Print Release (PDF)
BETHESDA, MD – April 21, 2010 – CoStar Group, Inc. (NASDAQ: CSGP), the number one provider of information, marketing and analytic services to the commercial real estate industry, today announced that revenues for the first quarter of 2010 were $55.1 million, an increase of $0.5 million compared to revenues of $54.6 million for the fourth quarter of 2009, with organic revenue growth driving the quarterly revenue increase.
Net income for the quarter ended March 31, 2010 was $2.9 million, or $0.14 per diluted share, compared to $3.6 million, or $0.18 per diluted share for the quarter ended December 31, 2009. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter ended March 31, 2010 was $8.8 million, compared to EBITDA of $9.9 million for the quarter ended December 31, 2009.
As of March 31, 2010, the Company had $218.5 million in cash, cash equivalents, and short-term and long-term investments, compared to $255.7 million on December 31, 2009. On February 5, 2010, the Company purchased an office building at 1331 L Street, N.W. in Washington, D.C., where it plans to relocate its headquarters, for $41.25 million in cash. The Company has no long-term debt.
“I am very encouraged by the continued improvement in leasing activity throughout the commercial real estate market and the corresponding strong demand for CoStar's commercial real estate information, marketing and analytic services,” said CoStar Group CEO Andrew C. Florance. “During the first quarter, office-based employment continued to grow and office leasing activity throughout the U.S. increased for the fourth consecutive quarter, two very positive indicators that I believe point to an economy that is beginning to grow again. I am also pleased to report that CoStar’s overall business continued to strengthen in this improving environment, demonstrating strong organic quarterly sales and a new record in quarterly revenue.”
“Over the past 12 months, CoStar took advantage of our strong financial position to invest in our business ahead of the economic recovery,” said Florance. “These investments included growing our sales force by approximately 25% and our research organization by approximately 10% to capture the revenue opportunities expected to accompany increased leasing and sales activity. We also added personnel to our expanded Analytics service and made two key acquisitions – acquiring Property and Portfolio Research in the third quarter of 2009 and Resolve Technology in the fourth quarter of 2009. Finally, we took steps to reduce our facilities costs by restructuring lease agreements for several offices and acquiring a new building to serve as our corporate headquarters, which together we expect will save us millions of dollars in long-term occupancy costs. While these investments are affecting earnings in the near term, we believe they position the Company for accelerated high-margin revenue growth as the commercial real estate market recovers.”
Also during the first quarter, CoStar continued to capture market share in the Internet lead-generation market. The number of brokers who are marketing listings on SHOWCASE.com® (http://www.showcase.com) is now approximately 9,750. In February, CoStar successfully launched the SHOWCASE.com service in the U.K.
CoStar’s 12-month trailing renewal rate for subscription-based services improved to approximately 86% in the first quarter of 2010 from approximately 85% in the fourth quarter of 2009. Subscription-based revenue accounted for approximately 95% of the Company’s total revenue in the first quarter of 2010. In addition, the number of net new paying subscribers increased by 1,265 during the first quarter of 2010 to 86,590.
“For the second quarter of 2010, we expect approximately $54.5 million to $55.5 million in revenues, and for the full year of 2010, we continue to expect approximately $218.0 million to $222.0 million in revenues,” stated CoStar Group Chief Financial Officer Brian J. Radecki. “We continue to expect organic revenue growth in 2010, with our renewal rates moving back toward our 90% historical average. After a strong first quarter, we are confident that we are tracking towards the middle to upper end of our annual revenue guidance range and we expect we will continue to do so,” said Radecki.
For the second quarter of 2010, the Company expects GAAP net income per diluted share of approximately $0.13 to $0.15 and non-GAAP net income per diluted share (defined below) of approximately $0.22 to $0.24. The second quarter outlook includes increased costs related to the transition of the Company’s new corporate headquarters in Washington, D.C. and higher selling and marketing expenses associated with the annual International Council of Shopping Centers trade show in May.
“For the full year of 2010, we continue to expect GAAP net income per diluted share of approximately $0.60 to $0.65 and non-GAAP net income per diluted share of approximately $1.06 to $1.22,” said Radecki. “Given our improving sales performance, we expect to grow revenues organically for the full year of 2010 and grow earnings in the second half of 2010. We expect to achieve our earnings outlook even with the short term dilution to net income resulting from our investments in a larger sales force, an expanded research organization, and the recent acquisitions of PPR and Resolve, as well as ongoing efforts to reduce long-term facilities costs.”
The preceding forward-looking statements, including forward-looking non-GAAP financial measures, reflect CoStar’s expectations as of April 21, 2010. We are not able to forecast with certainty whether or when certain events, such as acquisition-related costs, restructuring, settlements or impairments will occur in any given period. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. The Company does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.
Non-GAAP Financial Measures
In this press release, we disclose certain non-GAAP financial measures to supplement our consolidated financial statements presented in accordance with GAAP, including EBITDA, adjusted-EBITDA, non-GAAP net income, and non-GAAP net income per diluted share. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Management believes that these non-GAAP financial measures, when viewed with our GAAP financial measures, are useful to investors because they permit investors to assess the Company's operating performance, or to gain an understanding of factors and trends affecting our business, using the same tools that management uses to internally measure the Company’s operating performance and to understand factors and trends affecting our business. We believe these non-GAAP financial measures are useful to investors because they isolate non-cash charges and non-operating items, thereby providing additional information about our cost structure and allow for meaningful evaluation and comparison of our performance from quarter to quarter and from year to year. These non-GAAP financial measures are also useful as they are sometimes used by securities analysts, investors and other interested parties to facilitate the evaluation of our business performance on a comparable basis to other companies.
EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group, Inc. 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-related costs, (iii) restructuring charges and related costs, (iv) costs related to the acquisition and transition of the Company’s corporate headquarters, and (v) 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, Inc. before (i) purchase amortization and other related costs, (ii) stock-based compensation expense, (iii) acquisition-related costs, (iv) restructuring charges and related costs, (v) costs related to the acquisition and transition of the Company’s corporate headquarters, and (vi) settlements and impairments. From this figure, we then subtract an assumed provision for income taxes to arrive at Non-GAAP net income. We assume a 40% tax rate in order to approximate our long-term effective corporate tax rate.
Non-GAAP net income per diluted share is a non-GAAP financial measure that represents Non-GAAP net income divided by the number of diluted shares outstanding for the period used in the calculation of GAAP net income per diluted share.
Earnings Conference Call
Management will conduct a conference call to discuss earnings results for the first quarter ended March 31, 2010, and the Company’s outlook for 2010 at 11:00 a.m. ET on Thursday, April 22, 2010. The audio portion of the conference call will be broadcast live over the Internet at http://www.costar.com/investors.aspx . To join the conference call by telephone, please call (800) 398-9379 from within the United States and Canada, or (612) 332-0345 from outside the United States and Canada. Refer to conference reservation number 152943. A replay of the conference call will be available approximately one hour after the live call concludes and remain available for a period of time following the call. The replay telephone number is (800) 475-6701 within the United States and Canada, or (320) 365-3844 outside the United States and Canada. Refer to Conference reservation number 152943. The replay will also be available over the Internet at http://www.costar.com/investors.aspx for a period of time following the call.
About CoStar Group, Inc.
CoStar Group, Inc. (Nasdaq:CSGP) is the number one provider of information, marketing and analytic 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, CoStar has approximately 1,400 people working for the Company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com.