Thanks for joining. I'm Ashish Sabadra. I co-cover information services companies here at RBC Capital Markets. I'm excited to have, Marshall here, CFO of TD SYNNEX. Marshall, I'll kick off with a question that we're asking all the companies at the conference about the macro. So from your perspective, macro, which I think about it more like IT spend, how's that trending? How do you see those trends? Are those stable, improving, or softening a bit? Yeah, so thanks for having us. We appreciate the conference. So I think for us, when I think about IT spend, there's a number of factors that go into it in terms of thinking about what we've experienced in fiscal 2023, and then what we think about for 2024. So in our markets, we have three major regions. We have APJ, we have Europe, and we have Americas, and they've all behaved a little bit differently in terms of their IT spend and demand. If I think about Americas, and we called this out on our last two conference calls, the Americas has seen some stability in the Endpoint Solutions categories. I think in terms of the Advanced Solutions, we're seeing decent growth year-over-year, but given the strong 2022 we had, some softening has been experienced there. If I think about Europe, we think some of what they're feeling today could have been felt by the Americas region in the first half of 2023. So for both endpoint and Advanced Solutions, I think there probably will still be some softening as we try to find the bottom related to those categories. And APJ, I think for us in that geography, there still is quite a bit of expansion opportunities for us. So all three regions have a little bit different macro perspective. One of the other areas that we typically see is a correlation between the economies that we do business in, and we have about 100 countries that we do business in. Those economies, typically, we'll look at a GDP growth rate, and then IT tends to correlate to that positively by IT spend by 200 or 300 basis points. Close to around the pandemic is when that all got torn apart. Yeah. For us, we're trying to find: When does that correlation reappear? We think it will. We don't see any reason why at some point it doesn't come back, but the question for us is: Does that return in the first half of 2024? Does it return in some slow pace of recovery? To us, that's what we're still trying to figure out. As we started 2023, we really came in with a lot of concern just about what the second half of the year would look like, and I think as we started to play through this year, we at least felt like there was some bottoming out of certain spend patterns. Now, it's a matter of getting behind what does that recovery look like for us. That's great. Yeah, and as you said, right, like, the secular trends are a huge tailwind for IT spend and some of the new technologies that are coming through, and which we'll drill down further on Hyve and GenAI. But before we do that, I just wanted to address or drill down further on Europe. You talked, you called out that Europe weakness last quarter as well. As you mentioned, softness both on ES and AS front. I was just wondering, is that mostly macro, are there early signs that you're seeing of any potential recovery, or is this going to be another, like, cold winter? Yeah, our belief is that hopefully it won't be too cold of a winter. We do think that most of what we're experiencing at TD SYNNEX is macro-based- Mm-hmm. -not structural. Yeah. Within distribution, quite often we have an ability quickly to look behind what we just did. Yeah. To some extent in Europe, we saw that we lost a little bit of market share in the quarter, but it wasn't a structural-related matter. It was more just our decision to be more disciplined in certain opportunities that we had presented to us. We have seen that from time to time in the past, so our ability to kind of course correct and make sure that we're not missing opportunities or missing market share positions, we certainly will be mindful of that going forward. If I step back and just think about where Europe has been post-merger in terms of its performance, it's either been at or better in terms of market share growth. In Americas, we've seen the same thing, at or better, which was important, and we'll probably touch on this in a little bit. A lot of our desire and thesis around the merger was, as we come together as an organization, can we grow our market share with our vendors, and can we do it in such a way that it's a value-add decision- Yeah ... rather than just a pricing decision? Yeah. Yeah. No, absolutely. Before we go there, maybe if we can talk about the endpoint solution. So we've seen some softness in the PC cycle, but if you look at all the industry forecast, including Gartner, they're talking about a big PC refresh cycle. So what are you seeing from the endpoint perspective? Yeah, um- Endpoint Solutions perspective, sorry. Yeah, so when we think about the demand environment or the overall macroeconomic environment around the PC ecosystem, we look at a number of different sources. We certainly listen to what our OEMs are telling us. Mm-hmm. We listen to what they're thinking and seeing within the market. We certainly look at their earnings reports and most recently, some of their thoughts about the guide in terms of where they're going to go. Generally said, I think most of them are saying slow growth, but some growth. Yeah. So that's helpful just to have that as a point of context. The second is that we also look at our overall market share- Mm-hmm ... for what we have within the spaces that we compete in. And so for us, it's important to look at that just to get a sense of: What does the PC ecosystem look like? What has it historically done and behaved? We have been in previous cycles of refresh. Yeah. We've been in previous cycles of IT complexity, so that's not new to TD SYNNEX. But what is certainly in front of us as we think about 2024 is there's probably more benefits in front of us- That's it ... than headwinds. But to quantify how much of that is the aged replenishment- Yeah ... of technology, how much of that is a refresh due to Win 11, how much of that is just due to increased technology that companies must address- Yeah ... in their own IT ecosystem- That's ... those may be hard to pull out as we see the markets recover, but we do think those are all going to be beneficial for us in 2024. ... No, that's great. Just moving on to the Part A, Advanced Solutions, as you mentioned, that's been the high-growth business, high margin, high growth. We've seen some really strong momentum in the business. Backlog has come off a bit, tougher comps, but how do we think about the AS momentum going forward, and sustainability of that growth? Yeah. So we had such a strong 2022, and that pick a quarter, we had strength in some countries in different parts of 2024. But generally said, it was a very strong 2022 for us. Yeah. I think a lot of that just had to do with, again, the constraints on supply chain, the concern that not all of us would have enough technology to survive. Yeah. There was a significant backlog or a pipeline of AS-type solutions. Yeah. We did see that clear out substantially in fiscal 2023. Mm-hmm. We saw quite a bit of a reduction in our overall inventory cycles and in our cash conversion days. So now as I think about next year, it's probably going to be the first time in a while where it's a clean demand. Yeah. And what I mean, it's not aided by pipe. There could be some pipeline that builds again, but right now, my expectation is a lot of that should be behind us. Mm-hmm. We still think that the AS portfolio, as an aggregate basket of product solutions, still has good opportunity in front of us. Yeah. We'll have to see if we stay above water, meaning we're positively growing. We have seen over the course of the last four to six quarters, the growth rates for AS come down- Yeah ... diminish. They're still positive- Yeah ... whereas we've seen Endpoint Solutions declines start to shrink. Shrink. And so back to what we first said earlier on is, what does that recovery curve look like for Endpoint? And then for AS, how much is left in terms of demand? That's right. With it standing on its own with no pipeline, that's going to be part of what does that look like? Mm. The first half of 2024 could look a lot different than the second half. Yeah, yeah. And just in terms of the first versus second half, can you just provide some more color on, on that dynamic, first versus second half? Yeah. So again, it's helpful for me to give it in current terms of ES and AS. Sure. As I said, the bottom appears to have hit- Yeah ... on ES. ES. We see some recovery, although down year over year, sequentially, we are starting to experience some recovery. Is quarter one where we cross over? Yeah. Or is it quarter two? To me, a lot of that has to just do with the sequential momentum that the economies that we serve in, how they behave. Mm-hmm. So I think that that will be a difficult thing to call, but one in which we do think that there will be continued growth. It's just where do we cross over? And then on the AS side, a lot of that has to do with the strength of certain categories within AS, what we call high-growth technologies- Yes ... which I can touch on whenever you're ready. Yeah. But that strength of growth still is about a 2-3x factor of normal IT spend. Okay. We still see that today. It's still showing decent attributes of growth- Yeah ... good margin profile in terms of accretion. Balancing those two together in terms of that first half, second half, it'll be interesting to see how those play out. No, that's, that's helpful color. And that's a good segue moving into those high-growth areas. Hive definitely stands out. You've had Hive had really great success. So maybe if you can talk about the traction that you're getting for Hive, which is essentially based on the Open Compute platform. Sure, yeah. So I'll first start just to say that Hive is part of our high-growth technology- Yes ...basket, and we'll speak to what that is. So it's a piece of a highly performing, high-growth area that we continue to make investments in. So specific to Hive, just like AS felt great strength in the second half of 2022, we also call that great strength in Hive for a lot of the same reasons. There were just a lot of folks that were trying to grab as much CPU and technology equipment and ensure that their servers were built on time without any- Yeah ... disruption. But as I think about the Hive portfolio, there's a few things that are playing out well for us, and they're not accidental. They've been very strategic, and they've been kind of long-standing in terms of the investments we've made. We started out Hive a few years ago, ensuring that the customers we served had high quality, great service, low claims, all the things that you need in a hyperscale designer like us, and we've been able to perform that. The second thing we've done is we've been able to expand our service capabilities to the hyperscaler customers' design, and our assembly is kind of one broad category. The other is our design, our assembly, which is a growing, small but growing piece of our capability. Mm. The last is much more closer to fulfillment, where data centers for our hyperscale customers also are in need of repair- Yeah ... or they're in need of upgrade. And to have the number one world's largest distributor sitting in front of them, they can deploy our distribution capabilities to help service their data farms around the world. So it's a piece that initially, five years ago, I wouldn't have thought of being a meaningful piece, but we're always looking for ways to have stickiness with our customers, however we get it. And to be able to extend that distribution strength into those hyperscale customers that are through the Hive portfolio, has kind of rounded out that third piece. Right. So they continue to be all very important to our go-to-market strategy within Hive. It's a small customer set, and as we continue to prove success for the- Yeah ... customers we serve, we should start to see that expansion of diversified customers and also more services within existing customers. We did mention in last quarter's earnings call that we did land another large customer. Typically, what happens within the hyperscale space is that it takes quite some time to build that out. Yeah. And what that means is you're first given the opportunity to build out a design that is set by the customer. You prove that out. You certainly want to be the one who wins that opportunity. We are able to win that opportunity, and then typically, what happens is then that starts to build exponentially over time, and at that point, you just hope that you've gotten into the right space, the right design, the right market. That's it. But we do have four locations where we do manufacture within Hive across the world. Within the Americas, we've built out an end-to-end capability solution, which is extremely important- Yes ... as customers continue to look at... We've all gone through the supply chain constraint. Yeah. We've all had to sit in front of our boards, keep answering the question: What are you doing about supply chain risk diversification? Yeah. We really felt it was important for us to play that strategy- Mm-hmm. Have that being an enablement category, and we are getting a lot of interest in it, and we think that over time, that'll start to be goodness for the Hive team. No, that's fantastic. That's great. And so, just on the cloud, right, or hyper- like, cloud in general, there has been conversations or companies have talked about rationalizing their cloud spend and moving sometimes some of that back in-house on-prem on their private cloud. And so as you think about Hive or other high-growth businesses, what does it mean for your businesses? Yeah. Uh. Yeah, so, I've been around long enough to see the pendulum swing at least three times. Yeah. But nevertheless, you know, our desire is to ensure that strategically, and no matter what category of cloud, we have some solution for it. Yeah. Now, ideally, we want to maintain and grow that dollar. Yeah. Initially, when cloud was coming out, there was this threat against distribution about, "Oh, my gosh, this is going to be an exodus of dollars. Yeah. We had to build out cloud solutions and capabilities and practices which are quite meaningful and strategic and value added to our hyperscale customers on the distribution side. In essence, what that represents is that there's a marketplace- Sure ... for us to be able to facilitate, the hyperscalers to use distribution- Yeah ... as another go-to-market channel for their, for their revenue and their solutions. Flipping over to the hyperscale side of things, if you think about cloud and that concept about retaining and growing the dollar, we just were at the right place at the right time with the right strategy to lean into creating our own white box servers, primarily around compute and network- Yeah ... such that we could then create machines that could be developed- Yeah ... and customized that met all the parameters required that go into white box solutions, and then develop that, build that, and then sell that into the global marketplace. So we feel very fortunate to be in a position of having both a distribution strength and power on Cloud and also a Hyperscale strength for those that are building out the practice in their data centers. Yeah. Yes, we have seen that rationalization of, okay, if we need to be a little more thoughtful on productivity and cost efficiency, we can enable that in our distribution space. And if it's around hyperscale and being more competitive, that is also part of just making sure that we always come with the most efficient, price-sensitive- Yeah ... solution, but the stickiness that I mentioned earlier- Yeah ... about the other types of services that we provide in Hive. No, that's great. And then as we think about GenAI, again, the expectation there is with, as GenAI gets implemented, that will also drive increased demand for compute, particularly GPUs. What are you seeing from GenAI adoption perspective from your customer base, and how do you think about that spend going into next year but over the next several years? Yeah. Remember we were talking about some of the tailwinds? Yeah. It was hard to quantify it. I think AI for us is one of those. Yeah. We think it's a natural benefit. Mm ... or maybe a broader benefit to 2024. Hard to quantify. I think as we get closer to AI becoming monetized, we can actually start to see real examples of what that means within our business that we serve. We certainly know that there's capabilities being built out by our OEMs. Yeah. That, if you think about what we do and the SKUs that we actually sell on their behalf, if there's a whole another set of SKUs, by all means, we're going to benefit in being the distributor for those OEMs that have to build out those AI capabilities. If you think about the hyperscale side and the customers that are designing, I'll call them more powerful- Yeah ... and AI-equipped, that's about the extent of my technology knowledge, but those also serve us well as we can help build those forests. And then if I think about the growth rates beyond 2024, I don't know that kind of trajectory of what it looks like. Yeah. But I do know that as I hear and think and see about what our customers and our vendors are asking us to be ready for- Yeah ... they tend to be more positive momentum rather than flat or any type of cannibalism. We're not sensing that at all. We think it's going to be a plus one for us. That's great. And then, as you mentioned, Hive is just one component of the high growth businesses. High growth also includes cloud security software. Can you just talk about the trends that you're seeing on all those other fronts? Sure. As you are like, the conversations with CIO and your customers, like, how are those trending? Yeah. So we back in April of 2022, right after we merged the organizations, we felt it was important to come out and articulate our strategy- Yeah ... of where we wanted to be as a company, where we wanted to make investments. Typically, within distribution, there's always some form of high-growth technology that has a high revenue attribute in terms of growth rates, a high profit pool, and also value that attracts customers and vendors to want to use us. Yeah. That's the key. So for us, we identified exactly what you said. Yeah. Those areas of high growth had meaningful CAGR opportunities in front of us, 2-3 times the normal IT spend rate. The margin profile, although we haven't articulated what it is, is above the corporate average. Yeah. And then one that we felt over the medium term would become a much more meaningful piece of our overall revenue and our operating profit dollars. So it's one that we still think will differentiate us. We always have to be mindful of competition. There's going to be that next high-growth technology sector that we're going to find, that we're going to invest in, and that we're going to put in the portfolio, but it's important to recognize that to us, that still becomes one of the reasons why we think we can kind of... You talk about the GDP and the IT spend, and then we're going to get something better than that. Yeah. Part of that is because of these investments we're making in the high-growth technology areas. Yeah. Yes, no, that's very important. And going back to, as you talked about the integration of TD SYNNEX, one of the key tenet there was also the ERP integration. Can you just talk about how that's progressing, where you are, and how should we think about the benefit, not just on the cost side, but also the revenue synergies- Yeah ... as you go through that batter? ... So that was one thing that was very important to us, is to create one platform that we can all commonize around for the Americas region, and we did. We created, we made the decision to leverage our CIS system, which is an internally grown system that came from the SYNNEX side of the house, that has been in place for a number of years. All insourced in terms of program support, no third-party assistance needed, so extremely valuable in terms of our ability to be a low-cost provider. Yeah. One of the key things that goes with any integration and a merger of companies our size is you want to get as quickly onto one platform as possible. And then what comes from that is then a learning and a knowledge and a confidence by our commercial teams to then understand it, then the connection points that come from both the vendors and the customers, 'cause they interface- Yeah ... with our system, and then create a platform that's easy to consume, easy to buy, easy to sell, and then the confidence of our team just to continue to expand the value around that. So one ERP system, done. We can look forward now, kind of look at our broad portfolio that we have, take advantage of our market position, look at what our vendors are trying to continue to sell through to us, what our customers can now more easily purchase through one system- Yeah ... through us. Hopefully, that creates this synergy we were talking about in terms of, I call it TAM opportunity, which is another way of saying cross-sell. Yeah. If I have a relationship with you, and I can now bring you more services, hopefully over time, as your business grows, you're going to think about using me for more of your services- Yes ... and create that stickiness. So it really comes around, cross-sell creates and is manifested out of my ability to grow market share with you. Oh, that's great. Also, if there are any questions, please raise your hands, and someone with a mic will come around. But shifting to margins, you talked about high-growth areas being even higher-margin businesses. Last quarter, you had 2.8% margins. Your guidance is to 2.9%-3.1%. Can you just talk about what are the drivers for margin expansion? Yeah ... going forward, and how should we think about the trajectory for the margin expansion as well? Yeah, we're still quite confident in our medium-term thoughts, in which we provided that 2.9%-3.1%. Think of that about two to three years out, and so how do we get there? Well, we get there through continuing to lean in and invest in high-growth technology solutions. Also, to be mindful that out of the core, which is kind of everything else- Yeah ... it's extremely valuable because within the core is where new and fresh ideas get fostered. They get developed, they get invested in, and so that margin mix really does come out of creating value, accretive solutions that keep us relevant- Yeah ... in the space we compete in, that enables us to expand margins. Yeah. So I do believe that over time, you get that growth through absolute gross profit dollars. And then the other thing that's happening within our portfolio is that much more of what we do becomes agent relationship, which means, in the accounting world, no longer gross revenue. Your profit is your revenue. And so what we'll see over time is we'll see a slow migration of margin accretion, just in terms of percentages, as our mix of services shifts between endpoint- Yeah ... which is more gross revenue- Yes ... and Advanced Solutions, which is more margin, which is gross profit, which equals revenue. So small technicality, but both ways achieve that ability and our confidence that we can get to that 2.9%-3.1% margin. Oh, that's great. And then just in terms of SG&A, as a percentage of gross billing, it's been in that 2.75%-3.25% historical range. How should we think about SG&A going forward? Yep. We believe that within any given year, there's always going to be cycles and ebbs and flows of volume in that relationship of SG&A to gross billings. Yeah. But we also believe that having one platform per region- Yeah ... so a platform from Americas, a platform from Europe, and a platform for Asia, enables us to be the low-cost provider in the markets we serve. That's extremely important because if you think about good times and bad times, in some of the bad times that we're just coming out of- Yeah ... our ability to be a more efficient extension of our OEMs, to help them sell and maintain their margins and maybe even grow their revenue in soft patches- Yeah ... and environments, the only way you do that is if you're just- you have a very efficient go-to-market strategy. So it's extremely important that we maintain that. Yeah. So part of that is always being ready to adjust and adapt to the next thing we have to change within our environment, and and our system is all self-contained. It's all owned by us. We can make program changes on the fly. That's extremely critical, 'cause most of what we do is making sure that on a per-transaction basis, down to the SKU, that we're thoughtful about the margin we're gonna make. Yeah. In many cases, that margin may be three or four different decisions that ultimately lead to the right outcome. Yeah. But you may have to make two decisions with low margin, one decision with a medium, and one with a high, but the bundle for that OEM or that customer ends up being the outcome you need. So we still think we're gonna be able to maintain that leading, kind of low, cost, highly efficient, go-to-market strategy for distribution, and then be able to play that well across, across the regions we serve. Yeah. Yeah. Maybe just switching gear a bit and talking about free cash flow, or capital allocation, more importantly. You've... Can you just talk about your capital allocation? You've targeted returning 50% back to shareholders, the remaining 50% towards more tuck-in M&A. So, how should we think about the pipeline for tuck-in M&As going forward? Sure. The capital allocation itself, we just felt that coming together as a combined company, it was important to articulate our strategy. Yeah. Neither company had done that previously to a consistent basis, so we felt it was really important to say, "For every cash flow dollar we generate, free cash flow dollar we generate, here's our desire. Yeah. Invest half of it back in the business and half we want to return to shareholders." We know that there's going to be periods of time where it gets tilted one to the other. Yeah. But generally said, that's been our thesis. The other thing that's been incredibly over just a great benefit is- Yeah the consistent production of free cash flow. Yeah. The ability to generate that and be reliant on that happening again and again has been very important to us. Then if I think about the M&A side, there are pockets of products and capabilities and services that we're gonna continue to pursue. Given our market size, there's no large deal out there that- Right ... will lever up the balance sheet, but there's enough opportunities out there on a regional and on a product and solutions basis, that we still have quite a bit in front of us that can make us more efficient, more expansive, more scalable. Yeah. So, there's plenty of opportunities. We just, of course, wanna play at the right price and at the right pace, and the right solution for us. That's great. And then, as you think about the M&A strategy, is that also an opportunity to consolidate some of the emerging markets? Like, as we started off, APJ is a high-growth market. Mm-hmm. It's still very early stages in terms of those secular tailwinds. How do we think about M&A, not so much particularly APJ, but just in general in consolidating the market? Sure. I think for us, given our size, there's not a lot of scale play or consolidation play. Mm-hmm. But certainly to the extent we can take overlapping markets where there is incremental capabilities- Yeah ... It is a benefit. Yes. But for us, it's more about technology to build our cloud platform. Yes. Being able to take advantage of, of areas where we need to build out, capabilities. We mentioned in the past, in Europe, we're trying to build a stronger security practice. You can do that either through a build or a buy. Mm. We're open to both. We've certainly been vocal about that. That's a pursuit of ours. And then in APJ, I think we've touched on this, it's a geo opportunity, and it's a capability opportunity. That's great. Then in terms of leverage, can you just remind us where your leverage is, and what's your leverage target? How high can you take it for the right acquisition? Yeah. So our leverage right now, at the end of quarter three, was 2.2 times on a gross basis. It was below 2 on a net basis. We're comfortable with that range. You know, ultimately, the desire is to find ourselves somewhere around 2 times gross. There's not a heavy mandate that says we have to get there by X. We feel like the right behavior of EBITDA growth, as well as maintaining the right discipline on debt, is the way to go forward. We historically have levered up on the right deals that have the right accretion. In the last three or four acquisitions we've done, within 12 to 18 months, we've been able to get the leverage back to the pre-acquisition period. Yeah. No, that's great. And just given the strong free cash flow profile of the company, I think it's the de-leveraging story has been pretty intact in that sense. Yes. Yeah, I mean, if you look back over the course of 10 years, you, you see the collective TD SYNNEX lever up, get it back down- Yes ... lever up, get it back down. I think, given our size, you know, the levering up, it won't be like historical levels, where we're up at 3.9-4.1. Yeah. But for the right deal, I'm certainly willing to lever up. We have to be mindful of the cost of debt, for sure. Absolutely. But nevertheless, we've done it well, in the past. It shouldn't change going forward. That's great. Two questions that we've been asking all the companies presenting at the conference. First one is: What's the biggest decision the management team has to make over the next three years? So for us, I think that decision, if I can go back, was made at the merger. Yes. And for us, it was a collective decision to take two extremely well-run organizations, bring them together as the number one worldwide distributor. And then really put us in a position now, as we mentioned, to have one common system, one set of coworkers aligned around products and services solutions, a vendor community that continues to be at or growing with us, customer profile of over 150,000 customers. I think we're positioned well to enter our third year post-merger of what I call a polish phase, where we really are fine-tuning what we just built the last two years. And so if a few things economically break our way, and then we find ourselves be able to kind of out-achieve that, I think that decision we made two years ago will pay off in spades in 2024. Oh, that's great. Then the last question would be, what is the single best item that you're most excited about for the company in the future? Yeah, for me, I'm gonna go back to our high-growth technology strategy. And if I think about what's under the covers there, you think about cloud, IoT, data analytics, security, hyperscale, those continue to be really important. And then, if I step back and look at a strategic initiative we laid out back in 2022, was this thing called Solutions Orchestration. Mm-hmm. Really, what that does is it takes a lot of what we do from an aggregation standpoint. We bring vendors together, we bring solutions together, product solutions and services, but we do it in a very high-touch way because it's the way you show value and create it. We wanna be able to extend the marketplace we do today and make that more of a technology solution- Sure ... where we can bring MSPs, ISVs, CSPs, OEMs together collectively around the digital table, if you want a marketplace, and allow some of those transactions to be done without human intervention. We think that's probably a 2-3-year roadmap and journey, but in the past, we've built solutions similar to this for other reasons and other value, and believing that the market ultimately will feel that is a very important aspect of choosing us. Yeah. That's great. Thank you. Thanks again, everyone, for joining, and thank you, Mark. Thank you, Ashish. ... everyone for joining. Hi, I'm Ashish Sabadra. I lead Business and Information Services at RBC. I'm excited to host Cyndi, Head of IR at CoStar Group. Hello, everyone. Nice to see you. Thanks, Cyndi. So Cyndi, I'll just jump into- Mm. Resi Strategy - Right. because that's on the top of every investor's. Right. Can you just talk about how this lawsuit against NAR? Mm-hmm. and the jury ruling in favor of the plaintiff changes the residential landscape over the next several years? Mm-hmm. How is CoStar's resi strategy fits with this disruption that's happening on the residential front? Right. Yeah, so just to back up a bit, for those of you who are not familiar with, you know, sort of our strategy, you know, CoStar is launching a residential product in the U.S. And basically, we're mirroring, if you're familiar with the international strategies that have been rolled out, by companies like REA Group in Australia, Rightmove in the U.K., where basically you're providing a platform to agents to market the home. And so that doesn't really exist here in the U.S. So the models that exist in the U.S. with Zillow and Realtor and Redfin is really a buy-side lead gen model, where basically they're monetizing the commissions of the buy-side agent. So we're basically looking at providing a platform in which a seller agent can advertise the home, whereas the other models are looking at monetizing buy-side agent leads. So the reason why that's relevant, and sort of fast-forward to some of these cases, and I don't know how many of you have been following them, but there are sellers who have raised issues around sellers who have sold homes in the U.S., and maybe many of you may not know that when you sell a home, you actually pay a commission on that sale of 6% to both, 3% to the buy-side agent and 3% to the sell-side agent. So you're actually paying the commission for the buy-side agent representing the buyer, right? And so what's happened, you know, is that sellers are obviously upset about this. So there's a question as to whether they should be, you know, sort of funding that. And it basically goes back to some legacy, you know, contracts and rules that the National Association of Realtors have sort of embedded in these contracts, such that agents are sort of guaranteed this 3%, whether they're buy-side or sell-side. So the idea is, you know, consumers are being disadvantaged by being forced or sellers are being disadvantaged by being forced to pay this 3% commission. And so the plaintiffs are upset about that. What's happening is, late last week or week before last, there was a big settlement, damages of about $1.8 billion awarded to plaintiffs. And ultimately, that'll be treble of about $5.4 billion. And so, you know, what's happening now is now there's copycat lawsuits in other states, looking for, you know, $40 billion and plus in damages. So this is gonna continue on, where sellers are really upset that, you know, the- they've been sort of unfairly burdened with this commission. So all that is, you know, plaintiffs are getting rich, and plaintiffs' attorneys are getting rich. And that's not really what's meaningful to us. What's meaningful to us is that there's a likelihood that... and the DOJ is getting very involved right now because of housing affordability, right? Housing affordability is at the worst it's ever been, with interest rates and such. And so the DOJ is very, you know, interested in basically unbundling these commissions and not having a mandate for the sell side, the seller of a home to pay the buy-side commission. And so what that means is that when you unbundle these commissions, all of a sudden you get a situation where now you as a buyer of a home, you're thinking: "Gosh, am I really gonna be paying 3% to an agent, you know, to find the home and negotiate a contract?" 'Cause most of us, as buyers now, find homes on the internet, right? And so you're probably not needing a buy-side agent to drive you around and spend a lot of time with you. It's probably maybe negotiating a contract or help facilitating an inspection. So what that means to our competitors, that puts pressure potentially on these buy-side commissions. And so what's happening is there's a lot of questions. I don't know if any of you invest in Zillow or Realtor, but what that means to their business models, right? If you put pressure on buy-side commissions, which is really how they're monetizing or that's their revenue model, what that means for sort of the future state. And so what where that puts us, and we have not launched our product, we're in the process of launching our product. We're getting a lot of inbound interest, not only from investors in terms of our business model for... but also from agents and sort of looking at, you know, other ways, you know, to spend their money and, and looking at, you know, the fact that, you know, they are frustrated with a Zillow-type model, where they're taking, you know, a portion of their commission, their very expensive leads. They're having to share their leads with other agents, and so looking to, you know, potentially spend money on a different platform. So it's opening up an opportunity for us, in this market. I don't know if I-- I mean, there was a lot- Yes. Sort of, you know, I kind of gave out there. But did I kind of answer your question around what that means? Yes, it did, and maybe I'll follow up. Yeah. So maybe if, if you can talk about CoStar's residential monetization strategy. Mm-hmm. Like, how are you going to monetize- Yeah ... the subscription model, what are you going to charge for it, and the timelines? I think the management has talked about starting monetization in 2Q of 2024- Right ... but why 2Q? So any color on- Yeah ... the timeline, but also your strategy. Yeah. And so, just again, to back up a bit, right? So we are a commercial real estate technology company or historically were. And we've... you know, basically, if you look at the value of real estate assets in North America, I think there's about $70 billion dollars- sorry, $70 trillion dollars, of asset value, between commercial and residential in North America. Of that, only a third of it is commercial. So we decided that, you know, we sort of, you know, exploited that, and we have, you know, a lot of commercial products and offerings. And so we decided to move into residential to really exploit sort of the value of the rest of the, sort of, the pie in North America. And so we actually started to unlock that when we bought Homesnap late back in 2020 and then Homes.com in 2021. Our CEO and founder, Andy Florance, has always had a vision of really getting into this residential space and also had a vision of really you know deploying a model similar to what we do- they do internationally, right? Really, this promoted listing model, providing a marketplace or a platform where a seller's listing agent can advertise the home. And so fast-forward, you know, to where we are today, you know, just to answer your question, just- I just lost my train of thought there. No worries. The subscription model- Yes, okay. How are you planning to charge for it? Yeah. So fast-forward where we are today. So we've been investing in homes and residential. We have now built up traffic to a level where we are now the second-most trafficked residential portal in the United States. We ahad reported 100 million unique visitors in September, which is second to that of Zillow, which is about 200 million uniques. So we've surpassed both Redfin and Realtor. And so that was sort of the first part of the journey into this, you know, residential space. We have not launched our product yet. We're now in the process of sort of, you know, continuing to maintain that traffic, but also build brand awareness. Because what we've heard from agents is that they are willing to spend on a different platform, but they want, you know, Homes.com to be sort of a recognized household name, sort of like a Zillow. Yes. So we are in the process of launching a brand campaign, similar to what we did with Apartments.com, where we have some talent. We have Jeff Goldblum, who is sort of our spokesperson for Apartments.com. We'll have commercials and advertisement on social media, and build that sort of brand recognition. You know, once we get to a place where we're expecting that to be, you know, the unaided brand awareness to be at a level where we can launch the product, which will likely be, you know, sort of late Q1, early Q2. We will then look to sell subscription advertising or membership subscriptions to agents. So agents can basically buy, you know, an annual subscription for $200-$300 a month, to basically promote their listings, and then also promote themselves. So it's basically an advertising platform to promote both their homes and also themselves, so they can be featured on certain pages. You know, we have neighborhood pages and school pages that they can be featured on, and so basically it becomes like an advertisement for them. And the reason, you know... Really what we're going after in this market is we're not trying to actually take share from Zillow, although I talked about it a bit. You know, really we're looking at shifting agent spend from print today. They spend a lot of money on print. You probably get flyers in the mail for the street, you know, the house down the street and your ZIP code, and you throw it in the trash, right? Agents are spending a lot of money on print advertising, which is very ineffective. They're spending money on social media, like Facebook, Google, Instagram Ads, which also have proven to be very ineffective. So we're basically trying to provide a platform where they can spend money and get quality leads and be much more effective at the end of the day. The timeline is Q2, and then we've got, you know, a significant amount of work to do before we get there. We're really excited about the launch, and we think this sort of environment with these lawsuits is sort of creating a lot of, you know, a lot of talk, which is, you know, sort of, w e've gained a lot of interest from agents and investors like yourselves, about the market conditions, so. That's great. Mm-hmm. Again, just so that everybody has that context- Mm. Can you just talk about what have you guided in terms of your midterm, like 2027 targets, revenues, and margins for residential business? Yeah. Good point. So because we're in sort of a multi-year investment cycle, right? And this is actually a $15 billion opportunity in the U.S.- Mm. We have set some longer term targets, such that you guys can kind of understand, you know, what we're shooting for. So in 2027, we put targets out there that estimate that we will be at $5 billion of revenue for the whole company. Today, we're roughly $2.5 billion. Of that, $700 million to $1 billion of that will be generated through our residential platform. And overall, we'll have aggregated margins of around 40%. So likely, our commercial margins will sort of elevate from where they are today, which is about 40%, and our residential will probably still be gaining traction, right? And be at about 10%-15%, and ultimately we'll look to getting those up to about 40% as well. That's very helpful. Again, congrats on getting to 100 million unique user- Mm ... visitors by September, and the pace at which it went from 38 million in June to 100 million in September, and I don't think we've seen companies being able to ramp up that quickly. Also, on a year-on-year basis, it was very strong. But one of the pushbacks that we get is, and I think Andy mentioned that on the call as well, is a lower unaided awareness. Mm-hmm. And so the two questions there is: can you point us to other businesses where you've been able to improve your unaided awareness, and if those lessons are applicable here? Yeah. What strategies are you deploying in order to drive better unaided awareness as well as more repeat users? Yeah. So, if any of you followed us for quite some, you know, for a period of time, we acquired, well, actually our second marketplace, Apartments.com, back in 2014. At that point in time, Apartments.com was actually, I think they were fifth or sixth in terms of ranking in the marketplaces, in the rental marketplaces. Craigslist was first. I think Zillow was second. You had RentPath. So, when we bought that company, I think they were, like, $75 million-$80 million of revenue, invested in the tech, in the platform, invested in sort of a traffic strategy, and now built that business up to be, you know, the number one rentals platform in the U.S. It has 53% brand awareness, which is the highest brand awareness of any rental platform out there. It converts leads to leases at 2-3 times that of our closest competitor. Real big success story, right? We bought, I think, that for, I don't know, $300 million or $400 million. We're at about almost $1 billion in run rate and revenue. It's probably representing about 12 billion-15 billion of our market cap, half our market cap. A big success story there, and we're looking at deploying some of the same strategies in terms of building traffic, brand, you know, lead gen, and good consumer experience, with Homes.com as well. That's great. And then one thing that you mentioned for apartments, the lead to lease- Yeah ... is very high conversion. Mm-hmm. Andy, on the call, also talked about pretty good lead flow. So can you just talk about what do you mean by really good lead flow on the residential side- Yeah ... or what have you seen so far? Yeah. So, the fortunate thing is that we've actually looked at... well, one competitor in particular, we did some diligence on them, and understand lead flow and volume. So, we believe, you know, we're already generating, and we're not quantifying it specifically, but at least a, you know, a few million leads a quarter for agents, free leads. And we're getting a lot of great feedback from agents and from brokerages. We've received, you know, "Keep sending the leads, they're amazing," right? 'Cause they're, you know... I think the lead differences that, you know, you've got, you know, on our competing platforms, there's, you know, agents are getting, you know, sort of multiple their leads are getting shared with other agents, where our agents are just getting, you know, sort of individual leads. And so the lead flow is definitely, you know, high quality. We've got, you know, just a lot of positive feedback so far. I think the other thing to point out, just as it relates to agents and their feedback, is that we're actually doing quite a few focus groups with both agents and consumers. That's something that we spend a lot of time on as we launch products. And as we've gone through the focus groups, the feedback has evolved to now preferring our site, you know, 10 out of 10, compared to the other sites, because of the user experience, the high quality imagery, the speed of the site, the content that they're now seeing on the site. And so they see that there's, you know, an ability to generate even better leads, by virtue of the investment that we're making in the product and the platform. That's great. Mm-hmm. And then maybe just, again, drilling down or pulling back and talking about the addressable market. You talked about $15 billion addressable market in the U.S. I think there are close to 1.5 million agents in the country. Can you just talk about how do you think about that addressable market? Yeah. Like, who is- Yeah. Like, what's your target market? Yeah. So there is... There are 1.5 million agents today. There's a long tail of agents, right? I mean, folks that do it, you know, on the weekends or, or sort of just as a, as a side job or a side hustle. Our focus is really the, the agents that are, you know, sort of deemed to be professionals. Probably 250,000-300,000 agents out there making more than $100,000 a year, thinking about, you know, effectively spending marketing dollars and looking at spending, you know, 30%-35% of their commissions on a marketing platform. So, so the target audience is really, you know, those 250,000-300,000 agents. And if you think about a world, if you fast forward to 2027 and think about, you know, some of the targets we laid out, you know, you could see, you know, if you, if you basically sell, you know, to 100,000 agents, $10,000 a year, you kind of get to that $1 billion. And we've triangulated those numbers with international models, where agents are already spending, you know, on Rightmove or REA Group, you know, $20,000-$30,000 a year. So this isn't sort of, you know, off, you know, off target in terms of, what we think agents will spend. That's great. Mm-hmm. I have one more question on resi, and then we want-- I do want to talk about the U.K. market, given the- Yeah ... given the OnTheMarket, acquisition, in play here. But on the resi side, the last question would be on the investments. You're making some pretty big investments this year. The back of the envelope suggest anywhere in the $450 million-$475 million this year. I believe you mentioned 40-60 split in terms of the spend, 60% in the second half. Right. Annualizing that next year. So if you can just talk about how should we think about the spend next year? Mm-hmm. Any high-level color? Where is the incremental spend going? How are you going to measure the ROI of the spend over the midterm? Yeah. Thanks. Similar to apartments, right? I mean, what we did in terms of building a brand is, you sort of build, you know, both, you know, the people that can build out the tech, the product, the content, and then there's a certain amount of marketing spend on traffic, on advertising and advertising campaign. So, you know, we're building that base, as you mentioned, and so there would definitely be an annualization of those costs into next year. We will launch a brand campaign, where we'll have top talent, you know, in commercials and advertisements. So, that's definitely, you know, something that you have to consider as you're looking into next year. And like I said, we think about this as a multi-year investment cycle. But we look at the opportunity of $15 billion of TAM, just in the US. We also think, you know, our CEO thinks about, you know, software is portable, right? You can leverage software in all markets globally, and we've done that effectively on the commercial side. And so looking to sort of leverage that investment, you know, sort of internationally as well. So yeah, there definitely will be a cycle of investment here, moving into next year. Which is why we continue to point investors at the successes of the commercial business, right? We've got a commercial business that's growing or that we're projecting to grow next year, 11%-12%. It's growing about 13% now. We're expecting to generate 40% EBITDA margins. So, a really healthy, high-quality commercial business that allows us to invest in this sort of huge opportunity. That's great color. Before we go on to the commercial, I do want to talk about the international market. Mm-hmm. You announced the deal to purchase OnTheMarket. Mm-hmm. The question that we get is, why did you decide to go with the number three player in the space? And then in terms of what is CoStar bringing to the table- Mm-hmm ... can you just highlight, is there some of the capabilities that you built in the U.S., are those replicable there, or how are you planning to change that market? Yeah. What are your ambitions for a Pan-European- Yeah ... and how do you execute on it? So multi-part question. Right. Yeah, so OnTheMarket was certainly an opportunity that came up that presented you know an opportunity to really enter the European market. We don't really look at it as just entering in the UK market, but sort of a broader strategy. Now, we're already in Europe and have a pretty nice presence in commercial, but you know we think about residential and commercial being a bit you know leverageable in terms of you know there's a lot of assets out there in Europe that do both residential and commercial listings. So looking at this as an entrée into to sort of the broader European strategy, there also... The OnTheMarket asset was, is quite unique, given that, if you look at some of the key data points, right, you know, it has. So the number one player in that marketplace is Rightmove. The second, sort of, player is Zoopla. You look at OnTheMarket, it has about half the traffic of Zoopla, about a fifth of the traffic of Rightmove. It has agent relationships with about 60% of the agents. If you look at Rightmove, it's about 90%. So if you look at Rightmove and Zoopla, you know, Rightmove is probably, you know, GBP 5 billion- GBP 5.5 billion market cap, Zoopla, GBP 2 billion- GBP 3 billion. OnTheMarket, we got for GBP 100 million, and, you know, GBP 100 million pounds, right? So the value, and sort of what we're getting. And it's also a marketplace that has a pretty, it's a nice alignment with agents. It was founded by agents, and it has a reputation for being, you know, much more of an agent partner, which is really our model here in the U.S. And so that sort of fit with the strategy as well. And so definitely we're looking at more sort of an opportunity, you know, to sort of broaden our investment in Europe. You know, Andy mentioned on the last call, there are about 80 portals, real estate portals or in Europe, ripe for consolidation. So you kind of look at this as just the first step in that, in that strategy or that process. Yeah, and again, you're pursuing- Mm-hmm Both buy versus buy and build strategy. Yeah. So from a you talked about 80 portals and potential for some more tuck-ins there, but also from a build perspective, Andy also mentioned investing $46.5 million on marketing front. Right. So, can you just talk about how do you- Love it -plan to deploy those dollars, marketing dollars, as well as, from a technology perspective, are there things that you can bring to the European market? Yeah. Yeah, so you had asked, like, where do we see ourselves, you know, versus Rightmove, and how do we sort of, what's our competitive advantage? Yes. Right? And I think, you know, if you look at Rightmove as a good example, it's easy to target. Sorry to say, but, you know, they've, you know, sort of, you know, been operating at 70%+ margins. You know, lack of investment, you know, has sort of been obvious, both to agents and, you know, to the market or the community. You can see, you know, if you go on their site, you know, they haven't made a significant investment in their technology or their platform. And we believe we have the ability to sort of differentiate from that. You know, we've got about 1,000+ tech folks. I think they have less than 100. You know, they've not invested in marketing or branding. You know, obviously, that's something that we're proud of and sort of the brand we've built in Apartments.com and plan to build in Homes.com. So we certainly think that those are differentiators. Another key differentiator for us, as I mentioned earlier, is really—it's, it's really the rich content. You know, we've got a competitive advantage. We have about, say, 1,500 or 1,600, we call them researchers, that really are people that go out and build rich content, which has really benefited us and differentiated us both on the marketplace and on the data information side. So you think about a world where, you know, other companies like Rightmove or Zillow, those folks don't have, you know, either the history or the people, or the playbook to really sort of build out that rich content. And so that's another key differentiator. Yeah. No, that's great color. Mm-hmm. Maybe, uh- Yeah ... again, if you have any questions, feel free to please raise your hands. And maybe jumping on to the core business- Of course ... CoStar Suite. Mm-hmm. Can you just talk about the puts and takes on the CoStar Suite growth? Mm-hmm. Obviously, you have one of the most challenging CRE market right now. Mm-hmm. Company is guided to revenues troughing in the first half of next year. Mm-hmm. Can you talk about what's happening on the broker side, but also the tailwinds that you're seeing on the lender front? Yeah. Yeah, so CoStar Suite, you know, if those of you who don't know us, we kind of call ourselves the Bloomberg of real estate, right? I mean, you need CoStar to sort of operate. We have, you know, we built this robust data and information product. It's not really much. There's not much in the way of competition out there. Mm-hmm ... that really has the breadth and the depth of the data that we have, or the capabilities. Originally, we built it and sold it into the broker community. And we're probably about, you know, 70%-75% penetrated on the broker side. We've since diversified quite a bit, though, and now are selling the product into LoopNet, to owners, to lenders, to corporates. And it basically has just a lot more use cases because we continue to sort of add data and enhance the, you know, sort of the capabilities. And so that's really been, you know, in this macro environment where you do have consolidation in brokerages, it's really allowed us to sort of, you know, redirect our sales force and focus on sort of continued expansion into those other customer cohorts. So we've seen some nice growth in the owner and lender and corporate space. We've seen moderation in the broker community. But again, you know, most brokers need our platform to operate, right? So we've only seen a little bit of, you know, sort of, falloff in the smaller broker communities, the one to two shops, which are going out of business or consolidating. So it's been a pretty healthy, consistent, you know, business. It's grown about. I think it's got a CAGR of about 13% over the last five years. And so while we're only growing, you know, 7%-8% or projected to grow 7%-8% next year, we're growing 10%-11% this year. Like I said, we have a CAGR of about 13%. So, and we continue to invest and enhance the capabilities on the CoStar side. So we continue to expand our TAM and the opportunity. Yeah. Yeah. And then the CoStar for lender product- Yeah ... that seems to be going really well. Yeah. How do you think about the penetration? You mentioned 70%-75% penetration in the broker community. What's the penetration in lender, investor- Yeah ... corporate? Very small. You know, less—I'd call it less than 20% for owner, less than 10% for lender. So there's still a long runway ahead. And if you... By the way, I want to point you guys to our investor deck. We actually published our first ever investor deck. It's on our site. It might be a little hard to find. It's kind of hidden in the Q3 section under Filings, but that'll kind of give you an idea, you know, a little bit more about the profile and sort of the penetration. So yeah, so the lender opportunity, we launched that product, and it's really back in, I guess, early 2022. So it's been out there for about a year and a half. It has capabilities for banks, financial institutions, to manage their loan portfolios, to do all the CECL and compliance reporting. There's been a pretty big demand for that right now, just given, you know, obviously, market conditions. So we've seen some nice growth and ramp up there. So I think we have, you know, a lot of opportunity. We've got our sales force heads down, you know, focused on selling that. Little longer sales cycle on the lender side, but definitely a lot of success there so far. ... That's great. Mm-hmm. How much of the historical growth in the core business has been on like for like pricing- Mm-hmm. every year versus new products or upselling? Yeah, I mean, it's probably, you know, half and half. Yeah, so, and when you say core, you're sort of talking about, you know, both our commercial businesses, I'm sorry, our data information product as well as the marketplaces. And so, I mean, I think it, you kind of have to drill down a little bit further, because some of the marketplaces were so underpenetrated in certain areas that it's just pure, you know, penetration. Yeah. Maybe just switching gear, talking about multifamily. Yeah. Multifamily has a tremendous 23%+ growth profile- Yeah. in the second half of the year. Mm-hmm. How do you think about the revenue growth? One of the concerns that we hear is tougher comps. Mm-hmm. Um, and- Yeah. Can you just talk about the- I mean, you know, you can't complain about a business that's growing 24% last quarter. And so, you know, again, we built that brand. We believe that we're the leader in that space. And so, while we're, you know, further penetrated in 100-unit-plus properties, you know, we're about 48%-50% penetrated there, and continue to sort of take share there. You know, the real opportunity is really in sort of the sub-100-unit properties. And so that's been an opportunity to, you know, to sort of continue to grow. We've got a mid-market sales team that we've invested quite a bit in over the past year and a half, and really in growing volumes, you know, 40+% there. So that's been a nice opportunity. So we feel like we still have a long runway there on the multifamily side. And, you know, we continue to sort of like I said earlier, we convert leads to leases, you know, 2-3 times that of our competitors. And so able to prove that out in conversations and meetings with our customers, and continue to get, you know, yeah, just great feedback on the product and the lead volume. That's great. So- Yeah, that business has grown, what? 10x in the last 10 years. Yeah. A great success story. Maybe just one quick one on LoopNet. There were- Yeah ... some changes in the sales incentive, new leadership. Right. Mm-hmm. How is that tracking? Yeah, I mean, so we talked a little bit about that in Q2. We've, you know, sort of made all the corrections in terms of the commission plan and got a new leadership team in place. So we believe that we're well positioned. We're very underpenetrated in that space. That's our commercial digital marketplace platform. We're less than 5% penetrated in, like, a $4 billion-$5 billion opportunity. So a lot of, you know, sort of another place where we got a lot of runway for growth. But we believe we have, you know, sort of the right foundation in place to really grow that. So we'll have more to report, I think, here in the first quarter or in February of next year. Hopefully, we'll have some progress there. That's great. And maybe if I can just sneak in last two questions. One is: What's the biggest decision the management team will have to make over the next three years? Mm-hmm. What is the one thing that the management team and yourself are most excited- Yeah ... for the company? Well, certainly we're most excited about Homes.com. So I encourage you all to go back and, and not look at Zillow. I'm just kidding. Look at Homes.com. You know, give us your feedback. You know, tell us about your experience. Certainly, hopefully, you can find some of the media that we've shot on the neighborhoods, and, and so encourage you to do that. So we're most excited about Homes and believe that we're going to make a big splash and, and, and we are competitive, and we like to splash the competition, too, but that's, that's such a side point. In terms of, you know, biggest decision, I think prioritization is the hardest thing that we have going for us, because there's so much opportunity out there, it's like: Which one do you hit first, right? We've got so much runway, and we're so far ahead of our competition. It's really exciting in terms of, you know, how well-positioned we are to penetrate the opportunities out there. So I think that's our challenge, is how to prioritize. But right now it's Homes for sure. That's great. Mm-hmm. Thank you. Thanks, everyone, for joining. Yeah. Thank you, Cyndi. Yeah. Thank you. ... Get started then. My name is Rishi Jaluria. I cover software, and as Vivek likes to remind me, also digital media. Correct. here at RBC. So I'm delighted to have both Vivek Shah, who's the CEO, and Bret Richter, who is the CFO of Ziff Davis. Thank you guys both for being here. Great to be here. Thank you. All right, maybe let's start with a little bit of a high-level overview of what Ziff Davis is for the generals in the room, and then we can start diving deeper into some, some topics. Yeah, so Ziff Davis is a vertically focused digital media and internet company. We operate roughly 40 brands in seven different vertical categories: tech, gaming, health, cybersecurity, marketing, technology, connectivity, shopping. Very acquisitive company, so I'm sure we'll talk a lot about our serial acquisition program. About a 60-ish% advertising-based business, and the balance in subscriptions. Really, the company, while it's about a century old, started as a magazine publishing company by Bill Ziff and Bernard Davis. It's really undergone a fundamental transformation, really starting in 2010, when I had acquired PCMag, which was the last remaining original Ziff Davis brand, and again, in 2010. From there, we've acquired everything that's in the portfolio today, 100% internet, so there's no more print inside of the business. Yep. No, I think it's a great place to start. Maybe let's start with the number one, your kind of programmatic acquisition strategy, right? How you go about identifying the right targets, the right fits, and any updates in terms of just what does that M and A pipeline look like today, especially as we've been in this kind of macro uncertainty for the past four to six quarters. I'll start, and then Brett, you know, fill in some blanks. Absolutely. From a sourcing point of view, that's probably where I would start. Across the seven various verticals we have, we have general managers and deal sourcing teams at each. So we look for each one of our operating units to identify acquisitions that they feel would fit within the business, where we can extract some kind of value that we think is actually unique to us, and whether that's a monetization element that we can bring, whether there's a cost synergy, hopefully some combination of the two. We're looking for assets within each one of those verticals, so there's a fair amount of sourcing that goes on there. On top of that, at the corporate level, Brett and I and our corporate development team are looking for opportunities that may be new vertical opportunities for us, and we've had a few of those, obviously, in the course of our history. What I will say is that, we're very much a disciplined buyer, so we're looking for businesses where digital transformation has created, we think, a value creation opportunity. And that's one of two things: either the business has struggled with digital transformation, and we see an opportunity to help the business, or it's a business that has done well, but we think we have a path to accelerating their growth. Very much, cash-on-cash returns and orientation. As you've heard me speak about in the past, we look for, at minimum, a 20% cash-on-cash return. In this interest rate environment, I'd argue we're looking for more than that. So we often look at a, you know, 3 times multiple on our average cost of capital, and so obviously that creates a higher hurdle rate in this environment. Which probably answers then the second part of your question, which is: how are we thinking about the current pipeline? And because our hurdles are elevated, I think it makes it a little harder, so I'll start there. We've been even more disciplined. We've been more focused on seeing better returns, just given the interest rate environment. But also, I would say that there's still a disconnect between buyers and sellers. The bid-ask spread is narrowing, in my opinion, but it's still wide. And I think that has... And that, by the way, that's not just us. I mean, I think that's anyone who, you know, is very active as an acquirer will tell you a similar thing. I think a lot of that has to do with letting the current reality settle in. We're coming on now two years in terms of this macro, and I think it's beginning to settle in. I think the reality, too, is that for businesses that need capital, they're finding that difficult. And so if that's the right business for us, in which we think we can, we can put the business in a position to be generating free cash flow, that'll be the kind of opportunity that we look at. Brett, what did I miss? No, I don't-- well, you certainly didn't miss anything, but the only, the only thing I'd add is that M&A is a core tenet of our overall capital allocation strategy, which really starts with a business philosophy of ensuring that we're creating value within the businesses we own. So we're not seeking growth for growth's sake. We, we run our businesses for profitable growth. Overall, if you look at our P&L, our adjusted EBITDA margin's in the mid-30s%, we produce real after-tax free cash flow that we can reinvest in our business. When we think about capital allocation, it all starts with a healthy balance sheet, and our balance sheet is healthy. We have a, a metric we use, say we won't lever the balance sheet at more than 3x gross leverage. We're at two. Our net leverage is less than 1.7 times, even less if you count some of our, non-cash investments, and we look to our businesses to generate that after-tax free cash flow that we then cycle back through the system. First and foremost, we make sure our businesses have the capital that they need to pursue their growth opportunities, whether it be OpEx or CapEx, and, we try to fund our businesses to the extent we see opportunities in the market. And then, the balance of our capital allocation is M&A and shareholder returns. We will use capital for shareholder returns and even stakeholder returns. We bought back debt last year. We've bought back stock. But our preference is to deploy that capital through our M&A program, and we will, you know, travel through this current environment, which is depressed for all buyers and all sellers. Every metric that you see in the market, 2023, another down year. We're not alone in this environment of not transacting. Ultimately, we think our patience will be a premium, and, you know, as we approach and enter 2024, we're ready and to act with conviction when we see opportunities. You know, Brett said something that I just wanna add to that's important. The way the company's organized, we have about 4,300 employees, and about 60 of them are in corporate, so the rest are in the businesses, so a highly decentralized company. The businesses really have a fair amount of autonomy. They own their P&Ls. However, the cash all comes upstairs, and all capital allocation decisions are done corporately. It gives us the benefit to really choose among the various businesses and the various ideas that come forward for capital. Yep. Maybe alongside that, how do you weigh the decision of deploying capital into an existing business unit and kind of adding on to existing areas you are in, or doing like what you did with Everyday Health and maybe to a lesser extent, Retail... RetailMeNot, yeah. Going into what is relatively a brand- A new vertical? Yeah. I prefer the former, to be perfectly... I think it has less risk, right? Because if I'm within an existing business with an existing team that has a playbook that we can apply to acquisitions that are tucked into or part of that operating platform, much better. And so generally, you've seen historically over the 80-some odd acquisitions we've done, nearly all of them fit within the profile of a platform. When we look for a new platform, it's got to be really, I think, kind of priced to perfection, and it needs to be something that we have an extreme amount of confidence in. And really, over our history, it's really been those two. It's Everyday Health and RetailMeNot, the larger transactions, both of which have worked out exceedingly well. So in those, I think we have to see a lot of the elements that we see in our businesses, the ways in which we generate audience, the ways in which we extract monetization, the ways in which we can diversify revenue streams, the way it can be a platform for future acquisitions, right? As if those characteristics are in place, then we'll go do a platform deal, but my bias is towards the former. Yep. No, that, that makes sense. Bret, you talked a little bit about... alluded to the macro environment. Maybe let's dive deeper into that. Outright, are macro trends getting better? Compared to when? So it's 2022 was extremely challenging, and, fortunately, you know, we're past things like, or we appear to be past supply chain disruptions, high inflationary environments, rapidly rising interest rates. We're all monitoring what the next action might be of the Fed, if there's another uptick or when's the first downtick, but 75 basis points a meeting doesn't seem to be the environment we're in. 9% inflation is behind us, so the macro has gotten better. When we looked at 2023, both on a comparative basis and absolute basis, we thought the back half of the year would show some stability relative to the front half of the year. The quarter we reported last year, our top line validated that assumption. That being said, I think we're still short of good, and also it is specific to certain macros. Or, I'm sorry, specific to certain verticals. Our tech business continues to be pressured, while we've seen strength in certain of our other businesses. So on a relative basis, macro has gotten better, and we can't ignore, you know, the crises that are happening around the globe, the tragedies that are happening around the globe, and what impacts those might have if they continue or they spread. But on a relative basis, Q3's look better than many of the quarters that are behind us. Yeah, and look, I'd zoom out a little bit, right? I think, the last two years we've been essentially flat, where we've had, you know, sort of mid-single organic, declines in the existing portfolio, offset by some acquisitions. Generally speaking, considering the bad macro, I think that's actually outstanding. Prior to these two years, we were growing in excess of 20% a year, compounded top line at a 35% margin. I like to believe that's the company that we are, and I, and I think when an environment cooperates... And, and two things, it's, it's the advertising market that's been challenging. Within the advertising market, Bret said it, the tech, if you look between 2021 to now, if you take this kind of, seven quarters-... I believe tech's about 500 basis point headwind in revenue for the company. So it's been a significant challenge, that particular one vertical. The rest is kind of offset that. So again, I think it's been concentrated. And then the second piece is we've done very little M&A. So again, as you know, you've heard me, our target growth is 15% top line, half organic, half inorganic, mid-30s EBITDA margin, you know, 50-ish% free cash flow, true free cash flow over EBITDA yield at a gross debt, you know, cap of 3x EBITDA. So, you know, we've got a lot of flexibility and room in a lot of that. I think, if the environment cooperates, you know, this quarter being organically flat after, you know, 6 quarters of not, I think is an important sign for us, and to me, I always focus on slopes, and the slope is good. Yep, got it. All right. I wanna maybe pivot to a number of generative AI questions. I'll start with, look, there's kind of a bear case out there that generative AI is gonna replace search, it's gonna replace content generation, therefore, that's gonna be negative for digital media business. What are your thoughts on this? And I guess, well, I'm guessing you disagree with that statement. Why would you disagree with that statement? Look, I disagree with the statement, but I'll give the fact-based answer. So over the last two calls, for those who have listened, we've done a fair amount of analysis and shared that analysis that I think should support my view that this concern is not only overblown, it may be the opposite. So what we did two calls ago is we looked at Bing. Bing is the only search engine right now in broad release that is a generative search engine, where its results are a combination of traditional search results as well as a generative portion. Our referrals from Google are up 60% year-over-year, and sorry, from Bing, and the Bing underlying traffic growth is nowhere near that. So Bing has grown in usage as people are using Bing more, but the search traffic we're getting out of Bing is higher. So that was the first thing we looked at, which is, well, let's look at what is a real-world case. This last quarter, we did some expanded research to try to understand how often generative search shows up in Bing, what percentage of queries creates a generative response, a generative AI response, and we did the same with the SGE experience, which is the generative experience in Google, inside of Google Labs, which is not in broad release, but we can track that. And against our highest value keywords that represent the most amount of traffic we get from search, it was about 20%-25% of queries even generated a generative response. So the incidence rate isn't what I think people had anticipated, and that's actually going down. Okay, then we said: All right, well, when there is a generative search return, what is the click-through rate on a generative search return versus a traditional one? Cannot do that for Google right now, 'cause you cannot distill the Google Labs-based versus the general search, but you can for Bing, and lo and behold, the click-through rate is higher on generative search. All that is, to me, empirical data that supports my view, that I do not believe that the design of a search engine is to end search journeys. I actually think it's to enhance search journeys. Search begets search. You go down different paths, particularly for, with respect to the type of things that we write about and the content we create. So the concerns around search is dead or search, businesses that get search traffic, will be impaired is not something that we're seeing and is not, is not personally a view that I espouse. As for the content side of it, which is why do we need humans producing content, if, if machines can produce content? They're not gonna be able to produce the kind of content that we're producing with our, editorial organization. Simple things like our stories all have quotes. You can't... I, I don't have an AI calling sources to get, quotes and to be on the record. So a lot of the basic things aren't there. And so, look, do I think it can satisfy, you know, very kind of fact-based, simple queries of the capital of X state? Yes, of course, that can do that. That's already happened, right? I don't think it's gonna replace what we do when we're helping people deal with, you know, medical conditions or helping people level up in, you know, in, in a Zelda game. Like, these are things, when you think about what we're doing, I, I just, I don't see it. So I don't mean to be dismissive of it, but that's not the area that I'm concerned about. Yep. In fact, you know, I see a lot of opportunities with AI. I see the other side of it. You're literally leading into the next question, so I'll jump straight into that one. Yeah ... which is, with your vertical expertise, domain expertise you have in a lot of these areas, especially healthcare- Yeah -with Everyday Health, 'cause there's a ton of data there, and there's regulations. Yeah. Where do you see your opportunity for GenAI to turn into a tail? Yeah, I think in nearly every one of our businesses, and I'll put them in certain categories. First is predictions. So a lot of our businesses are actually... We provide data to help inform choices and decisions. So Ookla, which is amongst our fastest growing businesses, is really a data business, and it's in the business of selling network information to ISPs, to carriers, device makers, cell tower companies, et c, et c, the telco industry, which is a significant chunk of the global economy, to give them the analytics and the information to help them optimize network and optimize performance. It's a huge amount of data from which to extract insight. Machine learning is going to, and has, enhanced our ability to deliver insight. Customers pay for insight more than they even pay for data. So I see the opportunity there.... as being very interesting. We're experimenting in new categories. We are optimistic about our ability to predict KPIs of publicly traded telecom companies. We think we have insight on customer ads, device sales, et cetera. We have a very unique view into the ecosystem. How do we harness that into a nowcasting product that may be of interest to people in financial services? So we're going in other places that historically we might not have gone. So I think data, and we have RetailMeNot, has a significant amount of shopping data. Moz has a significant amount of search data and traffic data. So there are multiple data sets that we think are proprietary, on which artificial intelligence, machine learning more than generative, can be value unlocking. The second is UI, UX. I think the thing that... A lot of things are hard to use. Moz's software platform requires some training. Campaigner as a marketing technology platform requires some training. VIPRE as an antivirus platform requires some training. I think natural language interfaces on top of our experiences will make them easier to use, not just for us, but I think for everyone. I think what you're going to start to see is how AI actually makes interfaces, UX and UI, easier and better. So I think that's a whole category of opportunity, and I think that just drives retention, that just drives customer satisfaction. And then I do think that there are process improvements in any and all companies, ways to do things quicker and faster that just rhyme with productivity, but I'd put that last. You know, I look at the first two as, as real revenue drivers. You know, we run a fairly efficient business, and so when I'm thinking about this technology, we're trying to harness it. I'll give you a great example. I had a demo today. I just thought it was so great, I'll share it. We own Lose It!. Lose It! is a top weight loss and nutrition tracking app. You do a lot of logging. You log in what you had for breakfast and lunch, et cetera. You've got to type it in. They now have a voice-based AI, where you just tell the phone, "Hey, here's what I ate," and it's incredible. You can sit there and say, "I had cornflakes with oat milk. Oh yeah, and I also had a bagel, but I only ate half of it," and it just brings it in, and it- It's not a very nutritious breakfast. No, no, no. It, it isn't, but... And that's why they're using Lose It! That type of interaction, the more logging we get, first of all, that's data. Yeah. So the data set we're sitting on is pretty big, but secondly, that's just a better experience for the customer. So it actually fits one in two of my three areas of opportunity with AI. Yeah. Yeah, no, that's really enlightening. I think with Lose It!, you had mentioned on the call that it's getting some tailwinds from the other G that everyone's talking about- Yeah, GLP ... which is GLP-1 drugs, right? Yeah. Yeah. The one thing I'd add to that, though, is that we could also use it to increase the number of registered users we have on our site versus just- Mm ... visitors. So for instance, in talking about the application that we created, the chatbot for Legends of Zelda, we put that behind a registration wall, and it takes a customer who's active on our site, using our information, says, "If you want to access our information this way, become a registered user." Now we have the ability to communicate with that, visitor, not only through, you know, display and content on the site, but through email and through offers. And, you know, much like television moving from reliance on Nielsen rating to subscription services with registered users, we start to create a community of which we have direct point-to-multipoint contact with. Yeah. Yeah, got it. That's really helpful. And maybe just thinking, staying on the generative AI topic before we move on to some other things, if you kind of take off your CEO, CFO hats, what's a generative AI use case that you're seeing that no one's talking about out there? I actually think the UX/UI one is, is one, 'cause I don't- I, I think we're hearing a lot about productivity enhancers, you know, but content generation, marketing, advertising optimization, advertising delivery optimization, all these things that are relevant in our world. But I actually just think using it to improve UX and UI is an area that maybe you can't quite do the math on, and so maybe it doesn't elevate for everyone. But I think you're going to see fundamentally the way you interact with services, with platforms, is going to change on a natural language basis, and so that, I think, is gonna be quite interesting. But I think that's coming. I mean, you know, as, as you start to look at various examples. I think the other thing is that, you know, on a lot of these things, you know, I think we have to be careful on cost. We have to think about processing time. We have to think about some of these other things that aren't being entirely thought through right now. You know, you have a few major foundational models. I think that's how the world is gonna be. I think you're gonna have a few foundational models, and then what are you gonna do with it, right? So a lot of talk about RAG, and to me, RAG is all about what data set is it retrieving from? And I think that's the other piece, proprietary data. So if there's gonna be an arms race, so to speak, I think it's gonna be around proprietary data sets. And who has them? Who doesn't have them? How do you protect them? So we're spending a lot of time in our company making sure that there isn't data leakage, that we're inadvertently sharing data in a way that takes what we believe to be proprietary and valuable, and all of a sudden is not, and it's being distributed. I will also say there's another standard that we are, you know, focusing on in the company, which is data that needs to continue to update. If the data has value once, it's actually not that valuable. If the data has ongoing and recurring value, then that's something that I think you can build a business around. Yeah, that, that makes a lot of sense. I wanna talk a little bit about The Moz Group. So this feels like an asset, at least in my conversations. A lot of investors don't really appreciate that this is real software used by enterprises globally. Yeah. I guess number one, you know, how can we think about the potential to grow traction within that Moz group, especially in this, like, really competitive space, but maybe more importantly, an opportunity to expand Moz into other areas of MarTech, right? And build it out itself as a platform. Yeah, so let me take a step back, because I think this is what sometimes, you know, might create confusion. When we entered into the marketing technology space through the acquisition of email marketing platforms, platforms that let small and medium and enterprise businesses build email lists, send emails, et cetera, and then Moz, which is SEO software, which helps you understand how to optimize for rank. In all of those instances, our first order of battle, profitability. The thing we observed with software businesses as digital media operators at our core, is that these businesses shared this characteristic of customer acquisition, traffic acquisition, IP-based businesses. But unlike the businesses we were running, they were growth at any cost, they were not profitable, the KPI was revenue growth, not cash flow. And so our view was: we're gonna stop that. We're gonna come in, we're running these businesses for profit. And that was a huge change for the people inside of those businesses, really against who we compete. So job well done, 'cause the profitability of our marketing technology businesses is very strong. Now, step two is driving the organic growth of these businesses. And to your point, I think they're in the right markets. I, I, I would say this, that particularly with SMBs, before they go to paid marketing, they look for efficacy in earned media. Email feels free, social feels free, search feels free. They'll pay for the software to generate what is essentially the traffic that turns into customers. Paid media comes next. So well before you go into buying your first search ad or your first social media ad, you're optimizing against these sources. That's what we believe we bring. We're certainly, it's certainly a competitive space, but we are gonna do that, and we're gonna do it with profitability. Yep. Yep. And then maybe let's turn to the healthcare business. There's clearly a lot of regulations around pharma, with IRA, State Transparency Act, there's some stuff in Europe as well. How are the regulations that are out there, and maybe the ones pending in Congress as well, impacting the overall healthcare business? Huge structural advantage for us. So the health business, Everyday Health Group, is the largest business inside of our company. Of our seven verticals, it's the largest one. It's also one of the most consistent growers and, and one that we believe has continued potential. Pharmaceutical advertising, drug-based advertising, is highly regulated, and really isn't allowed on social platforms. So think about this. This is a large ad category that really doesn't play in social, and it's a large category where the drug pipeline has gone from mass-market drugs, for which television makes a lot of sense from a marketing point of view, to narrower population drugs and treatments and therapies that require targeting. So targeting matters. Then, the other piece of this market... Pharma markets two ways: to patients and to providers. You have 1 million doctors. They preside over $400 billion of annual prescriptions. Single most valuable media audience in the world, definitionally. Our ability to reach and engage those doctors is a big advantage for us. The old way of doing it was called detailing. Pharma reps would go into an office and, you know, bring a squeezy ball and a pen or something like that. That activity was on its way down. COVID really dealt it a blow. So pharma's ability to reach physicians has been challenged. We think we help address that challenge. On the patient side, it's narrower populations. So all of those things, I think, are helpful. In terms of recent regulatory changes, speeding of drug approval is great. Yeah. The faster drugs get to market in an expedited FDA process, good for us. On the pricing side, which may be part of your question, too, look, the reality is, you know, in the Inflation Reduction Act, it was really insulin, not much else. I think we feel confident that the pharma pricing dialogue isn't going to impede their marketing budgets, which is ultimately what we're focused on. We believe the GLP-1s are gonna be a huge category, by the way. We believe the advances in oncology are gonna present a big opportunity. So this is a space we love. It's a space that we've done very well in. Yep. Awesome. In the minute and a half we got left, I have two important questions. I'm gonna squish them into one. Okay. But, it's a very open-ended one. What's the biggest decision that you as a management team will have to make over the next three years? And what is the single biggest, biggest item that excites you about the future of Ziff Davis? I think the first is how we're gonna spend this nearly $800 million of cash and investments on our balance sheet. I think this is a unique opportunity to put capital to work. We gotta get that right. So that's the answer to the first one. On the second one, I would just say that, you know, that when we get back to what we've done for more than a decade prior to this, I think a lot of exciting things happen from a, from a shareholder value creation point of view. I'm a large shareholder of the business, I'm a happy shareholder of the business, and I feel like we're poised to, to get back to where we were, and I think we've weathered a pretty bad storm. What, what gives you the confidence that you can get back to those? I just see the quality of the businesses, the markets we're in, the teams, the opportunities, the growth, initiatives. We have been really focused on not pulling back our investments, as you know, this year, 'cause we're confident in where we're headed. Awesome. That was a very efficient answer to a long question. Thank you so much, Vivek.