BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of information services to the U.S. commercial real estate industry, achieved pro forma profitability for the fourth quarter of 2001, the company announced today.
The pro forma net income for the fourth quarter of 2001, which excludes purchase amortization and the related income tax benefit, was $222,000, or $0.01 per share, an improvement over pro forma losses of $(6.5) million or $(0.42) per share in the fourth quarter of 2000. Revenues for the fourth quarter were $18.6 million, a $1.8 million increase when compared to the same period a year ago. As of December 31, 2001, the Company's had $42.0 million in cash and short-term investments, an increase of $534,000 over the previous quarter end.
Revenues for the year ended December 31, 2001 were $72.5 million, an increase of 24% over 2000 revenues.
Year 2000-2001 Quarterly Results:
(in millions except per share data)
"We were committed to achieving pro forma profitability by the end of 2001 and we delivered," stated CoStar Group president & CEO Andrew C. Florance. "During 2001, the Company showed strong top line and earnings growth despite a severe downturn in commercial real estate, proving the viability of our business model."
"We have substantially completed our investment in building out our national platform," Florance continued. "Since 1993, we have grown from a single market, Washington, D.C., with a few hundred customers to approximately 50 markets and thousands of customers. Our product mix has expanded from one -- CoStar Property --to seven major revenue producers. Today, CoStar is an integral part of the commercial real estate business, providing essential information to our customers' leasing and sales process."
The Company is equally well positioned from a cash standpoint. "Given the effort to complete our expansion program this past year, we had expected our cash balance to be as low as $25 million," Florance stated. "Instead, we conserved cash, achieved operational efficiencies from our acquisitions, and ended 2001 with more than $40 million in cash and no long-term debt. We're better positioned than ever before to take advantage of new opportunities."
Key Achievements in 2001 include:
Achieved pro forma profitability: The Company reached pro forma profitability in the fourth quarter of 2001, reporting pro forma net income of $0.01 per share compared to a pro forma loss per share of $(0.42) in the fourth quarter of 2000. In the fourth quarter of 2001, CoStar achieved EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.3 million compared to an EBITDA loss of $(5.7) million in the same period last year.
Introduction of CoStar Connect™: In March 2001, the Company officially launched CoStar Connect™, a service that licenses CoStar's technology and content to commercial real estate firms to market their exclusive for-lease and for-sale listings on their company Web site. CoStar Connect™ is a cost-effective solution for brokers and property owners because it allows them to reduce the time and expense of building such functionality into their company web site, and relieves them of the burden of inputting and maintaining their listings. Over 150 clients are now using CoStar Connect™ on their web sites, with many switching from a competitive service offered by LoopNet.
Expanded CoStar Advisory Products: Introduction of the CoStar Office Report in October 2001 marked the first time ever that CoStar has published its comprehensive building-specific data in aggregated form. The CoStar Office Report 2001 Mid-Year edition contained 800 pages of statistics and analysis on 35 major U.S. markets, and was offered for sale via the Company web site as a complete national edition and as individual market reports. An extension of the popular CoStar Advisory™ reports that are sold on a subscription basis in Atlanta and Dallas, quarterly subscriptions are now being offered for CoStar Office Reports in 35 markets, beginning with the 2001 Year-End Edition.
Successful migration of CoStar Tenant® to the Internet: In June 2001, CoStar introduced CoStar Tenant 4.0, its first web-enabled version of CoStar Tenant®. CoStar Tenant® is a versatile prospecting tool for commercial real estate brokers, owners and vendors, providing access to the Company's data on approximately 750,000 tenants. The web-enabled version of CoStar Tenant® eliminates the need for CoStar customer support professionals to physically install software on the customer's desktop or network, and eliminates the need for customers to update their data set. As desktop customers are migrated from the desktop platform to the web platform over the next 12 to 18 months, the Company believes it can improve its overall customer service while reducing support costs.
Signed multi-year contracts with major clients: CoStar completed multi-year, multi-market renewal agreements in 2001 with Grubb & Ellis Co., one of the largest national commercial real estate brokerage firms, and Julien J. Studley Inc., a leading national tenant representation brokerage. In addition, the Company signed national multi-year contracts with Equity Office, the largest owner of office buildings in the U.S., and ProLogis, the largest publicly held global owner of distribution facilities, reflecting broad support among industry leaders for CoStar's business model.
Further development of database assets: In 2001, CoStar's databases were enhanced by the integration of data through organic growth, market expansion and the increasing penetration of CoStar Exchange™ and CoStar Connect™. As of December 31, 2001, CoStar's databases included over 23 billion square feet of properties, 950,000 buildings, 65,000 for-sale properties, 643,000 sale comps, 1.3 million digital images and approximately 750,000 tenants. In addition, CoStar's editorial team published over 7,700 news stories, which were viewed more than a million times on the web alone.
Outlook for 2002:
"Naturally, many of our customers have been affected by reduced transaction volume resulting from adverse market conditions over the past 12 to 18 months," Florance stated. "Net absorption of office space -- a major indicator of our clients' health -- declined by (137%) from 170 million square feet in 2000 to (63.1) million square feet in 2001. As economic conditions improve, we believe we will see a return to higher sequential quarterly growth."
"Leasing activity has begun to increase measurably in this current quarter," Florance added. "Reflecting that upswing, we expect our revenues to grow approximately 10% to 12% in 2002. For the first quarter of 2002, we expect sequential revenue growth of 1% to 2%, and continued pro forma earnings of approximately $0.01. Pro forma results for the year are expected to improve from a loss of $(0.51) per share in 2001 to income of $0.10 a share in 2002."
"Equally important, given the steps we took during the downturn, the infrastructure we now have in place is highly leverageable," Florance stated. "We believe we can more than double our revenue within the next four years solely by reaching new customers with our three core products, CoStar Property, Tenant and Comps, in existing markets. Additional markets, either domestically or overseas, and new products are expected to provide us with additional upside."
"We are proud of our ability to continue to grow through the low point of the commercial real estate market," Florance stated. "While economic conditions remain difficult, we are confident of our ability to accelerate sequential quarterly growth in revenue and earnings. Therefore, we intend to invest in the expansion of our sales force in 2002, and expect to increase quota-carrying account executives by 30%. This will position the Company to exploit improvement in economic conditions."
CoStar Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(a) Includes purchase amortization of $1,411 and $1,363 for the three month periods and $5,398 and $4,761 for the years ended December 31, 2001 and 2000, respectively
(b) Pro forma net income (loss) excludes purchase amortization, the related income tax benefit, and acquired in-process development
CoStar Group, Inc.
Condensed Consolidated Balance Sheet
Management will conduct a conference call to discuss earnings results for the quarter ended December 31, 2001, and outlook for 2002, at 11:00 am EST, Wednesday, February 13, 2002. This 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 (800) 329-4405 within the United States or (706) 634-0964 outside the United States. A replay of the conference call will be available two hours after the call concludes through midnight on February 20, 2002. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to conference ID 3065695. The replay will also be available over the Internet through midnight on February 20, 2002.
About CoStar Group, Inc.
Headquartered in Bethesda, MD, CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of information services to the U.S. commercial real estate industry. CoStar's suite of products offers customers access via the Internet to the most comprehensive, verified database of commercial real estate information in approximately 50 U.S. markets. The company has approximately 850 employees and contractors nationally, including approximately 650 highly trained commercial real estate research professionals in 27 offices.