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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 First Quarter 2008 Results
Record
Number of New Subscribing Firms Added During Quarter;
Net
Income Increases 178% Year Over Year, Company Raises Earnings Outlook for
2008
BETHESDA,
MD — April 23, 2008 - CoStar Group, Inc. (Nasdaq: CSGP), the number one provider
of information services to the commercial real estate industry, today announced
that net income for the quarter ended March 31, 2008 increased 178% to $5.0
million, or $0.26 per diluted share, compared to $1.8 million, or $0.09 per
diluted share for the quarter ended March 31, 2007. EBITDA (earnings
before interest, taxes, deprecation and amortization) for the first quarter of
2008 was $11.5 million, an increase of 128% compared to EBITDA of $5.0 million
for the first quarter of 2007. Revenues for the first quarter of 2008
were $52.3 million, a 16.6% increase over first quarter 2007 revenues of $44.8
million.
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Year
2007-2008 Quarterly Results
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(in
millions, except per share data)
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2007
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2008
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Q1
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Q2
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Q3
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Q4
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Q1
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Revenues
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$ | 44.8 | $ | 47.8 | $ | 49.3 | $ | 50.8 | $ | 52.3 | ||||||||||
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EBITDA
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5.0 | 4.2 | 8.0 | 16.8 | 11.5 | |||||||||||||||
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Net
income
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1.8 | 1.2 | 3.3 | 9.7 | 5.0 | |||||||||||||||
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Net income per
share - diluted
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0.09 | 0.06 | 0.17 | 0.50 | 0.26 | |||||||||||||||
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Weighted
average outstanding shares - diluted
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19.2 | 19.3 | 19.5 | 19.5 | 19.4 | |||||||||||||||
“We
are very pleased to report another quarter of robust earnings at CoStar
resulting from the organization's continued focus on adding and renewing
subscribers, growing earnings and effectively managing our cost structure as we
work towards achieving both a 30% EBITDA margin in our U.S. operations and
break-even in our international operations by 2008 year-end,” said President and
CEO Andrew C. Florance. “Based on our strong first quarter performance, the
outlook for our long-term revenue growth and profitability remains
bullish.”
Demand
for CoStar’s subscription-based products remained strong in the first quarter as
the company signed 591 new subscribing firms, the highest number to subscribe in
a single quarter, which contributed to the addition of 2,071 net new paying
subscribers to the company’s expanded service platform. In addition, the
customer renewal rate for CoStar’s subscription-based products remained strong
at 90%. The high renewal rate and surge in new subscribers contributed to the
increase in revenues for the quarter.
The
company also confirmed the May 2008 release of CoStar Showcase®, a new online
marketing service dedicated to helping commercial real estate professionals
maximize the value of listing their properties online by presenting their
listings before a large audience of prospective tenants and buyers.
CoStar’s
first quarter 2008 results included non-cash charges for equity compensation of
$1.2 million, primarily included in general and administrative costs, selling
and marketing expenses and cost of revenues.
As
of March 31, 2008, the company had $193.1 million in cash, cash equivalents,
short-term and long-term investments. Also, as of March 31, 2008, the company
had no long-term debt.
2008
Outlook
“CoStar
continues to anticipate earnings growth from U.S. operations through 2008 as a
result of consistent core revenue growth over a relatively fixed-cost base,”
said CoStar Group Chief Financial Officer Brian J. Radecki. “Based on strong
first quarter results and our ability to execute our plan, we are raising the
outlook for net income for the full year 2008 to approximately $1.05 to $1.10
per diluted share. We also continue to anticipate 2008 overall revenue growth in
the range of 14% to 16% over 2007,” added Radecki.
“For
the second quarter of 2008, we continue to anticipate a sequential quarterly
increase in revenue of 2.0% to 4.0% and fully diluted net income per share of
approximately $0.24 to $0.26, which includes seasonally high selling and
marketing expenses associated with the ICSC trade show and the pending release
of CoStar Showcase,” Radecki said.
In
addition, during the second quarter 2008, the company expects a charge of
approximately $300,000 resulting from the termination of a lease and write-off
of certain leasehold improvements that will save the company approximately $1.2
million over the remaining two-year term of the lease as it consolidates excess
office space in Maryland.
Management
will conduct a conference call to discuss earnings results for the quarter ended
March 31, 2008, and the financial outlook for the second quarter of 2008 at
11:00 a.m. EDT on Thursday, April 24, 2008. The
audio portion of the conference call will be broadcast live over the Internet at
http://www.costar.com/corporate/investor/. To join the conference call by
telephone, please call
2
(888)
688-0419 from within the United States and Canada, or (706) 634-0964 from
outside the United States and Canada. A replay of the conference call will be
available two hours after the live call concludes through midnight on May 8,
2008. The replay telephone number is (800) 642-1687 within the United States and
Canada or (706) 645-9291 outside the United States and Canada. Refer to
Conference ID 41904827. The replay will also be available over the Internet at
http://www.costar.com/corporate/investor/ for a period of time following the
call.
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CoStar
Group, Inc.
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Condensed
Consolidated Statements of Operations-Unaudited
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(in
thousands, except per share data)
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For the Three
Months
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Ended March
31,
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2008
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2007
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Revenues
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$ | 52,264 | $ | 44,831 | ||||
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Cost of
revenues
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19,721 | 17,826 | ||||||
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Gross
margin
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32,543 | 27,005 | ||||||
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Operating
expenses:
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Selling
and marketing
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10,873 | 13,166 | ||||||
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Software
development
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3,414 | 3,070 | ||||||
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General
and administrative
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9,805 | 8,063 | ||||||
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Purchase
amortization
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1,221 | 1,270 | ||||||
| 25,313 | 25,569 | |||||||
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Income from
operations
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7,230 | 1,436 | ||||||
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Interest and
other income, net
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1,938 | 1,862 | ||||||
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Income before
income taxes
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9,168 | 3,298 | ||||||
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Income tax
expense, net
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4,126 | 1,484 | ||||||
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Net
income
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$ | 5,042 | $ | 1,814 | ||||
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Net income
per share - basic
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$ | 0.26 | $ | 0.10 | ||||
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Net income
per share - diluted
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$ | 0.26 | $ | 0.09 | ||||
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Weighted
average outstanding shares - basic
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19,217 | 18,896 | ||||||
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Weighted
average outstanding shares - diluted
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19,369 | 19,207 | ||||||
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Reconciliation
of Non-GAAP Financial Measures with Net Income
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Net
income
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$ | 5,042 | $ | 1,814 | ||||
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Purchase
amortization in cost of revenues
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583 | 325 | ||||||
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Purchase
amortization in operating expenses
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1,221 | 1,270 | ||||||
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Depreciation
and other amortization
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2,478 | 2,015 | ||||||
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Interest
income, net
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(1,938 | ) | (1,862 | ) | ||||
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Income tax
expense, net
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4,126 | 1,484 | ||||||
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EBITDA
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$ | 11,512 | $ | 5,046 | ||||
3
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CoStar
Group, Inc.
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Results
of Segments-Unaudited
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(in
thousands)
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For the Three
Months
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Ended March
31,
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2008
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2007
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Revenues
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United
States
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$ | 46,403 | $ | 40,181 | ||||
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International
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5,861 | 4,650 | ||||||
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Total
Revenues
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$ | 52,264 | $ | 44,831 | ||||
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EBITDA
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United
States
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$ | 12,570 | $ | 5,850 | ||||
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International*
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(1,058 | ) | (804 | ) | ||||
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Total
EBITDA
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$ | 11,512 | $ | 5,046 | ||||
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*
International EBITDA includes a corporate allocation of approximately
$325,000 and $775,000 for the three months ended March 31, 2008 and 2007,
respectively.
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4
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CoStar
Group, Inc.
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Condensed
Consolidated Balance Sheets
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(in
thousands)
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March
31,
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December
31,
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|||||||
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2008
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2007
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(Unaudited)
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$ | 94,706 | $ | 57,785 | ||||
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Short-term
investments
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66,855 | 129,641 | ||||||
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Accounts
receivable, net
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11,708 | 10,875 | ||||||
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Deferred
income taxes
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2,097 | 2,716 | ||||||
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Prepaid
and other current assets
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3,371 | 4,661 | ||||||
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Total current
assets
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178,737 | 205,678 | ||||||
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Long-term
investments
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31,532 | - | ||||||
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Deferred
income taxes
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3,335 | 2,233 | ||||||
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Property and
equipment, net
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22,714 | 24,045 | ||||||
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Intangible
and other assets, net
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85,711 | 87,565 | ||||||
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Deposits and
other assets
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1,485 | 2,322 | ||||||
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Total
assets
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$ | 323,514 | $ | 321,843 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable and accrued expenses
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$ | 24,834 | $ | 27,863 | ||||
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Deferred
revenue
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10,723 | 10,374 | ||||||
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Total current
liabilities
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35,557 | 38,237 | ||||||
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Deferred
income taxes
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1,089 | 1,801 | ||||||
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Stockholders'
equity
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286,868 | 281,805 | ||||||
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Total
liabilities and stockholders' equity
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$ | 323,514 | $ | 321,843 | ||||
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Reconciliation
of Non-GAAP Financial Measures with 2007-2008 Quarterly
Results
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(in
millions)
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2007
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2008
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| Q1 | Q2 |
Q3
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Q4
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Q1
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Net
income
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$ | 1.8 | $ | 1.2 | $ | 3.3 | $ | 9.7 | $ | 5.0 | ||||||||||
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Purchase
amortization
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1.6 | 1.8 | 1.8 | 2.0 | 1.8 | |||||||||||||||
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Depreciation
and other amortization
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2.0 | 2.1 | 2.3 | 2.5 | 2.5 | |||||||||||||||
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Interest
income, net
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(1.9 | ) | (1.9 | ) | (2.1 | ) | (2.2 | ) | (1.9 | ) | ||||||||||
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Income tax
expense, net
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1.5 | 1.0 | 2.7 | 4.8 | 4.1 | |||||||||||||||
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EBITDA
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$ | 5.0 | $ | 4.2 | $ | 8.0 | $ | 16.8 | $ | 11.5 | ||||||||||
5
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 http://www.costar.com.
This
news release includes "forward-looking statements" including, without
limitation, statements regarding CoStar’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's filings
from time to time with the Securities and Exchange Commission, including
CoStar’s Form 10-K for the year ended December 31, 2007 under the heading “Risk
Factors.” In addition to these statements, there can be no assurance
that CoStar will achieve both a 30% EBITDA margin in its U.S. operations and
break-even in its international operations by 2008 year-end; that CoStar’s
long-term revenue growth and profitability will remain bullish; that the company
will release CoStar Showcase in May 2008 or that CoStar Showcase will help
commercial real estate professionals maximize the value of listing their
properties online by presenting their listings before a large audience of
prospective tenants and buyers; that earnings will continue to grow through 2008
from U.S. operations as a result of consistent core revenue growth over a
relatively fixed cost base; that net income for the full year 2008 will be as
stated in this press release; that overall revenue growth for 2008 will be as
stated in this press release; that sequential quarterly revenue growth rates for
the second quarter of 2008 will be as stated in this press release; that second
quarter 2008 fully diluted net income per share will be as stated in this press
release; that the second quarter 2008 charge from termination of a lease and
write-off of certain leasehold improvements will be as stated in this press
release; and that the company will save approximately $1.2 million over the
remaining two-year term of the lease. All forward-looking statements
are based on information available to CoStar on the date hereof, and CoStar
assumes no obligation to update such statements.
6