Good day, ladies and gentlemen and welcome to LoopNet, Inc.'s Earnings Conference Call for the Second Quarter of 2010. The date of this call is July 28th, 2010. This call is the property of LoopNet, Incorporated and any recording, reproduction or transmission of this conference call without the expressed prior written consent of LoopNet, Incorporated 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 website. The webcast will be available on the company’s website until August 27th, 2010. I will now turn the call over to Derek Brown, VP, Investor Relations and Corporate Planning. Please proceed, Mr. Brown.

Good afternoon. Thank you for joining us to discuss LoopNet’s financial and operating results for the second quarter of 2010. With me today are Rich Boyle, Chief Executive Officer and Chairman; and Brent Stumme, Chief Financial Officer. Today, Rich will provide an overview of the business and corporate strategy, a summary of the company’s second quarter performance, and review of our marketplace and information services lines of business. Brent will review the second quarter financial results and provide third quarter 2010 guidance. In Q3 2010, LoopNet has planned to meet with institutional investors in New York and Chicago among other locations and we will participate in the Pacific Crest Technology Leadership Forum in Vail, Colorado and in Morgan Keegan's Technology Conference in New York. We hope to see you at these events, but we will also make webcasts of our presentations available on the Investor Relations section of LoopNet’s website. I would now 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 yet 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 website at www.sec.gov for detailed discussions of the relevant risk and uncertainties. The company does not intend to update the forward-looking statements in this conference call, which are based on information available to us as of the date of this call. The press release distributed today that announced the company’s results is available on the company’s website 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 website in the Investor Relations section under SEC Filings and on the SEC’s website. You will also hear discussion of non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are contained in the press release distributed today and available on the Investor Relations section of the company’s website. Now, I will turn the call over to Rich Boyle, Chief Executive Officer and Chairman.

Thank you, Derek. I would like to welcome all of you to the LoopNet second quarter 2010 earnings call. On our call today, we will discuss our performance during Q2 2010, share with you our perspective on current conditions in the commercial real estate industry and discuss how these conditions are impacting our business. We will also provide you with updates on a number of other important initiatives at the company, including an update on the progress we are making with new investments to expand the breadth and depth of services we provide to our customers. Following my prepared remarks and those of Brent Stumme, our Chief Financial Officer, we will be opening the line for questions. LoopNet delivered very strong results across the board in the second quarter and we made ongoing meaningful progress in developing key areas of our business for the future. We are increasingly confident that the first quarter of 2010 was an inflection point for our business as we moved past the worst of the cycle that began in August of 2007. Some of the key achievements from the second quarter that we would like to highlight are; exceeding the financial targets we set three months ago, increasing revenue year-over-year for the first time since the fourth quarter of 2008, increasing revenue sequentially at the fastest pace since the second quarter of 2008, increasing our base of premium members sequentially for the second consecutive quarter and only the second time since the third quarter of 2007, introducing initially in a beta release our new property research database service, signing a long-term expanded enterprise agreement with CB Richard Ellis which includes access to the new property research database service, advancing our efforts to integrate recent acquisitions, and continuing to accelerate our organic investment program to expand…

Thank you, Rich. LoopNet's revenue for the second quarter of 2010 was $19.4 million compared to $18.8 million in the first quarter of 2010, $19.2 million in the second quarter of 2009, and our guidance of $18.6 million to $18.8 million. This marked the first year-over-year increase in our revenues since Q4 of 2008, reflecting an increase in our base of premium members and subscribers to recent sales during the current quarter, the impact of recently completed acquisitions, out-performance in more volatile areas of our business such as advertising, and a modest improvement in broader industry conditions. LoopNet's adjusted EBITDA for the quarter was $7.2 million or 37.4% of revenues compared to $8.2 million in the second quarter of 2009 and our guidance of $6.4 million to $6.6 million. Adjusted EBITDA margin was higher than planned and above our stated target range due largely to favorable timing issues associated with our hiring and product development efforts, coupled with a revenue upside from advertising and other high-margin sources. Net income applicable to common stockholders for the second quarter of 2010 was $3.2 million or $0.07 per diluted share compared to $1.8 million or $0.04 per diluted share in the second quarter of 2009 and our guidance of $0.04 to $0.05 per diluted share. Net income applicable to common stockholders for the second quarter of 2010 included an insurance recovery related to past litigation costs of $0.02 per diluted share and the second quarter of 2009 included litigation costs of $0.03 per diluted share. Non-GAAP net income, which we define as net income excluding stock-based compensation, amortization of acquired intangible assets, and litigation related costs for the second quarter of 2010 was $4.2 million or $0.10 per diluted share compared to $4.6 million or $0.11 per diluted share in second first quarter…

(Operator instructions) Our first question, ladies and gentlemen, comes from the line of Ian Corydon with B. Riley & Company. Please proceed.

Hi, Ian.

Hi. Couple of questions on the for-lease and for-sale listings. How do you expect the lease list – the number of lease listings to trend as they can be stabilized or decreased? Is there still room for upside there? And then do you have much visibility into sales listings and when those might pick up a little bit more than they have been?

Yes. I guess, a couple of quick thoughts. So on the leasing side, we definitely saw the growth rate mitigate a bit from where it had been running. I think we have been running close to 20% year-over-year for the last couple of years even. And I think the slowdown in the growth rate, there is two factors. I mean, one is just as the denominator gets bigger, it's sort of a natural effect. But then secondly, vacancy rates that were ballooning up rapidly last year, it's really kind of tapered off and so they are somewhat stabilized. So I think there is a little less wind at our backs. That said, yes, there is still plenty of room for growth there. We don't view ourselves as anywhere near a 100% penetrated in terms of having all of the listings in the world – or in the market on our platform. And so even with that basis alone, there is lots of opportunity to keep growing, even with slightly less wind at our backs, if you will. The for-sale side, the market is still, in a very broad sense, moving pretty slowly. We did see data from like Real Capital Analytics and firms like CB Richard Ellis showing that investment sale activities picking up. However, we primarily believe that's initially starting more at the high end of the market. Investors, they are sort of a – a flight-to-quality mentality about the properties they are looking to buy. There is also more financing available for larger properties. The sort of small property world financed by community banks is lagging that somewhat. So I think our view is it's going to continue to be a positive trend, but continue to develop frankly pretty slowly as the issue about the commercial loan balances that are held in the books of community banks throughout the country still have to get worked out if they are pre-conditioned to increase deal volume.

It makes sense. And on the property database, I realize you are still kind of figuring out the monetization there, but should we think of that as a monthly contract? And also, do you have any sense for how many of your premium members are currently actively using the database?

In inverse order, it's a relatively small percentage so far. We just launched it in May; we've just kind of begun spilling up all the marketing programs around it to get people aware of it and using it. There is also a substantial amount of software functionality that we are going to be adding to it over the next few quarters. So I think we are in the very early stages of driving awareness and usage. As we have been out in the field showing it to customers, the feedback has been fantastic. People are really excited about the information in it and where they see it going, and what they can do with it. So we are pretty pleased, but it's very early in the game in terms of rolling that out and getting people to start using it. In terms of the monetization, I do believe we will see it as a subscription-based service. There maybe some slight differences in terms of how it is consumed by customers from our primary premium membership products. And a couple of examples would be the opportunity to do an enterprise agreement with a firm like CB Richard Ellis that we announced today is something that the research and information services typically get organized at the corporate level, whereas the marketing services we provide in premium membership right now are very often a broker-by-broker decision. So the opportunity to do something at a corporate level for at least some of the firms, we think, is a little bit different. And then just in general, the consumption of the information is relevant outside of just the transaction. So it's very relevant for somebody who is maybe marketing a deal or searching for a deal, but it's also relevant to a broader set of people in a broader lifecycle of commercial real estate, if you will. So we think it opens up some interesting opportunities for us to go into new areas there as well. But by and large, we do see it as a subscription service, maybe a little bit packaged differently than premium membership, but that's how it will develop over time, we expect.

And do you have the ability to create tiered packages within the database, either regionally or in some other way?

It – we – absolutely, we have that ability. The way it's working right now in the beta period is we are most eagerly just seeking customer feedback. And so it is not constricted on a geographic basis at all. Anybody who is an existing premium member has full access to the property information in the property research database and they can use it nationwide for all the information. That is an example, though, of something that if we felt like that was appropriate for how customers wanted to consume it going forward, we absolutely can build that kind of access level then, if you will.

Great. Thank you.

Thank you.

Ladies and gentlemen, our next question comes from the line of Mitch Bartlett with Craig-Hallum. Please proceed.

Hi. Hi, Rich. Hi.

Hi, Mitch.

Sorry to make you do this again, because I'm juggling so many companies here. But will the – the property database, when it becomes part of a bundled package, will there be new content added to that that will drive that subscription? Do the – do folks have pretty much 80%, 90% of what will be consumed in a subscription available at their fingertips now, but it will be just differently organized? I know you just answered this, but could you just put a little bit more to that?

Yes. Well, so when you look at – and specifically talking about the property research database service now, not premium membership or recent sales, when you look at the property research database in and of itself, what we launched at the end of May is a massive set of information that LoopNet customers did not have available to them before. So it really is an unprecedented amount of new stuff that they can access. Now, at the moment, we are making that available people who are already paying subscribers at no additional cost, just because we are trying to solicit their feedback on what could make the product work for them in these first few months of life of the product, if you will, which is a not unusual strategy for companies like us. So the product, as it stands today, we think will be monetizable in a very direct way once we get a little bit further down the road about reacting to some of this customer feedback. So that's point one. But then point two, we will continue to invest in it, expanding breadth, depth, and detail of information in the service so that over time, it will – at whatever monetization level it goes out when we first flip the switch on that, we do think over time we will be continuing to invest in the product to add more and more value to it. Does that –?

Yes. Yes, thank you. The second question and I'll jump off here, is did I hear you say sequentially, profile views were up 13%? Does that –?

They were definitely up sequentially. Let me just double-check –

The real question here is, is that seasonally an acceleration? Is that kind of normal seasonal improvement? Q1 to Q2, is the business improving from a profile view?

Yes. I think it was actually up 15% sequentially from Q1 to Q2. And it's actually – the normal seasonality, if you go back all the way before September of '07 when a bunch of patterns in the world shifted a little bit, the normal seasonality for us was that Q2 was a typically a little bit lighter than Q1. When you looked at it, whether it was sort of operating metrics like profile views or monetization metrics like new – net new premium members was usually down a bit in Q2 relative to Q1. And so the sequential improvement in that, we think, is actually kind of a further indicator that the industry is stabilizing a bit and activity is picking up.

That's great. Thank you.

Sure.

Our next question comes from the line of John Blackledge with Credit Suisse. Please proceed.

Thank you. Thanks for taking the questions. Just a couple of questions. Firstly, just wondering what led to the share buyback activity in the second quarter and what your view is on capital allocation in the back half of the year. You guys have a (inaudible) on the balance sheet is – are share buybacks going to continue, are you guys done with – largely done with M&A activity at this point? Just an update there. And then the second question would be, with modest improvement in premium members and it's stabilizing, albeit a weak commercial real estate environment, just wondering why you expect kind of flattish revenue sequentially in the third quarter. Is there some seasonality there? Thanks.

Hi, John. This is Rich. So why don't I'll – maybe I'll take the first one and I'll let – Brent and I can kind of tag-team on the second one. So, on the buybacks topic, a couple of things. One, we back in the beginning of the year announced the increased authorization from our Board to do more buybacks. One of the things that we said is that the Board had encouraged us to execute buybacks at least to a level to offset options solution and that's basically the level that we've achieved so far through this year. And so that's something that is an ongoing policy matter, I think, the company will be looking at doing. In terms of the bigger picture, we do still have significant remaining authorization to do buybacks. Another way to look at what we did so far this year was basically offset cash that we've generated over the last year or so in the business. And so we still have substantial cash reserves at the company, I'll ballpark at about $100 million. I think our first preference, as it always has been, is going to be to go forward with our organic investment program. Our second preference is to continue to look for acquisitions. We do think there are still a number of things out there. They do frankly tend to be some of the smaller opportunities and so as we have excess cash, having that sit in the bank and earn a quarter-of-a-percent is, we think, no the best productive activity with it. So I think for now, we are going to continue the organic investment program, we are going to continue to look for acquisitions, we will probably be looking at additional buybacks down the road a little more opportunistically now that we've achieved the initial options offset that we wanted to.

Okay.

And talking about Q3, maybe I'll let Brent talk a little bit about that.

Okay, yes.

So as far your question about the Q3 revenue guidance, I think that the main delta there is our – kind of our non-subscription revenues, mainly advertising in Q2 came in strongly than we were expecting. I'd say our Q3 guidance, we are – we probably are assuming it's not going to come in quite as strong as they did in Q2. So that's part of the main delta.

Okay. How is advertising tracking thus far in the quarter? I don't know if you guys know of it.

I guess I don't feel comfortable kind of giving the inter-quarter results at this point.

Okay. Okay, that's fine. Thanks for taking the questions.

Thanks, John.

Thank you.

Ladies and gentlemen, our next question comes from the line of Steve Weinstein with Pacific Crest. Please proceed.

Great. Great, thanks for taking my question.

Hi, Steve.

Yes. The first question, a follow-up on the previous question that in Q3 guidance. So I just – I'm not sure I understand correctly that the reason you got in basically flat to slightly down is potential revenue trends not related to kind of the core premium membership business. If you broke those out, would you think that the premium membership business would continue to grow sequentially, just kind of given the momentum we've seen so far this year and potential inflection in the industry? That would be my first question. And then the second one is, understanding that you can't go into details around your deal with CB Richard Ellis, but I am wondering just the pricing model in general, how that works, is that going to be based on the number of people how use it? Did you set up a flat fee? Is there a way to kind of scale that over time with increasing usage? Thanks a lot.

Hi, Steve. It's Rich. So in terms of the first question on Q3 guidance, yes, I think if you broke out just premium membership, we are expecting a modest sequential growth in that product line for the third quarter. Building on kind of the momentum and industry dynamics we've seen so far this year, we think the industry is stabilizing; it is getting better, but at a pretty modest rate so far. But that's what we would expect to see happen in that product line. Regarding the contract with CB Richard Ellis, you are right, we can't go into tremendous detail. In the near term, the monetization impact is quite modest. The centerpiece of that agreement is really accessed by them to the property research database service, which is in beta and being given away for free right now at no additional cost to the existing subs. And so we weren’t in a position to go to CB Richard Ellis and say, everyone else can access it at no additional cost and we'd like you to pay up for it. We also view them very much as, frankly, a development partner in this service. They are, I think, a great partner of ours in business in general, not just the customer, giving us a lot of great feedback on what they like to see in the product. So it will begin to have an opportunity and I think that contract has some very significant opportunities in terms of monetization down the road. But over the next couple of quarters, as that service is kind of in its beta phase, it really won't have much of an impact at all.

Okay, great. Thanks for the explanation.

Ladies and gentlemen, our next question comes from the line of Brett Huff with Stephens. Please proceed.

Good afternoon, and congrats on a nice quarter.

Thanks, Brett. We can go ahead and say it's from Stephens so that we give you guys your advertising.

That's all right. I'm trying to understand from a market – your market commentary is always really helpful. Can you drill down a little bit and talk about which group of people was the driver of the premium sub growth? In my understanding, it's the demand side that has been sort of on the lane and is this a continuing increase in demand from the searchers or can you kind of characterize that for us?

Yes. I mean, we did see modest growth on the searcher side. I think that's probably where we saw a little bit more. That said, the overall proportion between the searchers and listers didn't change dramatically, it's still in the ballpark of 60-40 people on the marketing side, people on the searching side. I think the searching side grew a little bit more on a year-over-year basis. And it – we – that's probably where we are seeing a little bit more unit adds and maybe getting a little bit of pricing on the marketing side.

Okay, that's helpful. And then in terms of the transactions, in the past you've talked about the types of – either trends that are listing that you've seen come on that are distressed or whatever and I am curious if you can comment on that? And then maybe in the same breadth, comment on – is there any way for you to view or understand how many of the – how much of your activity that you are seeing in the increase is driven by the refi's that, I think, we are all expecting to start driving commercial real estate metrics generally here in the near term?

Yes. I don't have the specific numbers on the distressed listing right in front of me. We will put it in our updated investor press. That will be up on the website. But I'll give it to you as well, Brett. I do know that, as we've been watching it through the early part of this year, it has continued to go up. The number of new distressed listings coming out in the year in the first part of the year were still accelerating pretty rapidly. That said, the overall picture hasn't really changed much from where it was in Q1, which is the resolution of that problem in the small end of the market where banks recognize that they maybe have a loan on a small commercial property that is under water, they are trying to write it down to a soft landing as opposed to the force the disposition to the property and take a write-down in the near term. That is still absolutely the phenomenon that's kind of dominating activity. And so the real flood, if you will, of distressed listings that I think the commercial real estate community expected, say, a year ago is materializing much more slowly than everybody expected and I think that's still the case now.

Okay. And then on the leasing, I know that you commented a little bit more on leasing. The way I understand it is that leasing always kind of precedes buy and sell in the recovery and it seems the data that you are seeing sort of supports that thesis in this kind of recovery. Can you just describe again kind of the leasing?

Yes.

Leasing metrics or give us more color on that?

Yes. Well, so the broad dynamic – I mean, vacancy rates are still really high. So CB Richard Ellis' numbers were around 17% nationwide office vacancy. And that's a very high to put in context if you look back over the last 15 or 20 years for example. That said, they only increased very, very slightly last quarter. They increased by about 10 basis points. If you go back to last summer, they were increasing by probably 50 basis points to 60 basis points per quarter at least. And so the rate at which the empty space is expanding has slowed considerably and it is now sort of flat. We are not really back into absorption territory where it starts to go back down. And so it's sort this issue of existing businesses swapping out for higher-quality space is very much a – there is baseline of activity that I think is going on. I think that definitely accrues disproportionately to bigger firms in the market like CBRE and they are – I think they probably reported a pretty good quarter in activity as a result of that. But the big driver in an overall sense is going to be when things like unemployment start to come back down meaningfully. They came down a bit, but I think national unemployment data from Bureau of Labor Statistics is still we are at 9.5% or something like that. And that's still a really high number. And so I think to have leasing activity really pick back up to a more normalized level and net absorption to go positive to bring the vacancy rates back down is going to require unemployment growth – sorry, employment growth and the overall economy picking back up in a way that it's showing some signs of life, but it's nowhere near back to a normal level at this point.

Okay. And then just two more questions, I'll be quick. In terms of the database, the info you generate, as I recall, a lot of that is historical data that you all have been aggregating for a while and are just now kind of putting to use. Is that the right way to think about it?

Yes, that's a very massive chunk of the information. Other is information that we have worked with third-party partners to aggregate and integrate, other is information we proactively go out and gather ourselves through a variety of different means. But the centerpiece of it, if you will, is this information that's generated as a byproduct in operating our marketplace.

And that's primarily – is it still primarily user-driven or is there a – have you been proactive, not using third parties, you have been proactive yourself in doing research?

The starting point of listings information on LoopNet is absolutely still the user-generated content model. There is no question about that. And we think it's going to continue to be. There are segments of the industry where we do proactively gather listings information ourselves; we've talked about that and some of our efforts over the past few years to gather more data. But most of it is still user-generated in the beginning. However, we've always had a substantial operation internally. It's more leveraged on technology than it is just simply throwing bodies at it, but to then standardize and organize and cleanse and qualify that information. And so there is a lot of work that goes into making it good information that then synchronizes back to a specific building and ties up to all the other information we have about that building. And that's a process that we are doing more of than we used to do. But we've done it for a decade plus.

And then, last question. I appreciate the extra time. In terms of profile views, I am very encouraged by the number of profile views. Is it right to think of that as a leading indicator of interest? I think what you said in your prepared remarks was people are basically doing more work and thinking harder about looking at properties. Is that the right way to interpret that?

Yes, we think so. I mean, if you go all the way back over the course of the last year and half, two years, I mean what we said way back in the beginning of '08 was as this market went sour in terms of activity, what was going to happen eventually is – on the for-sale side, if pricing came down, you would start see buyers come back in and get interested. I think we are definitely at a point now where there is a lot of buy-side interest in some very attractive pricing in the market and the challenge has now shifted to a lack of supply. The buildings that are out there that would be sold at pricings right now, it sort of breaks into two camps, broadly speaking. One is owners who don't have to sell, who are looking at a not very attractive pricing environment and they are just deciding to hold. And two is people that are facing a refinance over the next few years that you would expect to have to sell, whether they like it or not and this pretend-and-extend phenomenon that we've talked about where the banks are extending their loans and giving them some flexibility that's basically letting those owners not be forced into a situation where they have to take the loss – the owners and the banks not be forced into that situation. So in the market, the demand has definitely started to grow in Q3 of last year, has continued to grow since, and we feel pretty good about that trend, and we definitely feel like it's a leading indicator. But the bottleneck right now is bringing more supply to the market, I think.

And Brett – Brett, this is Derek, just with one additional comment. Not just looking at profile views to get a sense for demand though, we've also seen some encouraging signs in the premium member base, both on the adds and the cancels, and also seeing activity on recent sales over the last several quarters as well. So there are sort of a bunch of different data points that we are looking at that point us to improving conditions on the demand side.

Great. I appreciate the time.

Thanks, Brett.

(Operator instructions) Our next question comes from the line of Jim Wilson with JMP. Please proceed.

Thanks. Good afternoon, guys.

Hi, Jim.

With just – I guess, first one the – just I guess, a maintenance or a numbers question. The insurance (inaudible), is that actually reversed out of G&A and where do I find that?

Yes. Yes, you'll see that it's just a net – netted out of G&A line item.

Okay.

And then we back – backed it out in kind of our non-GAAP number, if you look at the last table of our earnings release.

Yes, okay. And then the other, I – just more general, Rich, is I think everyone is trying out some of the same questions, the premium membership, but where or how do you foresee most likely being able to charge for additional services here and – I don't know, maybe if not, how much, but – which is hard to answer, maybe when do you see foresee that you might be able to start to tack on additional charges to premium membership for accessing different products and different – and the database?

Yes, the – I mean, the timing on some of the new products like the research database for example, I mean, it is still up in the air, it's going to vary depending on – there are two primary things. One is we are actively working on enhancing yet more functionality around the product now, some stuff that's going to be coming online in the second half of the year, and then soliciting customer feedback, basically. We want to make sure that we get it right in terms of what customers are really excited about. Maybe an interesting way to think about it is I think when we first launched our recent sales service a few years ago, it was out in beta form for probably a couple of quarters before we really started to sell it. And so I think looking at timing, just a quarter or two down the road as we build more functionality and react to customer feedback to make sure we've got the product right is probably the right kind of timing. But we do think that's a product that has some significant potential for us in the coming years. As we also then look at reinvesting, building more functionality and content in the recent sales product, that's something that we are also working on right now. And then I think we have some other new stuff that we will probably be talking about later this year, sort of broadening out the product suite as well.

Okay. All right, great. That's all I have.

Thanks, Jim.

With no further questions in the queue, I would like to turn the call over to the Vice President of Investor Relations and Corporate Planning, Mr. Derek Brown. Please proceed.

Thank you for taking time. We look forward to sharing more with you in coming weeks and coming months. Thank you.

Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation and you may now disconnect. Have a great day.