majority of our clients even as they deal with pandemic-driven market disruptions. The commercial real estate industry will continue to operate, and to do so, we'll need to sign and renew leases, find investment opportunities, value properties, disposal properties, analyze markets, and very importantly, market vacancies to generate much needed revenue. In a time when people cannot readily visit properties in person, digital marketing becomes even more important. CoStar Group and our digital solutions are here to meet the industry's continuing need for high-quality data and highly effective digital marketing.

In the immediacy of the initial phases of our prices, our clients are trying to assess what it all means and are trying to derisk. This means buying new information or marketing solution sometimes is not their first priorities initially. The clients of our clients are also putting things on hold and that's disconcerting to our clients. As I have communicated consistently over the years, in the initial phases of an economic disruption, let alone a global pandemic, our gross sales drop and cancellations rise initially. We are seeing some of that now. I want to stress that our business has always been really resilient through down cycles. In the 2008 recession, which was very hard on the commercial real estate industry, that was the only time our revenue ever contracted for even a quarter. And even then our revenue only dropped 1% in calendar 2009, 1%. We experienced a flat sales quarter followed by two quarters of declining sales, finishing with a slightly negative sales quarter after that cycle. Again, revenue dropped 1% in the worst year in our 34-year history.

Sadly, in any economic cycle, some number of our clients' businesses will fail, some clients will exit the business for good, others will lose buildings to bankruptcy. We share their pain or deeply empathetic for any of our clients' businesses to come in this downturn. We have often seen clients going through bankruptcy organization now and continue to pay for their mission-critical services. As some building owners, lose their buildings, these buildings remain valuable assets through bankruptcy and new investors step into buy them and many of those investors purchase our services as they begin to operate their new purchases. The fact remains in every past cycle, the majority of our customers continue to operate their business and continue to rely on our services.

Typically, sales of properties slowed dramatically for several quarters, two years or so after the disruption like this. Fortunately, we are not as heavily impacted by the property investment sales cycle. Our broker clients tend to drive a lot more of their revenue from leasing commissions. In the cycle, leasing pauses initially for quarters or so that tends to rebound sharply like a sharp V. This is the -- this is for the simple fact that any given time, the bulk of leasing activity is driven by leases expiring that need to be renewed. These expiration dates have no respect for an economic crisis and most companies remain in business and continue to need their facilities. So they sign leases even in a down cycle. And as they sign those leases, our clients earn commissions.

I've asked our economists to use the wealth of information we have on past cycles and to run Monte Carlo simulations to estimate expected leasing activity over the next 12 months. We believe it will be close to a million leases signed in the next 12 months. We believe that these will generate more than $0.5 trillion of leasing value and more than $20 billion of commissions. While leasing has initially seized up, eventually, there's still a lot of business we've done in the back half of the year. This analysis refers to total leasing activity not growth in demand. We expect there will be a significant contraction of -- in demand overall, with the commissions are not normally impacted or were not normally impacted by that. Rates fall a little bit, didn't really hit the commissions too hard.

In fact, with high leasing values and some contraction of demand, there is something like a game of musical chairs for building owners going on. There's a lot of leasing activity, but every time the music stops, there are few owners left without a critical tenant income, or by analog of chair. Marketing commercial space and apartments becomes even more important when it becomes harder when it's on a net vital revenue in a shrinking pool of tenants. The pandemic and social distancing make this economic downturn harder than other downturns. The physical leasing process of prospective tenants driving by properties, being signs and touring through the buildings, as in most cases, ground to a halt. Just when owners desperately need to promote their buildings and tour tenants to fill growing vacancies, the physical inspection of properties are becoming impractical.

The digital marketing Apartments.com, LoopNet, Realla, Belbex, LandsofAmerica or BizBuySell offer to become a critical replacement for the loss of the traditional physical leasing process. Respective tenants can tour their options on Apartments.com, see what the buildings look like, use aerial drone videos to understand the area, use Matterports to walk through the apartments virtually, and even potentially use our online leasing tools to apply final lease and pay the rent without ever exchanging stacks of paper with a stranger.

If Fortune 500 executives are touring potential new office space in a high-rise tower right now, I believe that it's much more likely they're in their PJs at home doing it on LoopNet rather than touring in person. It's much safer that way. I believe that this phenomena is why Apartments.com had its second-best sales month ever last month. And, in fact, if you exclude a convention sales month like NAA, it was our best sales month ever last month. Even as this happened, we achieved that best sales month, even after most of the country was locked down and our entire sales team was working from home. At this point, in April sales for Apartments.com is pacing ahead of April of 2019. To be clear, we expect that revenues overall may contract in the near term. But we feel that there are a number of drivers that make our business resilience, or even somewhat countercyclical over the course of the next year.

With 34 years of experience running a company that provides economic insights through multiple cycles, there is no doubt that this pandemic has created more uncertainty than any other scenario I've seen. But the pandemic has created too much tragedy for too many. It has created serious economic uncertainty. Good thinkers I respect hold diametrically opposed outlooks. So from where we stand today, it's essentially unrealistic to predict with a certainty we need, what the detailed consequences of this pandemic will be on our business over the year to come. So, we will provide guidance for the next quarter, but not the full-year. However, we continue to believe that our data analytics and marketing tools will be among the most viable source of information leads and potential traffic for our customers. Therefore, we remain very confident in our business model and the role we play supporting the CRE industry. We're maintaining our investments to strengthen our position, both from a brand, as well as a product perspective, and believe that we will exit the present uncertainty in a stronger position than before.

With that qualifying prologue, I want to continue and quickly review our Q1 results. I'm very pleased that in the first quarter, we delivered at the high-end of our guidance range across the board. CoStar Group's total revenue grew 19% year-over-year to $392 million. Across all of our service lines, our revenue growth was ahead of expectations with LoopNet revenues leading the pack at nearly 23% year-over-year growth. Apartments.com was strong with revenue growth just above 20%.

In the context of significant investments we are making into the Apartments.com brand, this year's -- this quarter's net income was strong at $73 million. Adjusted EBITDA was solid at $124 million.

During the course of the first quarter, our sales team generated $48 million in net new bookings, despite the pandemic's disruptive impact. Again, Apartments.com was the true stand out, achieving its second highest quarter ever of net new sales up 34% versus the prior year quarter. Fred Saint, Paige Forrest and the whole multifamily team delivered an amazing, resilient and adaptive performance throughout the first quarter. They never miss the beat. LoopNet had an exceptional start to the year also, but the CRE industry slowed little harder in March in reaction to the pandemic.

Let's go into Apartments.com little deeper. In 2019, we invested approximately $150 million to market Apartments.com to consumers. We continue to feel that Apartments.com represents a huge market opportunity for CoStar Group and then we can achieve an outside return by increasing our investment in marketing Apartments.com to our previously communicated level of $250 million 2020. Our enhanced marketing campaign launched in March, just as renters began quarantining at home and they consumed unprecedented amounts of media. The initial results from the first monthly campaign were strong with 1.5 billion impressions, nearly doubled that last -- scene last year. The total visits to Apartments.com reached a new all-time high. Our unaided brand awareness also continues to climb with a new high of 35%. I believe Jeff did a fantastic job with the creative and we're really happy with the whole series of ads we're going to be able to present to consumers over the course of the months to come.

After a dip in March, as quarantine efforts across America began, leads have recovered substantially and are now trending above the levels we saw at the same time last year. So without a doubt, our marketing investment is paying off and combined with the efforts of our sales force, we hope this will allow us to maintain good net new bookings levels.

We continue to work diligently through all the required regulatory processes required before we can close on our acquisition of RentPath. The bankruptcy proceedings are following the expected course. In late March, no auction was held -- OK. That's a virtual earnings call when the kids call you in the middle of the call and the call waiting hits your phone. Sorry. The bankruptcy proceedings are following the expected course. In late March, no auction was held because no qualified bidders came forward. From the public filings, we can see that the vast majority of the debt holders support the planned reorganization, which includes the contemplated sale to CoStar. The FTC review is ongoing and we expect a second request, which will extend the review on a time frame that is consistent with our previous estimates of three to 12 months from signing. As always, we respect the FTC process and will cooperate fully to provide the agency with all the information they need to perform their investigation. There is no additional information we can provide on the outlook for the process at this time.

LoopNet started the year very dynamically continuing the positive usage of sales trends that we saw in the fourth quarter. As we and the rest of the country transitioned to home in early March, we experienced a drop off in daily average users that lasted for about a month. Over the past couple of weeks, we've seen a steady increase in users, just about back to last year's levels. More importantly, the number of searches now exceed last year's level and that's what counts for our customers.

As I mentioned, LoopNet sales dipped as -- in March, as people transitioned to work from home. LoopNet sales have not yet shown a same resilience that apartment sales are shown. I think one thing to remember is the digital advertising value proposition has been well understood for many years now in the multifamily industry, whereas we are in the early stages of adoption for the commercial real estate industry. Ultimately, we believe that the current situation will actually accelerate LoopNet adoption. But it may take more time. I'm a huge believer that LoopNet will be an essential virtual solution for owners looking to win in outsized and important share of the hundreds of billions in commercial leasing dollars that are likely to occur this year. Right now, industry participants really need to know what's going on. They need to have the best information available for forecast, availabilities, listings and the pricing information that CoStar provides. We remain committed to continuously improving our user experience and the utility of our CoStar product. The CoStar Suite in particular, 2020 will be year of significant product development initiatives. We are deeply engaged with the back-end integration of the STR platform. As the year progresses, we plan to integrate STR into the CoStar product at the front-end as well.

While CoStar operates in dozens of countries around the world, our product is not yet one seamlessly integrated, multi-lingual system -- multi-localized system. Well, on the short-term, commercial property sales volumes will fall dramatically, we expect those surge again in a year or so. Much of that investment activity will be multinational. In order to provide the most value and capture the most value from that opportunity, we want to provide our clients with a truly CRE global transaction analysis and marketing platform. We are hard at work on that initiative and expect to release the first phases of our global system in the third quarter of 2020. We expect to support a dozen or so languages by the end of the year. Ultimately, a customer from one country will be able to use one platform to seek, analyze and compare investments across multiple countries and cities.

STRs clients are clearly one of the hardest hit segments for -- of our client base in this pandemic. Hoteliers definitely have had a hard time here. This downturn will be more damaging to them than 9/11 and the Great Recession combined. We expect that STR will likely see the drop in revenue and profit, but we expect the fall out to be relatively or comparatively mild. For our STR subscriptions, we have been able to handle about 80% of the client financial assistant request through payment deferrals. For the other requests, we have offered two- to three-month contract extensions that represent in total $300,000 in annual revenue. We also have $54,000 in annual canceled product subscriptions. At this point, it's remarkable but it suggests less than 1% of canceled revenue.

STR subscribers are a key partners and the least likely to cancel their products. These are hotel operators that know the data is vital to understand the market and what is happening with their competitors as well. They also want to make sure they have continuity in reportings they're able to track as soon as recovery is beginning in their market.

Due to the number of hotel closures in some markets, especially outside the US, we have a plan to continue to provide value to these subscribers even if we cannot report on market numbers for some period of time. We are providing custom analysis such as a deep dive on the average daily revenue declines that uncovered the fact that ADR declines were not from hotels slashing rates, but rather from a rapid shift in the mix of demand. The feedback from these clients in our exclusive content series developed for them has been overwhelmingly positive and underscores the importance and value of maintaining their contracts with STR.

STR has the most risk associated with the ad hoc revenues. Ad hoc revenues are off but we expect that revenue will begin recovering in June. This is revenue that will come back, and the industry will begin recovery and development activity will restart, which will result in trend sales. Or if we have a prolonged downturn, there'll be trend sales happening with distressed assets or portfolio evaluations or dispositions.

We are releasing for the first time tomorrow, monthly profit and loss analysis for US hotels. The data has continued to come even and even with so many hotels closed, and there's even more desire from hotels to see this profit-loss information. The entire industry is watching the recovery in China to hopefully shed light on what a recovery in their part of the world will look like. We have been reporting on China weekly and have now added a video series focused on China recovery that we're producing both in English and Chinese. As of last week, 90% of the hotels in China are open, and we have a couple of markets that are inching toward 50% occupancy. Overall, though, occupancy in China is at 35%, and that's certainly nowhere near the normal 70% to 75% occupancy we expect, but it's well up from the low of 10% occupancy a few months ago. Slow but measured recovery in a matter of months.

Finally, I want to update you on the state of the commercial real estate economy overall. It's really still too early to empirically see the full and ultimate impacts of the pandemic on the commercial real estate industry. The data so far shows an unprecedented collapse in economic activity, jobless claims over the past four weeks have exceeded $26 million, and this figure would likely be higher if it were not for the overwhelmed application websites and offices. Most high-frequency economic indicators are showing unprecedented declines from manufacturing output, poor traffic to retail sales, consumer confidence. Consensus forecasts are calling for a 4% decline in GDP in 2020 and for the unemployment rate to approach 20%, levels not seen since the Great Depression. We're already seeing the effects of the outbreak on commercial real estate.

Continuing with the hotel theme. Hotel revenue per available room is down more than 80%. We have simply never reported figures like that. The immediate impact is less profound in the other property types, though, thankfully. Our daily apartment rent series shows that asking rents have fallen by about only 1 percentage, since -- 1 percentage point since peaking on March 10. That's not much compared to what we've been seeing in hotels. But normally, we'd expect apartment rents to be up about 1% over the same period. But all in all, given everything, there's no problem there. But we believe that many Americans are active or looking for new apartments. And as we've seen, search activity at Apartments.com is exceeding pre-outbreak levels.

In the commercial sectors, leasing volume over the past few weeks has fallen to about half of typical levels. And we expect it will fall further in May before it begins rising again in June or July. We expect the retail sector to be the hardest hit as many shops have closed due to the social distancing measures. Demand for retail space has already turned negative so far this year. Many shops, restaurants, bars and coffee shops, sadly may never reopen. Our forecasting models predict occupancy losses of as much as 300 million square feet, and that vacancy rates could rise 350 basis points to levels well above the peak of the last downturn. Rent losses could reach 15%, topping the 10% losses in 2009.

Outcomes for office at this point will look less severe as vacancies are lower and construction is about half of the level in 2007. Still we expect occupancy losses ranging from 100 million square feet over four quarters to a 0.25 billion square feet over the next two years, compared with just 57 million square feet of the last downturn.

Our models predict asking rent losses of 10% to 20% compared with 14% in 2008. Declines in effective rents will be larger as landlords offer concessions and TI packages to retain tenants. Demand for industrial has held better thus far. First quarter leasing set an all-time record. And while the pace of leasing has slowed mid-March, Amazon has leased more than 6 million square feet in April alone. I can't help it. I need to point out that Amazon is one of the single heaviest users of LoopNet, and we can see their staff looking at LoopNet at many of these properties they eventually lease. Need a commercial in there in the economic section to pay for the economics. Amazon has also announced that it's already hired 100,000 workers to cope with the demand and plans to hire 75,000 more. But even industrial will see occupancy losses and rising vacancies, demand falls even in our upside scenario. So positive absorption returns quickly and rents resume trend growth by the middle of next year.

With negative net absorption will likely suppress the losses last downturn, the 2008 experience also gives us some confidence that leasing activity won't fall by nearly as much. In 2008, total leasing volume across the commercial property types was down just 7% from the pre-recession average, and 2009 was down just 4%, even as occupied space fell by more than 300 million square feet. By 2010, leasing was up 10% from pre-recession levels.

In the capital markets, it's too soon to know the effect on deal volume, but initial indicators suggest investment activity could be down by as much as 50%. In the last downturn, deal volume fell by 75%. Swift and unprecedented action by the Fed in its shored up financial markets and thus far prevented the worst, but we expect prices to fall by at least 10% and potentially by as much as 30% or more. In the most dire outcome, prices remain at the depressed levels for the next decade.

Our baseline scenario, though, predicts commission start to improve next year, while this prediction comes to pass, depends on containment of the outbreak and progress toward treatment and the vaccine, two variables that are almost impossible to predict and difficult to incorporate into economic models. What we can say with some certainty is that, many firms will fail, the rents will fall and vacancies will rise. But we also note that the day-to-day business of commercial real estate will continue as leases expire, tenants seek new space, brokers and landlords negotiate, borrowers refinance, lenders underwrite deals, appraisers determine value and opportunistic buyers come in strong looking for bargains, and Americans continue to look for new apartments.

CoStar Group is on a strong foundation as we face the full impact of this pandemic. With 19% year-over-year revenue growth, $73 million of net income in the quarter and $1.9 billion in cash on the balance sheet, we had a great quarter in the overall context. Our staff has successfully transitioned to remote working. We believe that we will have a rich set of attractive acquisition opportunities ahead, and we're currently exploring a number of such opportunities. We continue to support our clients' mission-critical needs, and we're hard at work building the innovative products that will drive our future growth.

At this point, I would like to turn the call over to our CFO, Scott Wheeler, for the much more interesting and entertaining section of the call.

Scott Wheeler -- Chief Financial Officer

Well done, and thank you, Andy. And certainly, it was an unbelievable start to this year in so many ways. It's unlike anything I've ever seen. That's for sure. But I'm thankful that our CoStar teams are safe and productive, our business is performing well, and week by week we will continue to navigate through all of these changes. Financially, we're in a very strong position. We maintain a very conservative balance sheet, precisely for times like this, a time when we can continue to invest for the future and take advantage of new opportunities that come our way. We have $1.9 billion in cash. Our subscription revenue model is resilient and the services we provide are 100% digital, perfect for a time when person-to-person contact has been practically eliminated.

Our business is much more diversified than it was in the '08-'09 recession, with 50% of our revenue now coming from online marketplaces as opposed to almost 100% from CoStar 10 years ago. On top of that, owners, property managers, institutional investors and lenders now represent our largest customer base, whereas we were much more heavily concentrated in the brokerage customer sector during the last downturn.

But things are changing and over the past month and a half, we have financially become very, very granular. We watch daily metrics on contracts, on sales, on customer inquiries, customer retention, cash receipts, purchases and payments. This information, although valuable, does not tell us what the future holds, but it certainly provides insights for the multiple revenue scenarios we create in our financial models, of which even the absolute worst-case scenarios do not indicate any concerns with regard to liquidity or the ability to continue generating strong positive operating cash flows.

Now, on to some color on the results. We had a great start to the year, with revenue in the first quarter up 19% over the first quarter of last year, while revenue growth in the first quarter, excluding the STR acquisition, was 15% year-over-year. CoStar Suite revenues grew 12% in the first quarter of 2020 versus first quarter of 2019 as expected.

As the stay-at-home orders began in early March, we saw the daily sales and the new contract flow for CoStar decline, dropping to roughly half of the January and February levels by the third week in March. Coming into the last week of April, sales levels have stabilized and have improved slightly. We expect renewal rates to gradually soften in the month ahead, just as they did in the previous economic downturn. We discontinued all price increases in early March to our customers. Assuming these sales and renewal trends continue through May and June, we would expect the revenue growth rate for CoStar Suite to be in the 7% to 8% range for the second quarter of 2020.

Revenue in our Information Services grew 72% year-over-year in the first quarter of 2020 to $32 million, and this includes our first complete quarter of results for STR. On a combined basis, STR and our real estate manager business represent approximately 80% of the revenue in Information Services. Both of these businesses have reoccurring subscription revenue, as well as one-time transaction or implementation fee revenue. The subscription revenues, which were 80% of the revenue in the first quarter, are stable, and as Andy said, will continue to be stable and actually growing both year-over-year and sequentially into the second quarter. This is encouraging as the global hospitality industry is certainly one of the hardest hit by these recent travel restrictions. Now, the transaction and implementation fee revenues have declined as customers delay purchases and planned implementations. Overall, we expect the reported revenue from Information Services to grow at a rate somewhere between 30% and 40% in the second quarter of 2020 compared to the second quarter of 2019.

Multifamily revenue growth for Q1 remained really strong at 20% over the first quarter of 2019, which was exactly what we were expecting. Our revenue growth continues to be generated from both an increase in the number of properties that advertise with us, which was up 9% in the quarter, as well as growth in the average rate per property, which increased 11% in the first quarter as customers upgraded to higher level ad packages. Despite the disruptive events that occurred in March, multifamily had a phenomenal first quarter with their second highest ever quarterly bookings. Digital marketing has never been more critical than right now. So far in April, we see continued strong sales levels, which is sustained through the second quarter, would result in revenue growth of approximately 18% to 19% for the second quarter of 2020 compared to the second quarter of 2019.

Commercial property and land revenue grew 20% year-over-year in the first quarter of 2020. Our LoopNet marketplace, which represents over 75% of the revenue in this sector, grew 23% year-over-year in the first quarter. Following very strong LoopNet sales in January and February, we saw sales volumes drop roughly in half, consistent with what you saw in CoStar Suite in the second half of March and the remainder of that levels pretty much through this time in April. With LoopNet user traffic and lead volumes improving week-to-week, we are optimistic that these sales levels could improve in the months ahead. We expect commercial property and land revenue growth rate to be approximately 10% to 12% for the second quarter of 2020 compared to the second quarter of 2019.

Our gross margin came in at 80% in the first quarter of 2020, in line with expectations and we expect our gross margins to continue at that level in the second quarter. Our profitability was strong in the first quarter, with net income, adjusted EBITDA and non-GAAP EPS results all ahead of the guidance we issued in February. Overall spending levels came in below our first quarter expectations as we rapidly adjust into the business to respond to the stay-at-home orders and prepare for the anticipated negative effects in the economy. In some areas, our spending increased, including cleaning and sanitation of our offices, the technology costs for moving to remote environments. We also increased our bad debt reserves to reflect anticipated economic hardships in certain customer segments, such as hospitality, retail and small brokerage shops. Our vacation accrual actually increased the time offers deferred by of our employees.

In other areas, of course, our spending decreased. This included travel, conferences, facility improvements, infrastructure-related initiatives that are not mission-critical to support our customers and our products. We froze non-essential hiring and compensation at the beginning of March, and we curtailed all discretionary spending.

Our marketing spend increased year-over-year in the first quarter of 2020 by over $20 million as part of our previously announced multifamily growth strategy. It included the higher levels of search marketing, as well as the launch of our Apartments.com brand advertising campaign. This represented a significant increase over prior year spending levels and total marketing spend in the first quarter was just modestly lower than planned, primarily due to the timing of the spend as some of the expected advertising events such as the NCAA tournament were canceled. In addition, we pulled back on certain types of marketing that would not be effective when our customers are working from home such as direct mail or office visit gifts.

As Andy mentioned, we intend to continue our increased investments in marketing as planned for the second quarter of 2020. Our digital marketplace tools are becoming more relevant and effective during social distancing, and now is not the time to pull back on marketing support for these investments.

Cash and investment balances were approximately $1.9 billion as of March 31, 2020, up $857 million since the end of 2019. In March, we borrowed $745 million against our revolving credit line in order to prefund the expected RentPath acquisition and to increase cash reserves for other acquisition opportunities that could emerge in the near future. The remaining $120 million cash generated was due to strong cash from operations and other areas in the first quarter.

Now, I'll look at a few of our performance metrics. At the end of the first quarter, our sales force totaled approximately 800 people. That's up 45 people from the first quarter of 2019 and down approximately 40 people sequentially from the fourth quarter of 2019. As we stopped hiring in March, sales force attrition is not currently being replaced with new hires. The majority of the attrition in the first quarter relates to the inside sales roles. In addition, we shifted a number of our best field customer service people into direct selling roles, resulting in little impact to our direct field sales teams for CoStar and multifamily. These levels are roughly equivalent to the fourth quarter, which is the slight decline.

The renewal rate on our annual contracts for the first quarter of 2020 was in line with the rate we achieved in the fourth quarter at 90%. The renewal rate for the quarter of customers who have been subscribers for five years or longer was 95%, also in line with the renewal rate in the fourth quarter of 2019. As a point of reference, during the last economic downturn in 2008 and 2009, renewal rates for CoStar declined gradually over the course of about six quarters. Similarly, we could see declines in our renewal rates in the months ahead. Our second quarter 2020 forecast assumes that our 12-month trailing renewal rate will decline around 200 basis points from the current levels. Subscription revenue on annual contracts accounts for 83% of our revenue in the first quarter, in line with the fourth quarter of last year.

Now, on to the outlook. And as indicated in our press release, and Andy mentioned, the uncertainty in the current environment, we're withdrawing full-year guidance and we're not going to be issuing new annual guidance at this time. We expect to resume our practice of providing annual guidance at some point in the future. We are able to provide estimates for the second quarter of 2020 as our subscription revenue model provides a reasonable forecasting visibility for the near term. Our approach to the second quarter revenue outlook assumes that the overall sales results observed for the first three weeks of April continue relatively unchanged throughout the end of June. Accordingly, we expect revenue for the second quarter of 2020 in the range of $387 million to $392 million, representing top line growth of around 13% at the midpoint compared to the second quarter of 2019.

For the second quarter of 2020, we expect adjusted EBITDA in the range of $110 million to $115 million. This outlook assumes we will seasonally increase second quarter marketing spend in Apartments and in LoopNet, which will partially be offset by reduced spend levels in personnel and other operating expenses when compared to the first quarter.

For the second quarter of 2020, we expect non-GAAP net income per share in the range of $2.02 to $2.12 based on 36.8 million shares.

In summary, we delivered very strong financial results in the first quarter of 2020 and our business is on a very solid financial footing. Our teams are safe and productive. And we believe our information analytics and online marketplaces will become increasingly valuable to our customers in the months and the years ahead. Thank you for all of your support, and I look forward to updating you on our progress in July.

With that, we will now open up the call to questions.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from Mario Cortellacci with Jefferies. Please go ahead.

Mario Cortellacci -- Jefferies LLC -- Analyst

Hi. Thanks for the time. I hope all of you and all your families are healthy and staying safe. I was just curious, because we have limited insight into how Apartments.com has performed during the last downturn, obviously, it wasn't part of your financials. Just wondering if you can give us a little more insight into how that business reacted. And, I guess, I think the expectation is that, it's more of a consumer-type of business, so it would likely be more impacted. But any extra color or any more -- or background on the performance will be greatly appreciated.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Sure. I've asked the executives who managed Apartments.com or similar companies that we acquired in the last downturn, and they have typically said that the Apartments.com does better in a downturn than in a really healthy market. So higher vacancy rates, mean there is more demand for leads and traffic in the leasing offices. So -- and point of fact, many people, executives believe that a really healthy market like we had a year ago is a bad environment to operate Apartments.com. Consumer behavior here is fundamental, it's like having a roof over year ahead. So, it's very resilient during a downturn.

Mario Cortellacci -- Jefferies LLC -- Analyst

Great. And then just more of a longer-term question. I think we've done a lot of questions around, how the industry could structurally change on the commercial real estate side? I guess, just the working from home environment, do you think that impacts demand for commercial real estate longer term? I think, I heard you tossed out a number on just square footage of commercial real estate declining over the next two years. I don't know if I heard that correctly or maybe this has something to do with that. But do you think that this is a structural change in the industry that could happen longer term as more people work from home and there's just less demand for office space?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Well, forgive me, I don't want to sound a flip, but after decades of having these sorts of discussions, I come across a little bluntly. I was in early cynic on the concept that co-working would take over the world. I'm a much bigger cynic on the fact that people going to want to continue working from home. And I actually think that -- I think there is a little knee-jerk where people say, oh gosh, everyone's going to work from home. I'm not seeing that. And in fact, I could actually make the argument that the potential downside of 0.25 billion square feet of demand going away in the office sector is really just driven by job losses. One person per 200 feet. But the demand for office space is very elastic to the price. So, the amount of space per person in Houston is dramatically larger than the amount space per person in London. So, as prices fall 28%, overall demand may go up, especially when companies are trying to figure out potentially over two years, three years how not to be sale over each other and want to spread out a little bit. But our staff in Beijing is thrilled to be back in the office. And I've never seen people like that happier.

Mario Cortellacci -- Jefferies LLC -- Analyst

Great. Thank you so much.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yeah.

Operator

Your next question comes from Peter Christiansen with Citi. Please go ahead.

Peter Christiansen -- Citigroup -- Analyst

Thank you, guys, and Sarah, great to hear from you. Thanks for the opportunity to ask some question. Andy, do you think this economic shock will -- will you think about changing any of your products or services, whether it'd be features or perhaps the way it's priced or packaged? Do you think CoStar will need to change any of its products because of this economic shock?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yes. We are -- our product teams have probably initiated a dozen or more product changes to deal with the situation. If you go to LoopNet, you'll see a very prominent virtual tour button now on the home page. We now have an ability in LoopNet, where a broker can -- or two executives, a broker and a tenant or two executives can join each other on a LoopNet tour and actually initiate video-conferencing together in the LoopNet website as they view properties. We call that co-tour. There are probably a dozen or so of these sort of virtual leasing, more social distancing-type things that we're doing. And we're also ratcheting up the marketing. This is -- the one thing that happens in any one of these disruptions is typically behavior changes permanently. And so, we believe that there's a chance that people will come to value online marketing and real estate much more than they valued it before, and we're basically pulling all the strings and product features to try to capture that as quickly as we can.

There's some other initiatives we're looking at, and maybe one or two acquisitions we're looking at, that are responsive to what's occurring right now and what we think will happen next year based on this cycle. So, we're -- I think probably 30% to 40% of what we're doing in product is around this situation right now. I don't think there's a lot changing in pricing. I think we never increased prices when the market is in disruption. But beyond that, I don't think there's a bunch of -- no big need to change pricing. Too long an answer there, I'm sorry.

Peter Christiansen -- Citigroup -- Analyst

No. That's fine. And then, have you seen any new use cases for CoStar products? Have there been new clients that have approached you? Interested if anything's popped up.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

It's a little early for that, but I'm positive there will be. What you typically see is, money on the sidelines looking to move in on distressed properties. So that's already starting to ramp up as usual.

Peter Christiansen -- Citigroup -- Analyst

Great. Thank you.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yeah.

Operator

Your next question comes from Stephen Sheldon with William Blair. Please go ahead.

Stephen Sheldon -- William Blair & Company -- Analyst

Hi. Thanks. Andy, you made the comment that revenues could contract in the near term. So I know there's a lot of uncertainty out there. But generally, how much visibility do you have right now looking at potential revenue in the third and fourth quarters this year? Is there at least a meaningful likelihood that revenue in the second half of the year could be down organically? Or were you just saying that as a general possibility, but maybe not what we should expect at this point?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

I would reiterate that there's a lot of uncertainty right here. We don't know if we're going to be fully back at work, when, how. But I would not be at all surprised if there wasn't -- I would expect softness in revenue. I have to say that when I saw the Apartment sales numbers come in last month, I was shocked. When I'm seeing the sales numbers coming in this month, I'm shocked, and like, oh my gosh, the world is falling apart and we're selling a lot of online marketing. But yeah, I have to assume that some elements of our business, as with other downturns, will see softness. Cancellations will go up. We've had a number of customers ask for forbearance on their bills. We've probably negotiated some deferrals on about 160 customers on CoStar. We probably eliminated some user headcount at some sites, on 100 or 200 some sites roughly. But -- yeah, we have to prepared for that. It doesn't really change the long-term course. We would expect to pick back up if there's softness shortly thereafter. And we're going to be try to -- we're going to try to keep everything move in the right direction. But we certainly can't say that it won't go negative here or there. But again, when it went negative last time, it -- only one time ever in 34 years, on annualized calendar basis, it was 1% down. So I'll take that. If that's the hit we're going to take, I'll take that. But we're going to try to fight it.

Stephen Sheldon -- William Blair & Company -- Analyst

Okay. And then secondly, you had mentioned the potential global system that you plan to rollout in the third quarter for the CoStar Suite. Any thoughts on what that could mean for the CoStar Suite financially as we think about the next few years?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yes. It's a -- it's certainly not a pandemic-related investment. It's the long play. But you look at -- I think we -- when I look at the early days of CoStar, we were in a handful of cities. There was x demand for our products. As soon as we covered the majority of the United States, I felt that there was 4x the demand for our products because we were a way to transcend multiple markets and geographies in the United States. I believe that same opportunity exists on international level. Once we can start to stitch together our European point solutions into a consistent solution, along with the consistent solution in the United States and tie in some of our new assets in Asia into that same platform, I believe we'll be able to offer a lot more value.

We will not be making massive investments in cycling up in Poland this year, obviously. But modest investments to start to build our network around the world. And we'll be doing things like if a customer subscribes to national data in the United States, they will automatically get global data. So someone in London will be able to search for sales opportunities in Toronto or in -- look at hotel information in Beijing, etc., etc. But we do think that we want to be well-positioned for what we think always happens in a cycle, which is a drop in investment sale activity, followed by a surge, which is multinational. And we want to really be able to build a -- really capture that global capital flow that's invested in commercial real estate. And it's making good progress. And we're lucky that our lead developer, Mike Fulkerson, there actually came to us from -- oh my gosh, how could I possibly remember that number one language software. What is it, Scott? If you're going to learn a new language what would you use?

Scott Wheeler -- Chief Financial Officer

That is a good question. Maybe C+?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Rosetta Stone?

Jaye Campbell -- General Counsel and Secretary

Rosetta Stone.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Thank you very much. Right. Okay. Thank you.

Scott Wheeler -- Chief Financial Officer

That comes from our General Counsel. Perfect guy to have running CoStar development as the guy who led development over at Rosetta Stone.

Stephen Sheldon -- William Blair & Company -- Analyst

Sounds good. Appreciate the color.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

We definitely have too many devices up on my screen on my desk. Now, I have like Rosetta Stone popping up on 16 bubbles on three screens.

Operator

Your next question comes from Andrew Jeffrey with SunTrust. Please go ahead.

Andrew Jeffrey -- SunTrust Robinson Humphrey, Inc. -- Analyst

Hi, good afternoon. Appreciate you taking the question and all the color as usual. And Andy, I know it's a super fluid environment, and I'm just trying to qualitatively put the pieces together, especially you're trying to circle I think around the second quarter guide, which is pretty good, all things considered. And some of the qualitative commentary about how things -- how bad things could get. Again, just suppose it against what the peer means. I think you even acknowledge surprisingly strong sales on multifamily LoopNet. So, if you continue to do well, given the investments in LoopNet and given the countercyclical aspects of multifamily, should we infer that to the extent the numbers sort of get much worse comparable to the worst part to the '08-'09 downturn, that most of the downside risk exists in Suite? And I just wonder about the mechanics of that?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yeah. So, we -- sadly, I really do expect to see a lot of bankruptcies. And I remember clearly in '08, you had thousands of companies that were clients going bankrupt. So I imagine you're going to see some bankruptcies, you're going to see folks at the end of their career decide to step out at this point. So you'll see that -- we'll see that hit the CoStar Suite side, and that typically -- that will happen over X number of quarters, but you also see new buyers entering the market in the -- after a quarter or two, especially like vulture investors or opportunistic investors. You will see building owners go bankrupt. The only up -- the silver lining there is that they tend to -- they have in the past, tended to maintain their marketing plans through bankruptcy. Bankruptcy courts tend to approve that because they don't want the revenue stream to erode during the bankruptcy process.

And then the thing that I remember clearly from the last several cycles is that, the new owner steps in, they just bought the asset for $0.50 on the dollar, they are flushed with cash and much of it flows our way. So, there -- I think that there will be friction throughout the system, but probably a little bit more on the brokers who step out of the business to go -- or go bankrupt on the CoStar side.

Operator

[Operator Instructions] Your next question comes from Mayank Tandon with Needham. Please go ahead.

Mayank Tandon -- Needham & Company -- Analyst

Thank you. Andy or Scott, maybe one of you could answer this. In terms of the multifamily platform, I think, Scott, you mentioned that 11% of the growth last quarter came from some of the upgrades. Could you provide a little bit more color in terms of what those features are that the users are buying? And what does that mean for 2Q in terms of the contribution from the upgrade on the platform? Thank you.

Scott Wheeler -- Chief Financial Officer

Yeah, sure. What I was referring to in the -- growth in the quarter was that the -- our clients are choosing higher level ad packages to purchase, which cost more per package. You may recall, last year, we announced that we were putting a Diamond Plus level for sorting to the top of the Diamond section. And then this last year, at the end of the fourth quarter, we also introduced Platinum and Gold Plus tiers as well to sorting to the top to those levels. Now, those aren't material parts of our sales right now. But they're just examples of when people want to get more exposure when they have additional vacancies they need to fill, then they can buy up to higher level ad packages to get more traffic and more leads. And we saw that in the first quarter, and that's what generated that 11% revenue growth from that price/mix effect.

Operator

Your next question comes from Bill Warmington with Wells Fargo. Please go ahead.

William Warmington -- Wells Fargo Securities -- Analyst

Good morning. I'm sorry. Good evening, everyone. It's a long day.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Can we start the call in the morning? It won't be that long.

William Warmington -- Wells Fargo Securities -- Analyst

So, Signature Ads at LoopNet, that was a big focus of the sales conference in January. And the whole move from having LoopNet go from being a broker-focused, broker-driven to the owner-driven market. Are you seeing uptake on those ads moving from the broker price point at $35, $40, $60 per listing per month up to the $2,000 to $3,000 level for the owners? Is that taking place?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yes.

William Warmington -- Wells Fargo Securities -- Analyst

And is that going to continue to drive the revenue? Because it sounds like the revenue on that division is going from around 20%, 22% expected revenue growth, about 10% to 12% revenue growth?

Scott Wheeler -- Chief Financial Officer

Yeah, that's right.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yeah. So, before the pandemic hit, we saw some really good sales results in LoopNet Signature Ads. And then the pandemic hit and everything just basically stopped while people are figuring out what's going on. But the really good results of Signature Ads continues in January, February. And as much as anything, I think we saw some brokers who are more vulnerable pulling back some of their spending. And while it's -- there was a dip in search activity in LoopNet initially as we went into the pandemic in the United States, that activity has come back up and searches are now stronger than they were before. I think we need to clarify our message or evolve our message to the owners about the fact that they have -- the message is really solid for those folks. There will be hundreds of thousands to 1 million leases in the next year. There will be a contraction of overall demand. People are not driving by and seeing building signs, people not touring the buildings. We are continuously improving the immersive quality of marketing their buildings on LoopNet. And we think we will pick up revenue, and I think it will keep going.

But we're being conservative right now because a lot of our revenue on LoopNet comes from small brokerage firms, and we think they will take an outside hit, but that's not really impacting the fact that we're going after a new market pretty aggressively, which is the larger institutional owners. And the amount of money they spend on an advertisement on a high-end LoopNet ad relative to their vacancy loss is about as levered as you can possibly be. You're looking at a $100 million vacancy loss, and you're looking at an ad that costs a couple of thousand bucks. So, I remain optimistic. I spent most of Sunday working on new marketing materials for LoopNet to try to adjust and focus, and I think we'll -- I'm still bullish about the potential there. But Mr. Wheeler, Dr. Wheeler, will be Dr. No, because we're seeing the low and being conservative.

Scott Wheeler -- Chief Financial Officer

And Bill, we talked about the revenue per listing increasing in Apartments as people buy ads. In just Signature Ads alone, we saw from the fourth quarter, we were around $500 per ad in the fourth quarter, now we're a little over $700 per ad in the first quarter. And that's not price increases. That's people deciding to buy the Platinum and the Diamond level Signature Ads in more and more quantities as time is going on and as our sales force is really focused on those high-value properties. So it's starting to move up nicely from an average price perspective.

Operator

Your next question comes from Ryan Tomasello with KBW. Please go ahead.

Ryan Tomasello -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Good evening, everyone, and thanks for taking the question. Regarding the expense base, can you talk about what levers you have to pull there going into the back half of the year? And how willing you'd be to pull them depending on how this all plays out over the next few quarters? And particularly with respect to the Apartment ad spend, can you clarify your comments regarding the intent to continue with that plan? Is that just with respect to 1Q, meaning the ad spend in the second half of the year could potentially be curtailed depending on how the environment unfolds?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

We -- at this point, as we've mentioned, so there are a bunch of different levers we can pull on cost structure. We have a lot of optionality there, but at this time, we don't have conditions that would merit contracting our spend dramatically. We actually have a lot of great growth drivers in the business and we are -- as we report this quarter, we're meeting our expectations. If things fell apart, certainly, we would react, but that's not what's going on.

And when you look at the results we're having in Apartments.com, they're strong, and we believe that potential is still there. And we don't see a reason at this point to change our strategy. Our traffic to Apartments.com and our lead flow is at the highest level it's ever been. So across the board, almost all of our key sites are hitting the traffic numbers. And we think that there's a transition going on from more offline to more online. And this is an opportunity that we don't really want to change our course or our mission, given what the facts we have today. So, we're anticipating continuing the same investment we originally planned unless something changes.

Operator

Your next question comes from George Tong with Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good afternoon. You withdrew your full-year 2020 guidance and only guiding one quarter out for now. Can you discuss your confidence level in achieving your previously disclosed 2023 targets?

Scott Wheeler -- Chief Financial Officer

Those are always fun questions to ask, George, in the midst of an extremely uncertain environment. When we decided not to give 2020 guidance, George asks me for 2023 guidance. I kind of knew you were lurking out there, George. You can get to that. So, right now, we -- like we said, we've gotten the second quarter is what we're seeing so far. And clearly, we are focused on growing back at our historic levels as quickly as possible and continue to invest so that can snap back, and continuing to pursue acquisitions, which will help fill any of those revenue gaps that might be created by a temporary slowdown. Certainly, you either have to buy more acquisitions or you're going to have to get that revenue growth rate running up further in the out years. But mathematically, we can still get there. Again, we didn't tell you now what the length and the duration of the downturn is. You can't say it for certain. But that's not all we know about it so far. And as pace and directions change, we'll obviously keep that in mind.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Uncertainty, clearly, is high right now. And -- but the -- and we don't have a reason to believe that it's not achievable at this point until facts change and there's -- or reasonably it's not achievable. I would actually say you could say if an element of that is organic, it would probably be more achievable to -- I'm sorry, or an element of that target is acquisitive for an acquisition, that may become easier to achieve those targets in this acquisition environment.

Operator

Your next question comes from Brett Huff with Stephens. Please go ahead.

Brett Huff -- Stephens Inc. -- Analyst

Good afternoon, guys, and glad you're all well. Andy, I want to follow-up a little bit with you because I know you've been probably talking with a lot of your customers, and we've gotten a lot of questions on kind of the microeconomic decisions that, say, a multifamily owner or a commercial building owner who wants to sell or maybe is under duress or maybe wants to wait. Do you have any anecdotes that will help us get some insight into those decisions that folks are making and how, therefore, they're going to make decisions on whether they'll advertise on LoopNet or advertise in multifamily? You gave us a good example of the large multifamily owner with lots of vacancy risk, buying an ad for a few thousand dollars. But are there any more in the middle market or even any more for LoopNet that you could give us? Thanks.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

So in terms of -- I think there are two different questions there. One is the microeconomics and decision to market on LoopNet or Apartments.com. I think that math is really quite simple. Like if -- across the board, the economic trend is going to be just softness in leasing revenue. And when you hit softness in leasing revenues on big dollar items and traditional methods like broker parties or events or signs or people spinning the sign outside or walking through the building are all gone away, that beautiful print brochure is not going to be seen or touched by anybody. It's a no-brainer that the trend should be to digital marketing, virtual experiences, more Matterports, more drone videos and the like. So that's a no-brainer.

And on the other element about decisions, how people are using our tools to try to decide should they sell, should they -- I think those trends are tsunami-like. And I think that -- I hope our clients use our data aggressively and trust the numbers to set their pricing realistically quickly to win at the game of musical chairs, i.e., sit down first if the data says you should sit down first because having a chair is better than having no tenant at all. So, I think that people should be using our data right now to really be realistic between -- and also to help coordinate between owner, lender and investor to make sure that they're all making that decision together with data as opposed to hope.

And then on the part of investment sales, I feel that there's typically a big disconnect right now where it's going to be really difficult for people to -- sellers to reduce their expectations enough to meet where buyers are right now. So typically, that doesn't happen for a year to 18 months to 24 months. But we will build products and services to try to be there with strong offerings as that volume unleashes.

Operator

Your next question comes from Sterling Auty with J.P. Morgan. Please go ahead.

Sterling Auty -- J.P. Morgan -- Analyst

Yeah. Thanks. Hi, guys. So for my one question, I just want to go back to multifamily in terms of the comments that you made. Is it fair to say that you actually believe the bottom has already been put in, in multifamily? Or is there a potential that multifamily could see sequential contraction in the upcoming quarters?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

I think there's two questions. One is our experience selling advertising to multifamily, and then secondly, rates and occupancy levels and asset prices in the multifamily world. I believe that just by the nature of our business, we are somewhat insulated as to what happens with occupancies. We may be inversely correlated to what happens with occupancies. I think we're relatively independent of what happens with the rent. The rent fall so far are not material. And I think we're independent of what happens to asset values. So we may be somewhat negatively impacted by the fact there may not be a lot of new development over the next two years. But at this point, the sales are holding up strong because if you have tenants who are not paying rent and they were paying rent the month before, and you anticipate they may not be paying rent again in the future, you need to begin to backfill them. If you just had a large property deliver and it's got a lot of vacancy, then you may have -- I need to really pick it up.

So I don't -- again, we can't really see beyond next quarters to what's going to happen in the economy. But right now, we feel pretty good about what's happening from Apartments.com's perspective and our experience. It could change, but right now, it's -- it has surprised me materially to the upside. Shocked me.

Operator

Your next question comes from Joe Goodwin with JMP Securities. Please go ahead.

Joseph Goodwin -- JMP Securities LLC -- Analyst

Thank you for taking my question. Just one quick, on comment on the revenue -- potential revenue growth going negative. Can you maybe just give us some color on how you're thinking -- what quarter...

Sarah Spray -- Vice President, Investor Relations

Joe. Joe, I'm sorry. Could you speak up a little bit? It's very dim. Could you try again?

Joseph Goodwin -- JMP Securities LLC -- Analyst

Is that better?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yes, much better.

Joseph Goodwin -- JMP Securities LLC -- Analyst

Sorry about that. Thanks.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Whole new you.

Joseph Goodwin -- JMP Securities LLC -- Analyst

Yeah. So, on the commentary around the potential of your revenue actually going negative growth. Could you maybe just give us some color around what quarter will likely be the bottom or at least how you're thinking about that?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

I would look at -- we don't know, but I would just look back to the worst we ever experienced in 30 years was '08-'09. And we had two quarters where it really materially fell. So that would be a quarter or two out on the CoStar side. But we -- this is a different cycle, and we have no idea when -- it's just too hard to predict past the quarter. But it typically wouldn't be -- if you were just taking exactly what happened in '08 and stick it right here, it would be third, fourth quarter.

Scott Wheeler -- Chief Financial Officer

Yeah. The other thing, people -- what were seeing -- and to keep in mind is that, if you recall back in the last recession, it started to build -- the negative momentum started to build through '08 and then dropped pretty heavily at the end of '08, early '09. And so, it took a number of quarters for that to develop. What we're seeing happen here is that, when we hit in March, things dropped quickly, and they dropped within a week down to the levels I mentioned, half of the levels of sales, etc., which never happened before in the '08-'09. And then when we see what's happened since then, as Andy mentioned, we've seen volumes move up in traffic and leads on both LoopNet and Apartments.com. Apartments.com is up where it was before the downturn. We've seen CoStar in the last week and a half, we've seen the contracts pacing move up a bit in CoStar in the last week and a half. So we just saw this -- the cliff dropped quickly, and then it held there for a week or two. And then we've seen some build underneath it.

Now, does that mean it's going to continue to build? Or is it going to drop again if something else happens in the economy? Or is it going to build faster? Like, we don't know, but the pattern is very different in this shock than what happened in '08-'09. But we're trying to take as many lessons as we can from it and then just see how this thing develops in a different pattern.

Operator

There are no further questions at this time. I'll turn the call back to presenters for any closing remarks.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Well, thank you very much for the first quarter -- joining us for the first quarter earnings call. I look forward to updating you this summer on the second quarter. And I hope you're all staying safe and well, and appreciate you all joining us here on the call today.

Operator

[Operator Closing Remarks]

Duration: 77 minutes

Call participants:

Sarah Spray -- Vice President, Investor Relations

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Scott Wheeler -- Chief Financial Officer

Jaye Campbell -- General Counsel and Secretary

Mario Cortellacci -- Jefferies LLC -- Analyst

Peter Christiansen -- Citigroup -- Analyst

Stephen Sheldon -- William Blair & Company -- Analyst

Andrew Jeffrey -- SunTrust Robinson Humphrey, Inc. -- Analyst

Mayank Tandon -- Needham & Company -- Analyst

William Warmington -- Wells Fargo Securities -- Analyst

Ryan Tomasello -- Keefe, Bruyette, & Woods, Inc. -- Analyst

George Tong -- Goldman Sachs -- Analyst

Brett Huff -- Stephens Inc. -- Analyst

Sterling Auty -- J.P. Morgan -- Analyst

Joseph Goodwin -- JMP Securities LLC -- Analyst

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