BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP) revenues increased 22.1% and pro forma earnings more than tripled in the fourth quarter of 2003 over the fourth quarter of 2002, the Company announced today. (Pro forma earnings is net income before purchase amortization in cost of revenues and operating expenses.) The Company also reported GAAP-basis net income of $0.06 per share in the fourth quarter of 2003 compared to a GAAP-basis net loss of $(0.05) per share in the fourth quarter of 2002.
Revenues for the fourth quarter of 2003 were $25.3 million, increasing sequentially by 4.8% for the fourth quarter of 2003 over the third quarter of 2003. CoStar has reported revenue increases in 22 consecutive quarters since its IPO.
The Company ended 2003 with $97.4 million in cash, cash equivalents and short-term investments.
"Three primary factors are contributing to our strong performance," stated CoStar President & CEO Andrew C. Florance. "Improving market conditions have created a more favorable selling environment, and the new CoStar Property Professional™ system has given us a major technology win. In addition, our exhaustive effort in customer service has paid off with the highest customer satisfaction level in years. Together, these factors combined to produce our highest quarterly organic sequential revenue growth in more than three years."
The renewal rate for CoStar's subscription products increased 2 percentage points to 91% in the fourth quarter of 2003 compared to the fourth quarter of 2002. In addition, the Professional versions of CoStar Property® and CoStar COMPS® experienced their highest usage levels of the year in the fourth quarter of 2003, Florance noted.
For the quarter ended December 31, 2003, GAAP-basis net income increased to $1.0 million or $0.06 per share, compared to a net loss of $(770,000) or $(0.05) per share for the fourth quarter of 2002. Pro forma earnings improved to $2.8 million or $0.16 per share for the fourth quarter of 2003 compared to pro forma earnings of $783,000 or $0.05 per share for the same quarter in 2002. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 117% to $4.2 million for the fourth quarter of 2003 compared to EBITDA of $2.0 million for the fourth quarter of 2002.
For the year ended December 31, 2003, the Company had GAAP-basis net income of $100,000 or $0.01 per share compared to a GAAP-basis net loss of $(4.8) million or $(0.30) per share in 2002. Pro forma earnings increased to $7.4 million or $0.44 per share for 2003 compared to pro forma earnings of $1.7 million or $0.11 per share in 2002. EBITDA increased 112% to $13.2 million for 2003 compared to EBITDA of $6.2 million for 2002. The Company had revenues of $95.1 million in 2003, an increase of 19.8% compared to 2002 revenues of $79.4 million.
As of December 31, 2003, the Company had $97.4 million in cash, cash equivalents, and short-term investments, an increase of $61.5 million compared to September 30, 2003. This substantial increase resulted from $53.5 million of net proceeds raised in the Company's follow-on public offering, which closed in November 2003, in addition to growing EBITDA, improved cash collections and $4.6 million of proceeds from stock option exercises of approximately 200,000 shares of common stock during the fourth quarter. The Company has no long-term debt.
"Demand for our products is very strong, and technology has made the cost of entering new markets much lower than in the past," Florance continued. "Considering these factors, we expect to increase pro forma earnings by over 80% in 2004 while positioning the Company for accelerating revenue growth during 2005. Today, I am pleased to announce that CoStar plans to expand into 21 new markets, consisting of approximately 80 new U.S. counties, in 2004. With contribution from these new markets, we believe we may be able to increase our quarterly sequential revenue growth rates by 50% on top of our current platform during 2005."
"Strategically, this broader market coverage will enhance our offering to national consumers of data, which currently represent our fastest-growing customer segment," Florance added.
"CoStar expects 2004 revenues to grow to over $110 million, resulting from an expected organic growth rate of approximately 16% over 2003 revenues," stated Frank A. Carchedi, CoStar's Chief Financial Officer. "The Company expects pro forma earnings for 2004 to grow by over 80% compared to 2003 and expects pro forma earnings per share of approximately $0.71 to $0.73 per share, based on expected diluted weighted average outstanding shares of 18.8 million in 2004. These outstanding shares take into effect the shares issued in our recent follow-on public offering and the estimated dilutive effect of outstanding stock options. Adjusting these pro forma amounts for purchase amortization, which we expect to be approximately $6.6 million in 2004, the Company expects GAAP-basis net income of approximately $0.35 to $0.37 per share in 2004."
"For the first quarter of 2004, we expect sequential quarterly revenue growth of approximately 4%," Carchedi continued. "In addition, for the first quarter of 2004, we expect pro forma earnings to continue to grow, resulting in approximately $0.16 of diluted pro forma earnings per share based on expected diluted weighted average outstanding shares of 18.6 million. Adjusting this pro forma amount for expected purchase amortization of approximately $1.8 million, we expect to have GAAP-basis net income of approximately $0.06 per share for the first quarter of 2004."
"Capital expenditures for 2004 are expected to include investments in assets required to support our planned market expansion, including additional field research vehicles, building photography, initial databases, and communications, measuring, photographic and computer equipment, totaling approximately $5.5 million," Carchedi stated. "Additionally, approximately $3.5 million to $4 million is budgeted to support existing operations, consistent with expenditures for the past several years."
Management will conduct a conference call to discuss earnings results for the quarter and year ended December 31, 2003, and the financial outlook for 2004 at 11:00 am ET, Wednesday, February 18, 2004. 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 telephonic replay of the conference call will be available two hours after the live call concludes through midnight on February 25, 2004. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to Conference ID 4810542. The replay will also be available over the Internet at http://www.costar.com/corporate/investor for a period of time following the call.
About CoStar Group, Inc.
CoStar Group, Inc., (NASDAQ: CSGP) is the leading provider of information services to commercial real estate professionals in the United States and the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information on 50 U.S. markets, London and the United Kingdom. Based in Bethesda, MD, the company has approximately 850 employees in 35 offices throughout the United States and the United Kingdom, including the largest professional research organization in the industry.