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NEWS
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Contacts:
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Analysts/Investors:
Brian
J. Radecki - Chief Financial Officer
(301)
664-9132
bradecki@costar.com
Media:
Timothy
J. Trainor - Communications Director
(301)
280-7695
ttrainor@costar.com
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CoStar
Group, Inc. Announces Third Quarter 2007 Results
Company
Reports Quarterly Earnings Upturn Following U.S. Market
Expansion;
EBITDA
Increased from $4.2 Million to $8.0 Million and
Net
Income Increased from $1.2 Million to $3.3 Million Over Prior
Quarter
BETHESDA,
MD – October 24, 2007 – CoStar Group, Inc. (NASDAQ: CSGP), the number one
provider of information services to the commercial real estate industry,
today
announced that revenues for the third quarter of 2007 were $49.3 million,
a
21.6% increase compared to $40.6 million in revenue for the third quarter
of
2006. Net income increased 177% from $1.2 million in the second quarter
of 2007
to $3.3 million in the third quarter of 2007 as a result of continued core
revenue growth and improved operational efficiencies. EBITDA (earnings
before
interest, taxes, depreciation and amortization) increased 88% from $4.2
million
in the second quarter of 2007 to $8.0 million in the third quarter of
2007.
|
Year
2006-2007 Quarterly Results
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||||||||||||||||||||||||||||
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(in
millions, except per share data)
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||||||||||||||||||||||||||||
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2006
|
2007
|
|||||||||||||||||||||||||||
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
Q3
|
||||||||||||||||||||||
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Revenues
|
$ |
37.3
|
$ |
38.9
|
$ |
40.6
|
$ |
42.1
|
$ |
44.8
|
$ |
47.8
|
$ |
49.3
|
||||||||||||||
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EBITDA
|
4.7
|
5.3
|
8.8
|
7.2
|
5.0
|
4.2
|
8.0
|
|||||||||||||||||||||
|
Net
income
|
1.9
|
2.3
|
4.7
|
3.5
|
1.8
|
1.2
|
3.3
|
|||||||||||||||||||||
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Net
income per share - diluted
|
0.10
|
0.12
|
0.25
|
0.18
|
0.09
|
0.06
|
0.17
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|||||||||||||||||||||
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Weighted
average outstanding shares - diluted
|
19.3
|
19.3
|
19.1
|
19.2
|
19.2
|
19.3
|
19.5
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|||||||||||||||||||||
"Our
third quarter results reflect the growth in earnings we expect following
the
investments we made to create value for our customers and stockholders,"
said
Andrew C. Florance, CoStar Group President and CEO. "As we previously
announced, CoStar Group made significant investments over the last four
quarters
to expand our commercial real estate market coverage in the U.S., to
grow the
sales force, and to improve product quality. Going forward, we expect
revenues
to continue to grow over what is now a relatively fixed cost base for
our U.S.
research operations. As a result, the company believes it is well positioned
to
generate continued, sustained earnings leverage through the end of
2008."
"The
management team at CoStar is focused on aggressively executing our earnings
growth strategy," Florance continued. "We are fully committed to
achieving a 30% EBITDA margin in our U.S. operations by the end of
2008."
Revenues
for the third quarter of 2007 were up sequentially by 3.2% over second
quarter
2007 and up 4.2% during the same period for core U.S. subscription-based
services. The top line results were partially offset during the third
quarter by
lower than expected revenue from non-subscription services, which account
for
less than 5% of total revenue. International revenues decreased from
$5.9
million in the second quarter to $5.8 million in the third quarter of
2007,
primarily due to lower consulting fees and the consolidation of duplicative
services. International operations contributed approximately 11.8% of
total
revenue for the third quarter of 2007.
CoStar
Group’s rate of renewal for subscription services was approximately 91% during
the third quarter of 2007. The company has reported sequential
revenue increases in every quarter since its IPO in 1998.
Net
income was $3.3 million, or $0.17 per share, for the third quarter of
2007
compared to net income of $4.7 million, or $0.25 per share, for the third
quarter of 2006. The third quarter 2007 results include non-cash
charges for equity compensation of approximately $1.4 million, primarily
included in general and administrative expenses, selling and marketing
expenses,
and cost of revenues. By comparison, non-cash charges for equity compensation
were $1.0 million for the third quarter of 2006. The company expects
2007
non-cash equity compensation expense to be approximately $5.8
million.
As
of
September 30, 2007, CoStar Group had $164.2 million in cash, cash equivalents
and short-term investments. The company has no long-term debt.
2
Fourth
Quarter 2007 Outlook
“We
expect a sequential quarterly increase in revenue of 3.0% to 5.0% and
fully
diluted net income per share of approximately $0.19 to $0.21 for the
fourth
quarter of 2007," said CoStar Group Chief Financial Officer Brian J.
Radecki.
"In addition, we expect to continue to leverage and grow earnings from
U.S.
operations through 2008 as a result of nearly completing earlier reported
step-ups in investment activity combined with consistent core revenue
growth,"
said Radecki.
Management
will conduct a conference call to discuss earnings results for the third
quarter
ended September 30, 2007, and the financial outlook for the fourth quarter
of
2007 at 11:00 a.m. EDT on Thursday, October 25, 2007.
The
audio portion of the conference
call will be broadcast live over the Internet at http://www.costar.com/corporate/investor/. If
you would like to join
by telephone, please call (888) 688-0419 within the United States or
(706)
634-0964 outside the United States. A telephonic replay of the
conference call will be available two hours after the live call concludes
through midnight on November 8, 2007. The replay telephone number
is (800) 642-1687 within the United States or (706) 645-9291 outside
the United States. Refer to Conference ID 20100647. The replay will
also be available over the Internet at http://www.costar.com/corporate/investor/
for a period of time following the
call.
3
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CoStar
Group, Inc.
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||||||||||||||||
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Condensed
Consolidated Statements of Operations-Unaudited
|
||||||||||||||||
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(in
thousands, except per share data)
|
||||||||||||||||
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For
the Three Months
|
For
the Nine Months
|
|||||||||||||||
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Ended
September 30,
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Ended
September 30,
|
|||||||||||||||
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2007
|
2006
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2007
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2006
|
|||||||||||||
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Revenues
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$ |
49,340
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$ |
40,571
|
$ |
141,965
|
$ |
116,791
|
||||||||
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Cost
of revenues
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19,551
|
14,005
|
56,695
|
39,537
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||||||||||||
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Gross
margin
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29,789
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26,566
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85,270
|
77,254
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||||||||||||
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Operating
expenses:
|
||||||||||||||||
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Selling
and marketing
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11,924
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8,834
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39,752
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31,868
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Software
development
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3,026
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2,835
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9,366
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8,817
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||||||||||||
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General
and administrative
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9,674
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7,985
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26,826
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23,187
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||||||||||||
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Purchase
amortization
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1,328
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1,076
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3,807
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3,300
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||||||||||||
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25,952
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20,730
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79,751
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67,172
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|||||||||||||
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Income
from operations
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3,837
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5,836
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5,519
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10,082
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||||||||||||
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Other
income, net
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2,072
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1,852
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5,825
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4,888
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Income
before income taxes
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5,909
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7,688
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11,344
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14,970
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||||||||||||
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Income
tax expense, net
|
2,659
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2,990
|
5,105
|
6,108
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||||||||||||
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Net
income
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$ |
3,250
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$ |
4,698
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$ |
6,239
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$ |
8,862
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||||||||
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Net
income per share - basic
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$ |
0.17
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$ |
0.25
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$ |
0.33
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$ |
0.47
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||||||||
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Net
income per share - diluted
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$ |
0.17
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$ |
0.25
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$ |
0.32
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$ |
0.46
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||||||||
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Weighted
average outstanding shares - basic
|
19,045
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18,787
|
18,997
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18,724
|
||||||||||||
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Weighted
average outstanding shares - diluted
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19,475
|
19,130
|
19,362
|
19,176
|
||||||||||||
|
Reconciliation
of Non-GAAP Financial Measures with Net Income
|
||||||||||||||||
|
Net
income
|
$ |
3,250
|
$ |
4,698
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$ |
6,239
|
$ |
8,862
|
||||||||
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Purchase
amortization in cost of revenues
|
439
|
264
|
1,387
|
781
|
||||||||||||
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Purchase
amortization in operating expenses
|
1,328
|
1,076
|
3,807
|
3,300
|
||||||||||||
|
Depreciation
and other amortization
|
2,349
|
1,609
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6,513
|
4,542
|
||||||||||||
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Interest
income, net
|
(2,072 | ) | (1,852 | ) | (5,825 | ) | (4,888 | ) | ||||||||
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Income
tax expense, net
|
2,659
|
2,990
|
5,105
|
6,108
|
||||||||||||
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EBITDA
|
$ |
7,953
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$ |
8,785
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$ |
17,226
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$ |
18,705
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4
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CoStar
Group, Inc.
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||||||||||||||||
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Results
of Segments-Unaudited
|
||||||||||||||||
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(in
thousands)
|
||||||||||||||||
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For
the Three Months
|
For
the Nine Months
|
|||||||||||||||
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Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
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Revenues
|
||||||||||||||||
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United
States
|
$ |
43,503
|
$ |
37,292
|
$ |
125,565
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$ |
107,556
|
||||||||
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International
|
5,837
|
3,279
|
16,400
|
9,235
|
||||||||||||
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Total
Revenues
|
$ |
49,340
|
$ |
40,571
|
$ |
141,965
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$ |
116,791
|
||||||||
|
EBITDA
|
||||||||||||||||
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United
States
|
$ |
9,407
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$ |
8,909
|
$ |
21,011
|
$ |
18,666
|
||||||||
|
International*
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(1,454 | ) | (124 | ) | (3,785 | ) |
39
|
|||||||||
|
Total
EBITDA
|
$ |
7,953
|
$ |
8,785
|
$ |
17,226
|
$ |
18,705
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*
International EBITDA includes a corporate allocation of approximately
$450,000 and $252,000 for the three months ended September
30, 2007 and
2006, respectively, and $2.2 million and $756,000 for the
nine months
ended September 30, 2007 and 2006, respectively.
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5
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CoStar
Group, Inc.
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||||||||
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Condensed
Consolidated Balance Sheets
|
||||||||
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(in
thousands)
|
||||||||
|
September
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ |
43,262
|
$ |
38,159
|
||||
|
Short-term
investments
|
120,981
|
119,989
|
||||||
|
Accounts
receivable, net
|
10,719
|
9,202
|
||||||
|
Deferred
income taxes
|
7,904
|
7,904
|
||||||
|
Prepaid
and other current assets
|
4,256
|
3,497
|
||||||
|
Total
current assets
|
187,122
|
178,751
|
||||||
|
Deferred
income taxes
|
494
|
6,973
|
||||||
|
Property
and equipment, net
|
21,302
|
18,407
|
||||||
|
Intangible
and other assets, net
|
90,485
|
69,669
|
||||||
|
Deposits
and other assets
|
2,336
|
1,637
|
||||||
|
Total
assets
|
$ |
301,739
|
$ |
275,437
|
||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ |
23,276
|
$ |
15,328
|
||||
|
Deferred
revenue
|
10,594
|
8,817
|
||||||
|
Total
current liabilities
|
33,870
|
24,145
|
||||||
|
Deferred
income taxes
|
942
|
1,182
|
||||||
|
Stockholders'
equity
|
266,927
|
250,110
|
||||||
|
Total
liabilities and stockholders' equity
|
$ |
301,739
|
$ |
275,437
|
||||
|
Reconciliation
of Non-GAAP Financial Measures with 2006-2007 Quarterly
Results
|
||||||||||||||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||||||||||
|
2006
|
2007
|
|||||||||||||||||||||||||||
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
Q3
|
||||||||||||||||||||||
|
Net
income
|
$ |
1.9
|
$ |
2.3
|
$ |
4.7
|
$ |
3.5
|
$ |
1.8
|
$ |
1.2
|
$ |
3.3
|
||||||||||||||
|
Purchase
amortization
|
1.4
|
1.4
|
1.3
|
1.3
|
1.6
|
1.8
|
1.8
|
|||||||||||||||||||||
|
Depreciation
and other amortization
|
1.4
|
1.5
|
1.6
|
1.9
|
2.0
|
2.1
|
2.3
|
|||||||||||||||||||||
|
Interest
income, net
|
(1.4 | ) | (1.6 | ) | (1.8 | ) | (1.9 | ) | (1.9 | ) | (1.9 | ) | (2.1 | ) | ||||||||||||||
|
Income
tax expense, net
|
1.4
|
1.7
|
3.0
|
2.4
|
1.5
|
1.0
|
2.7
|
|||||||||||||||||||||
|
EBITDA
|
$ |
4.7
|
$ |
5.3
|
$ |
8.8
|
$ |
7.2
|
$ |
5.0
|
$ |
4.2
|
$ |
8.0
|
||||||||||||||
6
About
CoStar Group, Inc.
CoStar
Group, Inc. (Nasdaq - CSGP) is the number one provider of information
services
to commercial real estate professionals in the United States as well
as the
United Kingdom. CoStar's suite of services offers customers access
via the Internet to the most comprehensive database of commercial real
estate
information throughout the U.S. as well as in the United Kingdom and
France. Headquartered in Bethesda, MD, the company has
approximately 1,300 employees, including the largest professional research
organization in the industry. For more information, visit
www.costar.com.
This
news
release includes "forward-looking statements" including, without limitation,
statements regarding CoStar Group’s expectations, beliefs, intentions or
strategies regarding the future. These statements are subject to many
risks and
uncertainties that could cause actual results to differ materially
from these
statements. More information about potential factors that could cause
actual
results to differ materially from those discussed in the forward-looking
statements include, but are not limited to, those stated in CoStar
Group’s
filings from time to time with the Securities and Exchange Commission,
including
CoStar Group’s Form 10-K for the year ended December 31, 2006, under the heading
“Risk Factors” and CoStar Group’s Form 10-Q for the quarter ended June 30, 2007,
under the heading “Risk Factors.” In addition to these statements,
there can be no assurance that earnings growth will continue following
the
investments made; that revenues will continue to grow over what is
now a
relatively fixed cost base for our U.S. research operations; that the
company is
well positioned to generate continued, sustained earnings leverage
through the
end of 2008; that the company’s management team will be able to successfully
execute the company’s earnings growth strategy; that the company will achieve a
30% EBITDA margin in its U.S. operation by the end of 2008; that 2007
non-cash
equity compensation expense will be as stated in this press release;
that
sequential quarterly revenue growth rates for the fourth quarter of
2007 will be
as stated in this press release; that fourth quarter 2007 fully diluted
net
income per share will be as stated in this press release; or that the
company
will be able to successfully continue to leverage and grow earnings
from U.S.
operations through 2008 as a result of nearly completing earlier reported
step-ups in investment activity combined with consistent core revenue
growth. All forward-looking statements are based on information
available to CoStar Group on the date hereof, and CoStar Group assumes
no
obligation to update such
statements.
7