BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP), http://www.costargroup.com, the leading provider of information services to the U.S. commercial real estate industry, today reported total revenues for the second quarter of $18.1 million, a 24 percent increase when compared with revenues of $14.6 million in the second quarter of 2000. The pro forma net loss for the second quarter of 2001, which excludes purchase amortization and the related income tax benefit, was $2.7 million or $0.17 per share, an improvement of $7.3 million or $0.48 per share over the second quarter of 2000. As losses narrow for the fourth consecutive quarter, revenue growth continues to be driven by strong demand for CoStar products.
"We have achieved a dramatic 74 percent reduction in pro forma per share losses from the second quarter of 2000 to the second quarter of 2001. One year ago, we were aggressively building a national platform to distribute our products, investing in new markets and focusing on moving each market toward profitability. Today, 46 of CoStar's 50 markets are cash flow positive," said Andrew C. Florance, CEO and president of CoStar Group. "The Company continues to make progress toward profitability. This quarter, solid revenue growth, reduced operating costs and increased efficiency resulted in a 41 percent reduction in pro forma per share loss from the first quarter of 2001. We have successfully executed our business plan and our performance is proof of our business model."
(in millions except per share data)
Revenue growth combined with operating expense reductions caused CoStar's cash burn rate to slow dramatically. During the second quarter, CoStar only used $1.7 million of cash, a 50 percent reduction in the burn rate from the first quarter of 2001 when the Company used $3.4 million of cash, and a $10.9 million reduction from second quarter of 2000 when the Company used $12.6 million of cash. As of June 30, 2001, CoStar had $42.0 million in cash and cash equivalents.
"We expect to further narrow our pro forma net losses by $0.06 to $0.08 per share in the third quarter. Despite a slower economy, we believe our sequential quarterly revenue growth for the third quarter of 2001 will most likely be in the range of two to three percent. Based on recent results and current economic conditions, we believe that sequential quarterly revenue growth rates for 2001 after the third quarter will trend toward a range of five to seven percent," stated Florance. "However, we continue to believe that seven to 10 percent sequential growth is achievable in the long-term based on recent results in our most established markets. We believe that achieving our objectives for the third quarter would keep the Company positioned to reach our stated goal of achieving pro forma earnings before year end."
In the second quarter, CoStar continued to develop its national sales force. Twenty-four professionals joined CoStar's sales force and completed a new and intensive training program, bringing the total for the year to 37 newly trained account executives. CoStar expects that these account executives will become quota carrying sales professionals during the third quarter of 2001. As a result of sales management's increased focused on sales force productivity and continued demand for CoStar products and services, product demonstrations during the second quarter increased in frequency by 45 percent from the first quarter.
This month, CoStar released its newest version of CoStar Tenant™, an Internet based application. The new Web based version of CoStar Tenant™ is strategically significant for CoStar since it moves CoStar even closer to a single interface and uniform platform for all its products. CoStar COMPS®, CoStar Exchange™ and now, CoStar Tenant™, provide customers with convenient Internet access at www.costargroup.com and a similar design and layout with consistent menus and commands. Using the new online access and standardized interface will reduce the time it takes for customers to learn CoStar's products, allowing users to become proficient quickly and realize improved productivity. With lower training costs, CoStar believes that this will allow CoStar sales professionals to more cost effectively cross sell products throughout CoStar's customer base. A new Web version of CoStar Property™ is expected to be released by year end 2001.
CoStar Connect™, launched in March 2001, combines CoStar's comprehensive data, imagery and Web hosting technology with a powerful software interface to market commercial real estate owners' and brokers' property listings on their corporate Web sites. CoStar has incorporated intuitive layouts and tools which are easy for tenants or non-real estate Web site visitors to understand. Customers have been subscribing to CoStar Connect™ at a rate of approximately one per day, with almost half of those customers switching to CoStar from LoopNet's service, LoopLink.
CoStar Connect™ is resonating with commercial real estate professionals for many reasons. Most importantly, this product provides brokers and owners with a streamlined solution for marketing listings. Commercial real estate professionals are inundated with places to market their listings and overwhelmed by the time required to reach both the professional community and tenants. With CoStar Connect™, in one easy step listing brokers can keep listing content up-to-date on their corporate Web sites and post the information in CoStar Property™.
(a) Includes purchase amortization of $1,329 and $1,277 for the three month periods and $2,663 and $2,121 for the six month periods ended June 30, 2001 and 2000, respectively
(b) 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 ended June 30, 2001 and outlook for 2001, at 11:00 am EDT, Wednesday, July 25, 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 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 August 1, 2001. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to conference ID number 1261369. The replay will also be available over the Internet through midnight on August 1, 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 900 employees and contractors nationally, including approximately 650 highly trained commercial real estate research professionals in 27 offices.