Welcome to LoopNet's earnings conference call for the first quarter 2008. The date of this call is April 30. This call is the property of LoopNet, and any recording, reproduction, or transmission of this conference call without the express written consent of LoopNet is strictly prohibited. This call is being recorded. You may listen to a webcast replay of this call by going to the Investor Relations section of LoopNet's web site. I would now like to turn the call over to Erica Mannion, Investor Relations for LoopNet.

Good afternoon. Thank you for joining us to discuss LoopNet's financial and operating results. With me today are Rich Boyle, Chief Executive Officer and Chairman; and Brent Stumme, Chief Financial Officer. Today, Rich will begin with an overview of the business and the overall corporate strategy, continued by a summary of the company's first quarter performance and review of the marketplace. Brent will review the first quarter financial results and provide second quarter and fiscal year 2008 guidance. Before I turn the call over to Rich Boyle, I would like to mention that the company will participate in the following investment banking conferences during the second quarter. Each presentation will be available via web cast on LoopNet's web site – Needham & Co. Internet and Digital Media Conference in New York City on May 8; JMP Securities Seventh Annual Research Conference in San Francisco on May 21; Stephens' Spring Investment Conference in New York City on June 4. I would like to bring the following to your attention. On the call today, you may hear forward-looking statements about events and circumstances that have not occurred. Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties. Please refer to the company's recent SEC filings at the SEC's web site at www.sec.gov for detailed discussions of the relative risks and uncertainties. The company undertakes no responsibility to update the information in this conference call under any circumstance. The press release distributed today that announced the company's results is available on the company's web site at www.loopnet.com in the Investor Relations section under Financial Press Releases. The current Report on Form 8-K furnished with respect to our press release is available on the company's web site in the Investor Relations section under SEC filings and on the SEC's web site. Now, I'll turn the call over to Rich Boyle, Chief Executive Officer and Chairman. Rich?

Thank you, Erica. Welcome, everyone, to LoopNet's first quarter 2008 earnings call. I am pleased to report that during the first quarter, we continued to make strong progress in serving our customers and building our business. Revenue for the quarter was $20.6 million, an increase of 33% compared to the first quarter of 2007. Adjusted EBITDA for the quarter was $9.6 million, which is a 31% increase over Q1 of 2007. This continued progress is a direct result of the unique value our services provide to our customers and it comes as we continue to see some challenging conditions in the commercial real estate industry that we serve. The conditions in the commercial real estate market have been consistent with our expectations. Specifically the activity in the investment sale market has slowed dramatically driven by the disruptions in the credit markets that began last year. The challenges created by the credit crunch have been further exacerbated by concerns about the economy, employment, and recessionary fears. We believe this has impacted the overall industry in numerous ways with one important example being that the activity levels of investors looking to buy buildings have remained muted. Research firm Real Capital Analytics reported recently the transaction volumes of properties valued at $5 million and up were down significantly in Q1 of '08 as compared to Q1 of '07 across all major asset types. According to RPA, industrial sales transactions during the quarter were down 36%, apartment buildings down 40%, offices down 62%, and sales of retail buildings down 75%. The picture on the leasing side of the business is not so bad with many of the underlying fundamentals in the commercial real estate space in relatively good condition. Vacancy rates and rental rates remain within reasonable ranges in both market segments, though in…

Thank you, Rich. LoopNet's revenue for the first quarter of 2008 was $20.6 million, an increase of 33% from $15.5 million in the first quarter of 2007. The increase was due to higher average monthly prices for premium membership, an increase in the number of our premium members, and continued growth of our non-premium membership products. On a year-over-year basis, we experienced a 19% increase in the average monthly price of premium membership, resulting in an average monthly price of $59.20. This increase was a result of the price increases that were implemented in Q2 of 2007 for premium members who use our service to list and search for properties and the shift to a volume-based pricing structure for listers, which we began to implement during Q3 of 2007. LoopNet's adjusted EBITDA for the quarter was $9.6 million or 46.6% of revenues, an increase of 31% from $7.3 million in the first quarter of 2007. The company has reported adjusted EBITDA, which we define as EBITDA excluding stock-based compensation and litigation-related costs because management uses it to monitor and asses the company's performance and believe that it's helpful to investors in understanding the company's business. Net income for the first quarter of 2008 was $4.9 million or $0.12 per diluted share compared to $4.5 million or $0.11 per diluted share in the first quarter of 2007. Net income in the first quarter of 2008 included $0.02 per share of stock-based compensation and $0.01 per share of litigation-related costs. Net income in the first quarter of 2007 included $0.01 per share of stock-based compensation and no litigation-related costs. The effective tax rate for the first quarter of 2008 was 41.2% compared to 41.3% in the first quarter of 2007. As of March 31, 2008, the company had $76.3 million of cash,…

Thank you, sir. (Operator instructions) Our first question comes from Andrew Jeffrey from SunTrust.

Hi guys, good afternoon.

Hi, Andrew.

Good performance in a – in an obviously a very challenging macro environment. And part of the performance as previously advertised was obviously a function of very strong pricing. I heard you mention the 2Q '07 price increase, as well as the volume-based price increase. Maybe you could give us a little color as to the magnitude of each of those price increases impact in the quarter and as well as what you'd anticipate in terms of how that rolls out through '08 and whether or not you have any other pricing increases or changes on the docket?

Yes, we'll try to provide a little bit of color for you. I don't have right in front of me the specific breakdown of the components. I mean the price changes that we were referring to was in Q2 of '07, the base price for listers went from $69 a month to $89 a month. And then in Q4 of '07, the volume-based pricing with scaling for basically the brokers having the option of paying more listings and having an increased fee on a per-listing basis. The list we got in Q1 would have been affected by both of those. I don't have a percentage breakdown as to the relative difference between the two. I know going forward this year, starting this quarter, in Q2 of '08, the list will still be affected by both of those things because of the date at which we implemented the $69 to $89 price change was at the end of Q2 of last year. And then as we get into Q3 of this year, it'll be still affected by the volume-based shifts. And then once we get into Q4, it'll be pretty much done propagating all the way through. It's early Q4 that we moved to the volume-based. So that's kind of the phasing throughout the year in which we'll get the effect. And the shift overall has gone very well. And ultimately what we are doing right now is giving our users the choice of how many of their listings they want to get enhanced marketing exposure for and leaving it up to them to align the dollar spend with the marketing results they get. And we are pretty pleased with the results. I don't know, Brent, if you have anything to add in terms of the–

No. And, of course, I don't have the specific breakdown either between the two.

Any plans for additional price increases or adjustments this year?

No. I think we are pretty comfortable with the model as it is right now. And ultimately I think the changes we have made, we still have a ways to go propagating them through and the changes that we have made to date are really creating a situation where the users can kind of turn the dial themselves and decide what – how much of their marketing spend the want to allocate, how they want to measure the ROI in that and drive additional results. But I think the pricing model or the pricing engine that's in place is pretty complete for 2008 at this point.

Okay. And then with respect to the premium registered members, which was essentially flattish sequentially, are you prepared to think about a return to growth on a sequential basis? Or are we still in sort of a holding pattern?

I think we are still in sort of a holding pattern. At the end of the day, the market conditions that are driving that, and we talked a little bit about it on the call, or on the script earlier, we are seeing solid growth in the monetization on the marketing side, no question about it. And the demand side of the industry is seeing some headwinds right now. And we don't think those market conditions have changed at this point. We look forward to when they do and we think we are in a great position as we eventually come out of the cycle, but we don't se that changing in the near term.

Okay. Thanks a lot.

Our next question comes from Derek Brown from Cantor Fitzgerald.

Hi. Thank you. Two questions. The first is in relation to the demand side of the equation, in particular profile listing view growth was I guess surprisingly robust given your comments about demand. And I'm trying to sort of figure out where there's a disconnect between those two, number one. And number two, with respect to competition, there's been obviously some noise in the market and I'm wondering if you have any kind of updated thoughts on the competitive landscape?

Okay. Well, the profile view metric, I guess there's a couple things going on there. Certainly there's sequential acceleration from Q4 to Q1. There's a little bit of seasonality there that we see normally. The 15% year-over-year growth is definitely a deceleration from where it was a year or so ago. And I think it is showing some of those industry effects if you will. We believe there is a phenomena where we are starting to see more people kind of coming back into the markets and looking, but we haven't really seen them converting into active buyers, which is when they really become paid subscribers to our searching services. So that's kind of our interpretation of the data as it stands right now. So if – we are beginning to think we are in a great position going forward, but we just haven't seen the buy side activity really sink in a material way yet. In terms of the competitive landscape, we haven't really seen any material changes. There is a competitor that's been talking about a new marketing service. We have heard that they are out pre-marketing the service. But I don't believe it's live yet, so we haven't seen it in actual use or from customers in any detail. What we have heard is that it basically appears to be a knockoff of our Showcase product. In fact, it's unfortunately got the same name in terms of providing marketing service to brokers for their listings. The challenge for them I think, of course, would be the – they have got to convince customers that they can provide a successful marketing platform and deliver a substantial and sustainable marketing audience. And most people today think of them just as a closed research service. But if you use CoStar numbers I think is a – or, sorry, comScore numbers as a third-party basis of comparison, our average monthly unique visitors during the quarter were I think about 4.5 times what theirs were. And that's just to loopnet.com, which is only part of the marketing exposure that we offer to our customers. So, we continue to believe that the real strategic issue for us is just simply getting people to move from the offline world to the online world. And from that perspective, we are happy that online paid marketing is getting a lot of interest and we believe the benefits are going to accrue to us as the clear leader in this space. And once customers are in the online world, they really start to look at things like measuring their marketing results. And we are very confident of the value we deliver in that regard. But we haven't seen any material change at this point.

Okay. And one additional question – with respect to the pricing changes, can you give us some sort of a ballpark for the percentage of your customers that have now been touched by higher price points maybe within the last 12 months?

Percentage of customers that have been touched by higher price points? Well, it would be – a substantial portion of people on the marketing side are would have at this point been touched. On the searching side, obviously, we haven't changed prices at all, so none of those people have been impacted. But on the marketing side, if you go back to Q4 of '06 is when we made the first pricing model change. And so we have been through pricing changes over the course of the last 18 months that would have touched everybody. That said, I mean, we have made pricing model changes in the past as well, so it's sort of – it's happened on a over time.

Great, thank you.

Sure.

Our next question comes from Steve Weinstein from Pacific Crest.

Great. Thank you very much. Just wanted to check in on the CityFeet acquisition and see if that was still meeting your financial expectations just kind of given how the environment has changed. And then two, now that you have owned the business for a while if you have any sort of change in plans about how you may run it or if it's consistent with what you have told us at the time of the acquisition.

Yes, it's pretty consistent. So the standalone results that are coming from that business unit if you will are roughly in line with what the original expectations were. Roughly a $2 million run rate is I think what we talked about back at the time of the acquisition and that's still kind of where it is. Where the leverage is coming from is really integrating that broader distribution network with the listings flow that was coming into LoopNet. And so the Showcase product, what we have talked about in the past on LoopNet, which is an agent can optionally choose to spend some additional marketing dollars to get more marketing exposure for their listing, both by getting sort of top search results placed in on LoopNet and by syndicating it out through the CityFeet distribution network. We have been really pleased with how that business has been developing for us. And it's – that's where I think the majority of the leverage has come from in the CityFeet acquisition and been running probably slightly favorable to our original expectations. We are very pleased with that. And in terms of the integration between the two businesses, that was probably the primary step we wanted to make happen initially. The other step that's going on now is companies that were listing in both places, we have been reconciling that, so they only have one place to list to and they would typically start on LoopNet and then we would distribute listings out to the CityFeet network from that starting point, so the customers no longer have to list in both places. And that work at this point is I think fairly complete and so we are pretty pleased overall with the results.

All right. Thank you.

Our next question comes from Jim Wilson from JMP Securities.

Oh, thanks. Good afternoon, guys. Was wondering in the – if you could give the absolute numbers of – the number – the absolute numbers of listers that are in the premium member account, as well as the number of searchers? I'm just trying to look through here. I'm going to guess that of your 4% net increase, you actually had a lot – much higher growth in listers and maybe some reduction in searchers and that also contributed to mix shift in pricing? Is that correct?

There are some differences. We actually don't provide the detailed breakdown. We did see strong growth on the monetization size as you look at total dollars. It's a function of price menu on the lister side. They are roughly in parity, but we don't provide the specific breakdowns at this point. And the – it is true as well that searchers tend to be – by and large a larger proportion of them are what we call transactional people that kind of come and go around a given deal, so they are a much more fluid subscriber base if you will. But we don't, unfortunately, provide the specific breakdowns in the various segments.

Okay. And then the other question I guess, customer turnover churn rate, how was that in – I'm not sure I heard it, but how was that in the quarter or recent trends? And I'm just wondering maybe if property is starting to stay on the market longer and obviously you are having an impact, helping the market or actually subscriptions therefore stay in place longer? That's what I was kind of wondering.

Yes, the overall churn or cancellation rate was right in the range that we had expected and talked about in our last call, which was between 4.5% and 6.5% on a monthly basis. And that came in pretty much right as expected, again, primarily driven by an elevated rate in the searchers that are not looking to buy (inaudible) at the moment. And in terms of property staying on the market, we have seen that creep up a little bit. It hasn't crept up a lot. I think days on market on the investment sales side is maybe up about 10% or so. But it's not a dramatic change at this point.

Okay. Then I guess just finally, would my – would that – I guess true potentially that if properties do start staying on the market even longer that that actually could be to your benefit in terms of the listers obviously having that much more motivation to subscribe that much longer?

Yes. I mean, I think generally the thesis there of in a market where demand is lacking, the – your best marketing sources become even more valuable to you. We absolutely think it's true. There's not a direct correlation. I mean, we don't get paid 100% today based on dollars per listing per month. We are rolling out – as we roll out the volume-based pricing model, you start to see the business a little more correlated with that, but it's not quite a direct connection at this point in time. So there's some benefit to that, but I wouldn't say it's real material yet.

Okay. All right, great. Thanks.

Sure.

Our next question comes from Mitch Bartlett from Craig-Hallum.

Hi. How are you?

Hi Mitch.

You talked – you spent a good amount of time on the call talking about Xceligent. And I'm not as familiar with that. I saw the last press release where they talked about Oklahoma and what not, but sounds very interesting. I don't know how – what percentage of the company that you own or what your plans are, how many markets they are in right now and how fast that they can roll out, and maybe if you could just touch on what their cost structure is as opposed to others that might be competing against them?

Sure, so I guess a couple of points. They are – I think they are in I want to say 20 to 25 markets today, somewhere in that range. The company's been around since the late nineties. And we own a small minority position in the company. We have invested in them to really try to strengthen the partnership, as well as provide them with some capital to help them accelerate their growth. So we are not a majority owner, but we are closely aligned with them at this point. The business model, it is a research-based service. They do have I think more of a collaborative approach to how they do that than some of the other research companies that are in this space. They have also been working really hard over the last couple of years to in effect come up with what I'll call a next generation research process, which gives them some real competitive advantages from an efficiency point of view so that from a cost point of view, they are able to deliver back to the market their researched and fully verified data at a lower price point than some of the competition. So–

Is it significantly lower than the competition on price or–?

Yes, I believe so. I believe it's – on average it's probably 50% less or something like that, a substantially lower cost. I'm not completely familiar with their pricing schedule versus the competition, but I think it's definitely a substantial difference.And I would say they are still in the early stages of rolling this out, but they have got – what we hear from customers – and we obviously have great connections kind of throughout the industry, all over the country – a lot of really positive momentum from customers that are looking for alternative solutions and are excited about what these guys can do for them. So obviously there's still a lot of scaling to be done. It takes a while to roll out these kinds of services, which is–

Could they touch 25% of your listings in two, three years with the information?

I think – yes, potentially. I think they'll be constrained by the pace at which they can go research these markets, just because it does take a lot of work. But at this point, they are showing some really good progress.

Last question – you are not defining where you are on your churn, but that you were inside the range. But could you give a little more breakdown on kind of the progression of churn on the lister side? It certainly must be up over a year ago, but is it progressing more dramatically than maybe the last few quarters we have seen?

Well, on the lister side, no. I mean, it's up a little bit. What we tend to see is when we make a pricing model change similar to what we have done, the cancellation rate does go up slightly. And we are fine with that. People tend to – they don't leave our system. They go back to using the free service for a period of time and we are very comfortable with that trade-off. Our customers can make the choice and there's no issues there. I think we are probably seeing a little bit of an elevation even on the listing side from just market conditions, meaning some of the less productive agents are not necessarily subscribing as much as they were. But it hasn't changed tremendously. What's been driving more of the cancellation rate increase for us is coming on the searching side. Investors that are – that would buy our product for a three-month period while they look for a building to buy, for example, just due to the financing debacle that's going in the broader world right now, they are just not active in the market. And so that's what's driving the primary elevation in our cancellations.

Fabulous quarter. Thank you.

Thanks.

(Operator instructions). Our next question comes from Heath Terry with Credit Suisse.

Great, thank you. I was wondering if you could just kind of walk us through the – as we are focused more on the macro side of things here, kind of update us on some of the penetration metrics or the areas that we first started talking about that provided so much growth for the business in terms of what kind of penetration you think you have got with the active commercial brokers that are out there and how that number might have changed, both as you have grown subscribers and we have potentially seen fewer active commercial brokers in this current environment.

Sure. I mean, from an overall penetration point of view, if you kind of look at – and I'm talking about activity on our platform right now independent of who's a paying subscriber, so this is inclusive of all of the free activity as well. When you sort of paint with a broad brush, we think we have about 20% of the sort of annual active sort of transactions and transaction participants in the marketplace on our system right now. And that's whether you look at it as a listing skew, meaning the supply side of the marketplace or the demand side of the marketplace. So and it's showing solid growth and we think we are the biggest online player in that regard, but we still have quite a ways to go in terms of trying to get the industry online.

Great. Thank you.

I'm showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect and have a wonderful day.