Welcome to LoopNet Incorporated’s Earnings Conference Call for the third quarter of 2010. The date of this call is October 27, 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 October 30, 2010. I will now turn the call over to Derek Brown, Vice President of Investor Relations and Corporate Planning. Please proceed, Mr. Brown.

Good afternoon. Thank you for joining us to discuss LoopNet Inc.’s financial and operating results for the third quarter of 2010. With me today are Rich Boyle, Chief Executive Officer and Chairman; and Brent Stumme, Chief Financial Officer. In addition to discussing our performance in Q3 2010 during this call, we plan to share 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 new investments we are making to expand the breadth and depth of the services we provide to our customers. First, Rich Boyle will provide some context for quantitative result and offer some color on our business and plans for the future. Then Brent Stumme will walk through our third quarter financial results and guidance for Q4 2010. Following these prepared remarks, we will open the lines for your questions. In Q4 2010, LoopNet has plans to meet with institutional investors in Boston and New York among other locations and we will be participating in SunTrust Robinson Humphrey’s (inaudible) conference next week followed by Credit Suisse’s Annual Technology Conference from November 29 through December 2. We hope to see you at these events but we will also make webcast 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.

We are very pleased to report that LoopNet delivered strong financial results in the third quarter and made significant progress on a number of important initiatives intended to increase our utility to customers and drive growth in our business in the quarters and years ahead. Overall, we think these better than expected results speak to the strength of our underlying business model, our financial discipline and team’s ability to execute stabilizing industry conditions and the effective recent acquisitions among other factors. We are particularly excited to see revenue growth accelerate further and are optimistic that this trend will continue in coming quarters driven by three key factors. First, our ongoing efforts to aggregate marketing and searching activity in our commercial real estate business for sale and land for sale marketplaces. Second, expanding the array of products and services we deliver to our customers particularly some of our new information services. And third, stabilization and in some areas improvements in the market conditions in the commercial real estate and business for sale industry. We made progress and saw positive signs in all three of these areas of the business in the third quarter and on today’s call we plan to take you through each and give you a better sense of what we are saying. So let’s begin with a quick review of current conditions in the commercial real estate market to provide some context for the discussion about our business initiatives and results. In short, the industry continues to grind slow along the bottom with overall transaction activity remaining at a historically low level as we had anticipated. While signs of stabilization and modest improvement continue to emerge across many dimensions, the fact remains that most segments of the industry especially those targeting the long tail of small transactions remain…

Thank you, Rich. LoopNet’s revenue for the third quarter of 2010 was $19.8 million compared to $19.4 million in the second of quarter of 2010, $18.8 million in the third quarter of 2009 and our guidance of $19.2 million to $19.4 million. The revenue growth was due to the impact of recently completed acquisitions and increase in our base of subscribers to recent sales, outperformance 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 $7.4 million or 37.2% compared to $7.8 million in the third quarter of 2009 and our guidance of $6.6 million to $6.8 million. Adjusted EBITDA margin was higher than planned and above our stated target range due largely to timing issues associated with our hiring and product development efforts, coupled with revenue upside from advertising and other high-margin sources. Net income applicable to common stockholders for the third quarter of 2010 was $2.7 million or $0.06 per diluted share compared to $3.7 million or $0.09 per diluted share in the third quarter of 2009 and our guidance of $0.04 to $0.05 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 cost and recoveries for the third quarter of 2010 was $4.4 million or $0.11 per diluted share compared to $5.5 million or $0.13 per diluted share in third quarter of 2009. The effective tax rate in the third quarter of 2010 was 34.8% compared to 26.1% in the third quarter of 2009. The lower rate in the third quarter of 2009 was due to a favorable tax credit. LoopNet repurchased 465,269 shares of its common stock during the quarter ended September 30th, 2010 for $5.5 million.…

(Operator Instructions). Your first question today comes from the line of John Blackledge with Credit Suisse. Please proceed.

Hi, thanks for taking the question. Just a question on the premium numbers; so the net ads were kind of flat to maybe down very modestly. So just wondering what the driver was there and what do you think about – how we can think about the fourth quarter and heading into 2011 on that metric? Thanks.

Sure. Hi, John, this is Rich. Yes, you’re right, it was basically flat sequentially from Q2 to Q3. And couple of issues there; the first is if you look back historically, there’s always been some seasonality or two. Q2 to Q3 transition tends to be a little software, so Q3 being a little bit softer. And then, secondarily, I think just bouncing along the bottom volatility in the overall market what we saw in some of the sectors and in particularly and investors looking to buy is some underperformance in that segment vis-à-vis our original expectations or kind of what had happened in Q2. And it was offset a little bit by some out performance in some of the more professional segments, the full-time commercial real estate market, brokers’ market came in a little bit better than expected, but that lack of investor commitment right now is probably the biggest challenge. As we kind of look at in Q4, I think dramatically we’re seeing it is somewhat the same. Q4 tends to be seasonally our weakest quarter. We’re still looking at a market that overall is pretty choppy in terms of investment activity in the commercial real estate market. We do see it stabilizing and improving over a longer period of time. It’s tough to see exactly when the momentum really picks up steam. So as we get into 2011, I think we’ll have in a more detailed commentary as we get a little more visibility there.

Great, thank you.

Yes, thanks Tom.

Your next question comes from the line of Ian Corydon with B. Riley & Company. Please proceed.

Hi Ian.

Mr. Corydon, your line is open.

Sorry about that. So, I guess first I’m just looking for your latest thoughts on monetizing the property research database, and how you monetize that and who you market that to as well?

Yes, so – hi Ian, this is Rich. We did flip the switch on the initial monetization right at the beginning of October, so we’re in the early stages of charging for it now. It will start to have some modest impact even this current quarter as we run some tests. And then I think really begin to ramp-up into the full production mode after we get into the first part of next year. You can – on our website, at the moment, you can see that the list prices listed is $59.99 per month. We have some different prices that are being tested in different combinations right now. But as an example one of the offers right now is a 1999 bundle if you buy it with some of our other products. So it gives you a flavor for kind of some of the initial thinking and what we’re testing right now and we’ve been really pleased with the initial feedback from customers and the initial uptick as we’re beginning the test marketing. We have not yet gone into what I would call a full marketing mode. We haven’t kicked it off in a full-scale marketing and sales effort to all of our existing users on our platform. We’re doing it somewhat selectively as we’re in these early test stages. But we’re pretty happy with initial traction.

Okay. And that charge for now is only to new users, is that correct?

Yes, it’s correct. What we’re doing right now is offering for new people signing up for premium membership now or recent sales now, the opportunity to buy this bundled upgrade with the property database. And we are testing some different combinations and different price points. And I will say it’s not said and stowed at this point, you’d expect it to see some variability between now and say the first quarter. This is the pattern we followed in the past as we’ve watched in recent sales a few years ago or even all the way back to when we first launched premium membership. We’ll do some test and gather some data before we make our final decisions.

Okay. And the second question is just on the EBITDA margins. Obviously, the investments that you’ve been making have yielded some fairly exciting new products. How do you look at the ability to get EBITDA margins over 40% if you look out to say 2011 as you continue to make these investments?

Yes, we have a track record in the business of having a wonderful margin profile and we feel very confident in terms of our longer-term ability to manage it to that 40% plus level. That said, yes, we’re still in the ramp phase of the investments. I think it’s a high-class problem to have, but I think going into Q3, we were preferred to put more dollars to work. We’re pretty excited about what we think is the return on these investments and we’re committed to keep doing it. So I think right now I would expect to see margins actually go down a bit from where they are right now as we continue to ramp-up investment dollars in the next two quarters. We haven’t – I guess we’ll talk about 2011 in more detail when we get there. But in the near term, we’re going to continue with the investment program.

Got it. Thank you.

You bet.

Your next question comes from the line of Brett Huff with Stephens. Please proceed.

Good afternoon.

Hi Brett, how are you?

Good. How are you guys doing? Question, just a follow-up question on the last one. When you all think about the long-term goals of $200 million in revenue in the very good margins that you had in the past and I think can have in the future versus the timeline it will take to do a lot of that organically versus M&A, when you all raise that money I think a lot of us expected that there was going to be a bigger, bigger chunks of M&A, but it seems like the focus at least so far has been on organic. Can you just give us your thoughts on how far away are we away from the I guess kind of the finish line in terms of achieving some of the product development that you were talking about and when do we see the revenue growth reaccelerate or accelerate faster as a result of that?

Yes, so you touched on a couple of things. I mean, the first in terms of achieving the $200 million revenue goal. Yes, we definitely think of that as a medium-term thing, not a long-term thing, and I guess it’s all definition to some degree. But it’s something that we think of it as a more near-term target for us. In terms of the big M&A versus small M&A, I would say we definitely have an appetite for both when we raised some capital I guess over a year-and-a-half ago now we were thinking about some bigger opportunities. Obviously we haven’t gotten done. I wouldn’t say that the door has closed, but evidence would suggest that we’re more likely to be doing more small things than big things right now just because we couldn’t make them happy. That said, I think when you look at the aggregation of smaller things that we’ve done, I think it’s been I guess seven acquisitions now in the last several years in our kind of over the last – over our history. We’ve been really pleased with how those worked out and our ability to execute following up on them. So I think we’re contained to do to do those. And then in terms of when we expect to see the revenue reacceleration, I think we’re seeing it already getting up to the 5% top line growth is clearly not where we want to be, but it’s – it turns the corner we believe and is really kind of accelerating in the right direction. So as we look forward in the relative near term, I think the combination of us getting more scale in our core marketplace business and driving monetization there, getting some of these new products out like property database and reinvesting in recent sales, as well as hopefully, but we’re frankly not banking on them in the near term a reacceleration in overall market activity, that accommodation we think will return us to very strong top line growth in the not too distant future.

And one question on the metric, and I want to make sure that I’m understanding it. The active or the views – profile views for active number, to me that’s a really important one. And does that – how do you define the active member in that particular cases, it paying or not paying, or how do you distinct – or is there a distinction in that?

Well, it’s the – I think its profile use proactive listing it was what we talked about in the call.

Okay.

So I don’t know if you’re doing your own ratio.

No, that was it. I was just thinking it was an active member. Okay that helps.

Yes, it is. And that would be a listing that’s currently on market. And it’s – they’re specifically to the LoopNet commercial real estate platform, it would not include the business-for-sale listings for example.

Okay. And then last question from me is on Xceligent, can you just give us a sense of how many total cities they’re in on a sense of how many you think they can kind of put on in the near term, maybe annually something like that?

Yes, I believe they’re in now probably in the mid 20s in terms of current cities that they operate in with their, what I would call kind of the partnership model with us. I think they have a few legacy markets where they have a little bit different of approach. But in the sort of current markets, it’s up in the order of mid 20s. And they’ve been rolling them out at – it varies a little bit by scale. They can do a few to a several per quarter if they’re relatively small markets and a lower number right now if it’s in the top MSA market which they’re starting to work on some of those. So I think over the last few years, they’ve probably launched in the order of five to 10, over the last maybe year and a half or so, so something along that pace.

Okay. And then, I guess last question on Xceligent, how – is the property database that you’re developing linked at all with Xceligent in the data gathering that they’re doing?

Part of the partnership is we do do some information sharing between the platforms as they go into a market, we can share with them information about our history of data, about not just current availabilities, but buildings as well which lowers their cost to enter new market and makes them more efficient. And then as they do research on maintaining availabilities in some of the in particular the bigger multitenant lease type properties they can send us that information to expand the footprint of our marketplace. So, yes, they are linked together in the markets where we’re cooperating and that provides leverage to both of us.

Great. That’s all I needed. Thanks for your time.

Thank you.

Your next question comes from the line of Jim Wilson with JMP Securities. Please proceed.

Thanks, good afternoon, guys.

Hi Jim.

I was wanted just little further on the pricing. So I guess if a new subscriber if any of the services wants the entire bundle, is that basically this $59.99 plus a $19.99 for the entire bundle. I was just trying to get a little bit handle on sort of how overall pricing –

Yes.

With all the new products.

It’s a good question. We’re looking at and testing a variety of different bundles right now. But to give you an example, the list prices for – if you’re coming in and let’s your investor who is thinking about investing in commercial real estate right now and you want to get educated as you can on the market. The three services we have at the moment that we’re charging for would be a searching membership or premium membership where the list price is $49.99, our recent sales product which is comparable to transaction records, the list price is $29.99. And then the property database product where the listed price is $59.99. If I put on my quick math challenge and do it in my head, it’s about a $140 a month if you roll all scheduled [ph] list prices. And what we are offering in terms of bundled discounts would be substantially less than that. And the other factors that are playing are basically the prepayment terms that we have often discounted for in the past. If you prepay for a quarter or a year, you get a lower price as well. So those are literally sort of what combinations customers are interested in and what combinations you yield the best kind of net revenue to us are exactly the tests that are ongoing right now. But those are the pieces that are in play.

Okay, and then if I mean you’ve been making acquisition. You’re still spending for investing. I’m trying to get a sort of thing through leverage. And at the point you either stop or slow and invest your material stop and then slow it, any of the new – is there any – is basically everything incremental from their follow bottom line. That’s what I’m getting at is, is there any reason that there is a lower margin structure with any of the businesses you required and once you lay them on to your entire platform?

I think some of them, yes, they’re slightly lower than our core marketplace business. I mean if you look at – or even some of the new organic products that require a little bit more investment on an ongoing basis in terms of the information content. But on a blended basis, when we look at the entire – and we think there’s a lot of leverage between these products. We feel very comfortable in our ability to hit that 40% plus EBITDA margin target. But the – if you go back to the high point in our marketplace business, I think it was close to a 50% margin, and we don’t think that some of these standalone information intensive businesses will get to that level. The margin structure will be a little bit lower when blended with our marketplaces where we think we get there.

Yes, all right, great, thanks.

Thank you.

(Operator Instructions). Your next question comes from the line of Steve Weinstein with Pacific Crest. Please proceed.

Great, thank you for taking my question.

Hi Steve.

When I listened to or read the comments from some other people in the industry, whether it be CB Richard Ellis or one of your competitors, I think their commentary on the market was maybe they see a little bit more robust than the way you’re describing it. So I was wondering if you could talk about the segment of the market that you’re really operating in. And if you know historically, has that kind of trailed or let or coincided with the commercial real estate market overall in terms of level of recovery. And also is there anything about maybe the way people use your product or who your premium members would be, that would maybe make them trailed recovery whether it’s because they add some much value from the free service or people are able to share memberships or anything like that that would be to lag and when we should have pick up in terms of premium membership growth?

Yes, I think there is a couple of things that are driving our results or sort of the activity levels we’re seeing in the what’s called small property segment of the market than say CB Richard Ellis’s traction more at the high end of the market. And you can see this reflected I think even in their own reports a little bit, but data from Real Capital Analytics I think was talking about this as well. Where there is a bifurcated if not trifurcated market where at the high end, speaking kind of about the investment market right now, the high dollar value properties that are sort of the “trophy properties” are considered to be a very safe haven if you will and are attracting a lot of capital and we’re seeing a lot of activity in that segment. And, frankly, pricing has rebounded in that segment to some degree as well. But it’s a small fraction of the market on a units basis and that’s not to your question Steve is really our primary area of activity. What you see mostly of them is listed in the small property be under $1 million kind of stuff and it is just behaving differently. I think it doesn’t attract the same kind of institutional capital from an investment point of view. Financing is largely done by community banks as opposed to other financing channels and that’s a difficult environment to get deals done in right now and the investors are less interested in that segment, so I think that’s the primary difference in the investment market is on a segmentation basis. And then the other thing that I would point out is our business probably weights a little more towards investment sale transactions for sale properties as opposed to leasing transactions. And I think [inaudible] data as well. They’ve seen stronger recovery to date in their leasing environment and in their leasing activity than they have in the sales side of the market. So it’s probably those two factors primarily that are driving the difference or it will lag if you will. And then in terms of whether our market overall – it’s tough to say in whether I think looking at historical patterns, I’m not sure I would say that our market lags the market in any sort of a systemic sense. I think a large part of it has to do with this unique phenomena around the financing channels and the community banks being locked up with new loans right now.

Great, thanks a lot.

Sure.

Ladies and gentlemen, that concludes today’s conference. Thank you so much for your participation. You may now disconnect. Have a great day.