BETHESDA, MD -- CoStar Group, Inc. (Nasdaq: CSGP), the Internet based, leading provider of information services to the U.S. commercial real estate industry, today reported financial results for the fourth quarter and year ended 2000.
Revenues for the fourth quarter were $16.8 million, an increase of 89 percent over fourth quarter 1999 revenues of $8.9 million. The pro forma net loss for the fourth quarter of 2000, excluding purchase price amortization and the related income tax benefit, was $6.5 million, or $0.42 per share, a $0.13 per share improvement over the pro forma net loss for the third quarter of 2000 of $0.55 per share.
Revenues for the year ended December 31, 2000 were $58.5 million compared to $30.2 million for 1999, an increase of $28.3 million, or 93 percent.
Year 2000 Quarterly Results ($'s in millions except per share data):
"We are pleased with our performance for 2000, particularly the improvement in pro forma net loss in the fourth quarter. The $0.13 reduction represents the second consecutive quarter of narrowing losses and exceeds management's goal of a $0.10 per share reduction in pro forma net loss from the third quarter. It also demonstrates the strength of our business model, which provides revenue growth over a fixed cost structure," said Andrew C. Florance, CEO and President of CoStar Group, Inc. "The revenue growth for the fourth quarter was principally a result of strong demand for our quality information products in our existing markets. In addition, the successful integration of the Comps acquisition and other operating efficiencies allowed us to reduce costs beyond internal expectations. In fact, our operating costs have declined over the last two quarters. Overall, 2000 was a very successful year for CoStar Group and we believe that we are on track to achieve pro forma earnings before the end of 2001."
Key Achievements in 2000 include:
Continued successful integration of Comps: During the fourth quarter of 2000, Comps, Inc. reached cash flow break even and contributed $4.7 million to CoStar's revenues. CoStar expects the Comps, Inc. division to be cash flow positive in the first quarter of 2001, a significant achievement after eliminating the $2.0 million monthly burn rate Comps carried at the time of the February 2000 acquisition.
Added experience and depth to management team: During the last 12 months, CoStar made significant additions to its senior management team through recruitment, acquisitions, and internal promotions, providing CoStar with one of the strongest and most seasoned teams in the industry. New managers include Larry Dressel, Chief Operating Officer; John Place, Executive Vice President; Mark Klionsky, Senior Vice President Electronic Media and Marketing; Craig Farrington, COO-Comps Division; Michael Arabe, Vice President of Customer Service; Mark Policinski, Vice President of Tenant Research; Laurie Corn, Vice President of Electronic Media; Pamela Silberman, Vice President of Investor Relations; and Steven Coutts, Vice President of Sales.
Increased penetration of CoStar Exchange™: Officially launched in June 2000, CoStar Exchange™ now has 146 subscribing firms, an increase from 93 firms at the end of the third quarter. CoStar Exchange™ now has an annual revenue run rate in excess of $900,000. The number of properties listed increased to a total of 59,000 with a value of $70.6 billion as of December 31, 2000, an increase from 52,300 listings, or $59.0 billion, as of September 30, 2000. A comparison by CoStar in mid-November showed that CoStar Exchange™ had an overwhelming advantage in content when compared to other sites. For example, based on such comparison, CoStar Exchange™ had approximately 34,000 properties listed for sale in the top U.S. 15 metropolitan statistical areas, while LoopNet had approximately 9,000, RealtyIQ had approximately 6,100 and PropertyFirst had approximately 3,300.
Introduction of CoStar Connect™: In January 2001, CoStar Connect™, a service that licenses CoStar's technology and content to commercial real estate firms to market their property listings on their corporate web sites, had several customers in Beta. CoStar Connect™, which is expected to be released broadly during the first quarter of 2001, is a cost-effective outsourcing solution for brokers and property owners that will allow them to significantly reduce the time and expense of building the property listing functionality into their corporate web sites. Based on its national research coverage, CoStar believes it is the only the provider that can offer a commercial real estate product that integrates both Internet based software and comprehensive data content.
Acquisition of significant new technology: In November 2000, CoStar joined with First Image Technologies, maker of Metropolis software system, a single interface that combines commercial real estate data from multiple information providers into a comprehensive resource. With the highest customer satisfaction CoStar has found of any technology currently used by commercial real estate professionals, Metropolis was a customer oriented acquisition and strategic addition to CoStar's product suite.
Further development of database assets: In 2000, CoStar's databases were enhanced by the integration of data from acquired companies and organic growth from expanded market coverage. As of December 31, 2000, CoStar's databases included over 20 billion square feet of properties, 800,000 properties, 583,000 sale comps, 59,000 for sale properties, 968,000 digital images, and over 1 million tenants. In comparison, as of December 31, 1999, CoStar's databases included 14 billion square feet of properties, 314,000 properties, 39,000 sale comps, 31,000 for sale properties, 328,000 digital images, and 380,000 tenants. CoStar's editorial team is one of the most prolific in the industry. In 2000, CoStar published over 9,600 news stories, a significant increase over 1999 when CoStar published approximately 5,500 articles.
Outlook for 2001:
"We are focused on achieving earnings over our existing platform and expect to grow revenues by approximately 30 percent year over year in 2001 as we continue to penetrate our markets with a broad product suite," added Florance. "Two short term factors that prevented us from achieving even higher growth rates in the fourth quarter and may affect revenue growth in the first quarter of 2001 are the difficulties experienced by some of our telecom customers and the impact of substantial marketing activity by commercial real estate Internet startups."
In the fourth quarter, a downturn in telecom related businesses forced many telecom companies to discontinue or curtail their operations. At their peak, telecom customers represented less than 6 percent of CoStar's revenue base, but have recently accounted for over 50 percent of all cancellations. These companies now account for approximately 3 percent of CoStar's revenues. While telecom cancellations may affect first quarter 2001 revenue growth, CoStar believes that the future impact by telecom customers beyond the first quarter is limited. CoStar has realigned its sales force to focus efforts on traditional commercial real estate firms, where there is very strong potential for revenue growth.
During 2000, many well-funded competitors entered the commercial real estate information technology sector. These startups had considerable access to capital in the first six months of 2000, and spent a significant portion of it on marketing activities. In the last half of the year, many of these competitors suspended operations or laid off a significant portion of their staff. RealtyIQ, one of the largest of those firms, laid off the majority of its workforce and experienced prolonged service interruptions on their web site. As a result, in January 2001, CoStar executed license agreements with a substantial number of RealtyIQ clients, setting record sales levels in its Northeast markets.
"After the first quarter, we expect that the short-term factors impacting our revenue growth will subside and that sequential quarterly revenue growth will trend toward our targeted range of 7 to 10 percent," stated Florance. "With an energized sales force, increased expectations for sales productivity, and a full product suite that meets our customers' information needs, we believe we can achieve our stated goals and objectives. We believe that our competitive position today is stronger than ever. We continue to believe we are in position to move the Company to pro forma earnings before the end of 2001, and expect consistent progress toward that goal throughout the year."
Includes purchase amortization of $1,363 and $212 for the three month periods, and $4,761 and $777 for the years ended December 31, 2000 and 1999, respectively
Pro forma net loss excludes purchase amortization, the related income tax benefit, and acquired in-process development
Management will conduct a conference call to discuss earnings results for the quarter and fiscal year ended December 31, 2000 and the Company's outlook for 2001 at 11:00 a.m. EDT on Wednesday, February 14, 2001. This conference call will be broadcast live over the Internet at http://www.costargroup.com/corporate/investor/. If you would like to join by telephone, please dial (800) 659-1081 within the United States and (904) 779-4708 outside the United States. A replay of the conference call will be available approximately two hours after the call concludes on Wednesday, February 14, 2001 through midnight on February 21, 2001. The replay telephone number is (800) 252-6030 within the United States and (402) 220-2491 outside the United States. Refer to conference ID number 7920906. The replay will also be available over the Internet through February 21, 2001.
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 over 50 U.S. markets. The company has approximately 1,000 employees and contractors nationally, including approximately 700 highly trained commercial real estate research professionals in 27 offices.