PRESS RELEASE DETAIL


Apr 27, 2016

CoStar Group Grows First Quarter Revenue 26% Year-over-Year and EBITDA 234% Year-over-Year

Company Raises 2016 Earnings and Revenue Guidance

WASHINGTON, April 27, 2016 -- CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of commercial real estate information, analytics and online marketplaces, announced today that revenue for the quarter ended March 31, 2016 was $200 million, an increase of 26% over revenue of $159 million for the first quarter of 2015. EBITDA in the first quarter of 2016 increased to $48 million compared to $14 million in the first quarter of 2015, which represents an increase of $34 million or 234% year-over-year.

"We had an excellent first quarter with strong revenue growth and margin expansion," said Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group.  "We continue to deliver strong sales as net bookings in the first quarter of 2016 were $30 million, up 47% compared to first quarter of 2015. Net new sales on annual subscriptions were $25 million in the first quarter of 2016, up 53% compared to first quarter of 2015."

Florance continued, "CoStar Suite revenue grew 12.5% in the first quarter of 2016 compared to first quarter of 2015 and grew at a rate of 4.4% sequentially in the first quarter of 2016 over the fourth quarter of 2015.  Our Multifamily marketplace revenue was up 100% in the first quarter of 2016 compared to first quarter of 2015, as we continue to expand our Apartments.com lead in unique visitors and consumer engagement versus other apartment listing sites, according to comScore. We remain confident that we are able to reach our goal of $1 billion in revenue with a 40% margin exiting 2018."

 

Year 2015-2016 Quarterly Results - Unaudited

(in millions, except per share data)


2015


2016


Q1

Q2

Q3

Q4


Q1








Revenues

$159

$171

$189

$193


$200

EBITDA

14

(1)

22

55


48

Net income (loss)

(6)

(15)

(5)

23


17

Net income (loss) per share - diluted

(0.19)

(0.47)

(0.17)

0.71


0.52

Weighted average outstanding shares - diluted

31.8

31.9

32.0

32.3


32.4








Adjusted EBITDA

24

11

36

65


58

Non-GAAP Net Income

11

2

17

36


31

Non-GAAP Net Income per share - diluted

0.34

0.08

0.53

1.10


0.95

 

Adjusted EBITDA (which excludes stock-based compensation and other items as defined below) was $58 million for the first quarter of 2016 versus $24 million in the first quarter of 2015, which is an increase of 142% year-over-year.

Net income for the first quarter of 2016 increased to $17 million or $0.52 per diluted share compared to a net loss of $(6) million in the first quarter of 2015.

Non-GAAP net income (defined below) for the quarter ended March 31, 2016 was $31 million or $0.95 per diluted share, an increase of $20 million or 185% compared to non-GAAP net income of $11 million in the first quarter of 2015.

As of March 31, 2016, the Company had approximately $473 million in cash, cash equivalents and investments, which is an increase of $35 million since December 31, 2015. Short and long-term debt outstanding, net of debt issuance costs, totaled approximately $351 million as of March 31, 2016.


Revenues By Services

"In order to provide additional insight into our revenue, we will report Revenue by Services details in our quarterly financial results and press releases," said CoStar Group Chief Financial Officer Scott Wheeler. "As we continue to grow and expand our service offerings for commercial real estate, we believe this additional transparency will provide our investors with a better understanding of our performance and the drivers of growth."

 

CoStar Group, Inc.

Revenues by Services 2015-2016 Quarterly Results - Unaudited

(in millions)









2015


2016


Q1

Q2

Q3

Q4


Q1

Information and analytics







CoStar Suite

$    87

$    89

$    91

$    94


$    98

Information services

19

19

19

19


19

Online marketplaces







Multifamily

26

35

49

50


52

Commercial property and land

28

28

29

30


30

Total revenues

$  159

$  171

$  189

$  193


$  200

 

Highlights

  • CoStar Suite: CoStar Suite was approximately 50% of CoStar's total revenue in the first quarter of 2016, and grew 12.5% versus the first quarter of 2015. CoStar Suite is comprised of our flagship CoStar services in both North America and Europe, including CoStar Property Professional, CoStar COMPS Professional, CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy.
  • Information Services: Information Services were approximately 10% of total revenue in the first quarter, and are comprised of LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam and Belbex.
  • Multifamily: Our Multifamily marketplaces were approximately 25% of CoStar's total revenue in the first quarter of 2016, and grew 100% versus the first quarter of 2015. This includes the added revenue from the Apartment Finder acquisition. The Multifamily marketplaces are comprised of Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com.
  • Commercial Property and Land: Our Commercial Property and Land marketplaces were approximately 15% of CoStar's total revenue in the first quarter and grew 10.5% versus the first quarter of 2015. Commercial Property and Land marketplaces include LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica and LandAndFarm; and CoStar Private Sale Network.

 
2016 Outlook

"Our strong sales growth and focus on controlling costs were evident in our first quarter 2016 results," stated Wheeler. "We expect to continue to grow the top line and deliver solid margin expansion throughout 2016."  

The Company expects revenue of approximately $204 million to $206 million for the second quarter of 2016 and approximately $834 million to $840 million for the full year 2016, an increase of $2 million at the midpoint from the Company's prior outlook.  

For the second quarter of 2016, the Company expects non-GAAP net income per diluted share (defined below) of approximately $0.80 to $0.84. Marketing costs are expected to increase in the second quarter of 2016 over the first quarter of 2016 to support sales efforts during the spring apartment rental season.  Marketing costs are expected to decline in the second half of 2016, in line with our previously stated plan of reducing spend by $20 million in 2016 versus 2015. This is expected to result in additional margin expansion in the second half of the year. For the full year of 2016, the Company expects non-GAAP net income per diluted share in a range of approximately $4.00 to $4.10, an increase of approximately 100% at the mid-point over 2015. 

The preceding forward-looking statements reflect CoStar Group's expectations as of April 27, 2016, including forward-looking non-GAAP financial measures on a consolidated basis. We are not able to forecast with certainty whether or when certain events, such as acquisition-related costs, the exact amounts or timing of investments, transition, restructuring, settlements or impairments will occur in any given quarter. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. Other than in publicly available statements, the Company does not intend to update its forward-looking statements until its next quarterly results announcement.

Reconciliation of EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share and all of the disclosed non-GAAP financial measures to their GAAP basis results are shown in detail below, along with definitions for those terms.

 
Non-GAAP Financial Measures

For information regarding the purpose for which management uses the non-GAAP financial measures disclosed in this release and why management believes they provide useful information to investors regarding the Company's financial condition and results of operations, please refer to the Company's latest periodic report.

EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group before (i) interest income (expense), (ii) provision for income taxes, and (iii) depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that represents EBITDA before (i) stock-based compensation expense, (ii) acquisition and integration related costs, (iii) restructuring charges and related costs, and (iv) settlements and impairments incurred outside the Company's normal business operations.

Non-GAAP net income is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group before (i) purchase amortization and other related costs, (ii) stock-based compensation expense, (iii) acquisition and integration related costs, (iv) purchase accounting adjustments, (v) restructuring charges and related costs, and (vi) settlements and impairments. From this figure, we then subtract an assumed provision for income taxes to arrive at non-GAAP net income. The company assumes a 38% tax rate in order to approximate our long-term effective corporate tax rate.

Non-GAAP net income per diluted share (also referred to as non-GAAP EPS) is a non-GAAP financial measure that represents non-GAAP net income divided by the number of diluted shares outstanding for the period.  For periods with GAAP net losses and non-GAAP net income, the weighted-average outstanding shares used to calculate non-GAAP net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.

 
Earnings Conference Call

Management will conduct a conference call at 11:00 AM EDT on Thursday, April 28, 2016 to discuss earnings results for the first quarter of 2016 and the Company's outlook. The audio portion of the conference call will be broadcast live over the Internet at www.costargroup.com/investors/events. To join the conference call by telephone, please dial (800) 230-1951 (from the United States and Canada) or (612) 332-0335 (from all other countries) and refer to conference code 391087. An audio recording of the conference call will be available for replay approximately one hour after the call's completion and will remain available for a period of time following the call. To access the recorded conference call, please dial (800) 475-6701 (from the U.S. and Canada) or (320) 365-3844 (from all other countries) using access code 391087. The webcast replay will also be available in the Investors section of CoStar Group's website for a period of time following the call.

 

 

CoStar Group, Inc.

Condensed Consolidated Statements of Operations-Unaudited 

(in thousands, except per share data)









For the Three Months




Ended March 31,




2016


2015














Revenues


$199,739


$159,020


Cost of revenues


42,900


45,396


Gross margin


156,839


113,624








Operating expenses:






  Selling and marketing


75,204


69,478


  Software development


17,635


15,148


  General and administrative


27,476


25,363


  Purchase amortization


6,223


7,142




126,538


117,131








Income (loss) from operations


30,301


(3,507)


Interest and other income


84


294


Interest and other expense


(2,509)


(2,343)


Income (loss) before income taxes


27,876


(5,556)


Income tax expense, net


11,155


571


Net income (loss)


$  16,721


$   (6,127)








Net income (loss) per share - basic


$      0.52


$     (0.19)


Net income (loss) per share - diluted


$      0.52


$     (0.19)








Weighted average outstanding shares - basic

32,085


31,831


Weighted average outstanding shares - diluted

32,382


31,831


 

 

CoStar Group, Inc.

Reconciliation of Non-GAAP Financial Measures-Unaudited

(in thousands, except per share data)











Reconciliation of Net Income (Loss) to Non-GAAP Net Income












For the Three Months




Ended March 31,




2016


2015








Net income (loss)


$    16,721


$     (6,127)


Income tax expense, net


11,155


571


Income (loss) before income taxes


27,876


(5,556)


Purchase amortization and other related costs

11,919


13,489


Stock-based compensation expense


8,331


7,442


Acquisition and integration related costs


1,447


624


Settlements and impairments


-


1,402


Non-GAAP income before income taxes


49,573


17,401


Assumed rate for income tax expense, net *

38%


38%


Assumed provision for income tax expense, net

(18,838)


(6,612)


Non-GAAP net income


$    30,735


$    10,789








Net income (loss) per share - diluted


$       0.52


$      (0.19)


Non-GAAP net income per share - diluted


$       0.95


$       0.34








Weighted average outstanding  shares - basic**

32,085


31,831


Weighted average outstanding  shares - diluted**

32,382


32,172








* A 38% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate.

** For periods with GAAP net losses and non-GAAP net income, the weighted-average outstanding shares used to calculate non-GAAP net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.







Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA











For the Three Months




Ended March 31,




2016


2015








Net income (loss)


$    16,721


$     (6,127)


Purchase amortization in cost of revenues


5,696


6,347


Purchase amortization in operating expenses

6,223


7,142


Depreciation and other amortization


5,602


4,324


Interest income


(84)


(294)


Interest expense


2,509


2,343


Income tax expense, net


11,155


571


EBITDA


$    47,822


$    14,306


Stock-based compensation expense


8,331


7,442


Acquisition and integration related costs


1,447


624


Settlements and impairments


-


1,402


Adjusted EBITDA


$    57,600


$    23,774








 

 

 

CoStar Group, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands)








March 31,


December 31,



2016


2015



(Unaudited)



ASSETS





Current assets:





  Cash and cash equivalents


$        461,720


$     421,818

  Short-term investments


1,092


0

  Accounts receivable, net


47,315


40,276

  Income tax receivable


154


430

  Prepaid expenses and other current assets


9,656


10,209

Total current assets


519,937


472,733






Long-term investments


9,944


15,507

Deferred income taxes, net


8,890


9,107

Property and equipment, net


85,962


88,311

Goodwill


1,252,484


1,252,945

Intangible assets, net


226,392


238,318

Deposits and other assets


2,404


2,650

Total assets


$     2,106,013


$   2,079,571






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





  Accounts payable and accrued expenses


$         83,460


$       76,397

  Current portion of long-term debt


16,777


16,746

  Deferred revenue


43,105


42,138

Total current liabilities


143,342


135,281






Long-term debt, less current portion


334,146


338,366

Deferred gain on sale of building


20,608


21,239

Deferred rent


29,630


29,628

Deferred income taxes, net


6,074


4,585

Income taxes payable


6,737


6,692






Stockholders' equity


1,565,476


1,543,780

Total liabilities and stockholders' equity


$     2,106,013


$   2,079,571

 

 

 

CoStar Group, Inc.

Results of Segments-Unaudited

(in thousands)











For the Three Months





Ended March 31,





2016


2015


Revenues







North America



$193,261


$153,017


International







    External customers



6,478


6,003


    Intersegment revenue *



11


8


Total International revenue



6,489


6,011


Intersegment eliminations



(11)


(8)


Total revenues



$199,739


$159,020









EBITDA







North America **



$  46,864


$  13,677


International ***



958


629


Total EBITDA



$  47,822


$  14,306









*Intersegment revenue recorded during 2015 and 2016 was attributable to services performed for the Company's wholly owned subsidiary, CoStar Portfolio Strategy by Grecam S.A.S. ("Grecam"), a wholly owned subsidiary of CoStar Limited, the Company's wholly owned U.K. holding company.








**North America EBITDA includes an allocation of approximately $167,000 and $202,000 for the three months ended March 31, 2016 and 2015, respectively. This allocation represents costs incurred for International employees involved in development activities of the Company's North America operating segment. 








***International EBITDA includes a corporate allocation of approximately $55,000 and $58,000 for the three months ended March 31, 2016 and 2015, respectively.  This corporate allocation represents costs incurred for North America employees involved in management and expansion activities of the Company's International operating segment. 

 

 

CoStar Group, Inc.

Revenues by Services-Unaudited

(in thousands)









For the Three Months




Ended March 31,




2016


2015








Information and analytics






CoStar Suite


$  97,634


$  86,810


Information services


19,425


18,537


Online marketplaces






Multifamily


52,238


26,133


Commercial property and land


30,442


27,540


Total revenues


$199,739


$159,020


 

 

CoStar Group, Inc.

Reconciliation of Non-GAAP Financial Measures with 2015-2016 Quarterly Results - Unaudited

(in millions, except per share data)









Reconciliation of Net Income (Loss) to Non-GAAP Net Income














2015


2016



Q1

Q2

Q3

Q4


Q1









Net income (loss)


$   (6.1)

$ (15.0)

$   (5.4)

$  23.0


$  16.7

Income tax expense (benefit), net 


0.6

(7.4)

2.6

10.2


11.2

Income (loss) before income taxes


(5.5)

(22.4)

(2.8)

33.2


27.9

Purchase amortization and other related costs


13.5

13.5

17.1

13.9


11.9

Stock-based compensation expense


7.4

8.4

9.3

9.4


8.3

Acquisition and integration related costs


0.6

2.9

1.8

1.0


1.5

Restructuring and related costs


-

-

2.3

(0.3)


-

Settlements and impairments


1.4

1.4

-

-


-

Non-GAAP income before income taxes


17.4

3.9

27.7

57.2


49.6

Assumed rate for income tax expense, net *


38%

38%

38%

38%


38%

Assumed provision for income tax expense, net


(6.6)

(1.5)

(10.5)

(21.7)


(18.9)

Non-GAAP net income


$  10.8

$    2.4

$  17.2

$  35.5


$  30.7









Non-GAAP net income per share - diluted


$  0.34

$  0.08

$  0.53

$  1.10


$  0.95









Weighted average outstanding  shares - basic**


31.8

32.0

32.0

32.0


32.1

Weighted average outstanding  shares - diluted**


32.2

32.3

32.2

32.3


32.4









* A 38% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate. 

** For periods with GAAP net losses and non-GAAP net income, the weighted-average outstanding shares used to calculate non-GAAP net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.

















Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA













2015


2016



Q1

Q2

Q3

Q4


Q1









Net income (loss)


$   (6.1)

$ (15.0)

$   (5.4)

$  23.0


$  16.7

Purchase amortization


13.5

13.5

17.1

13.9


11.9

Depreciation and other amortization


4.3

5.1

5.4

5.7


5.6

Interest income


(0.3)

(0.1)

(0.0)

(0.1)


(0.1)

Interest expense


2.3

2.4

2.4

2.3


2.5

Income tax expense (benefit), net 


0.6

(7.4)

2.6

10.2


11.2

EBITDA


$  14.3

$   (1.5)

$  22.1

$  55.0


$  47.8

Stock-based compensation expense


7.4

8.4

9.3

9.4


8.3

Acquisition and integration related costs


0.6

2.9

1.8

1.0


1.5

Restructuring and related costs


-

-

2.3

(0.3)


-

Settlements and impairments


1.4

1.4

-

-


-

Adjusted EBITDA


$  23.7

$  11.2

$  35.5

$  65.1


$  57.6









 

 

 

CoStar Group, Inc.

Reconciliation of Forward-Looking Guidance-Unaudited

(in thousands, except per share data)











Reconciliation of Forward-Looking Guidance, Net Income to Non-GAAP Net Income


























Guidance Range


Guidance Range




For the Three Months


For the Twelve Months




Ended June 30, 2016


Ended December 31, 2016




Low


High


Low


High












Net income


$    11,700


$    13,900


$    73,000


$         79,000


Income tax expense, net 


7,800


9,300


48,600


52,600


Income before income taxes


19,500


23,200


121,600


131,600


Purchase amortization and other related costs


11,400


11,400


45,000


45,000


Stock-based compensation expense


10,000


9,000


40,000


36,000


Acquisition and integration related costs


1,000


500


2,500


2,000


Restructuring and related costs


-


-


500


500


Non-GAAP income before income taxes


41,900


44,100


209,600


215,100


Assumed rate for income tax expense, net *


38%


38%


38%


38%


Assumed provision for income tax expense, net


(15,900)


(16,800)


(79,600)


(81,700)


Non-GAAP net income


$    26,000


$    27,300


$  130,000


$       133,400












Net income per share - diluted


$       0.36


$       0.43


$       2.25


$             2.43


Non-GAAP net income per share - diluted


$       0.80


$       0.84


$       4.00


$             4.10












Weighted average outstanding  shares - diluted


32,500


32,500


32,500


32,500












* A 38% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate.





















Reconciliation of Forward-Looking Guidance, Net Income to Adjusted EBITDA
























Guidance Range


Guidance Range




For the Three Months


For the Twelve Months




Ended June 30, 2016


Ended December 31, 2016




Low


High


Low


High


Net income


$    11,700


$    13,900


$    73,000


$         79,000


Purchase amortization and other related costs


11,400


11,400


45,000


45,000


Depreciation and other amortization


6,200


6,200


24,600


24,600


Interest and other expense (income), net


2,400


2,400


10,300


10,300


Income tax expense, net 


7,800


9,300


48,600


52,600


Stock-based compensation expense


10,000


9,000


40,000


36,000


Acquisition and integration related costs


1,000


500


2,500


2,000


Restructuring and related costs


-


-


500


500


Adjusted EBITDA


$    50,500


$    52,700


$  244,500


$       250,000












 

About CoStar Group, Inc.

CoStar Group, Inc. (Nasdaq: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 10 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move's family of websites, which include realtor.com®, doorsteps.com and move.com.  CoStar Group's websites attracted an average of approximately 24 million unique monthly visitors in aggregate in the first quarter of 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of approximately 2,600 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.



CONTACT: All Contacts, Scott Wheeler, Chief Financial Officer, (202) 336-6920, swheeler@costar.com, or Richard Simonelli, Vice President, Investor Relations, (202) 346-6394, rsimonelli@costar.com
 


 

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about CoStar Group's financial expectations, the Company's plans, objectives, expectations and intentions and other statements including words such as "hope," "anticipate," "may," "believe," "expect," "intend," "will," "should," "plan," "estimate," "predict," "continue" and "potential" or the negative of these terms or other comparable terminology. Such statements are based upon the current beliefs and expectations of management of CoStar Group and are subject to significant risks and uncertainties. Actual results may differ materially from the results anticipated in the forward-looking statements. The following factors, among others, could cause or contribute to such differences: the risk that the trends stated or implied by this release cannot or will not be sustained at the current pace, including trends related to sales, earnings, revenue, unique visitors and consumer engagement; the risk that the Company is unable to sustain current growth rates or increase them; the possibility that the Company modifies the additional Revenues by Services disclosure it expects to provide to investors or the frequency of that disclosure; the risk that the additional revenue disclosure does not provide the expected understanding of the Company's performance and drivers of growth; the risk that top line growth and/or solid margin expansion do not continue throughout 2016; the risk that revenues for the second quarter and full year 2016 will not be as stated in this press release; the risk that net income for the second quarter and full year 2016 will not be as stated in this press release; the risk that non-GAAP net income and non-GAAP net income per diluted share for the second quarter and full year 2016 will not be as stated in this press release; the risk that adjusted EBITDA for the second quarter and full year 2016 will not be as stated in this press release; the risk that actual marketing costs for the second quarter, second half and full year 2016 differ from current expectations stated in this release; the risk that the Company is unable to achieve additional margin expansion in the second half of 2016; and the risk that the Company is unable to achieve the revenue and margin goals stated in this press release.  Additional factors that could cause results to differ materially from those anticipated in the forward-looking statements can be found in CoStar's Annual Report on Form 10-K for the year ended December 31, 2015, which is filed with the SEC, including in the "Risk Factors" section of that filing, and the Company's other filings with the SEC available at the SEC's website (www.sec.gov). CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  

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