BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP) revenues increased 18.5% and pro forma earnings increased 131% in the second quarter of 2004 over the second quarter of 2003, the Company announced today. (Pro forma earnings is net income before purchase amortization included in cost of revenues and in operating expenses and the related income tax benefit.) The Company also reported GAAP-basis net income of $0.09 per share in the second quarter of 2004 compared to a GAAP-basis net loss of $(0.02) per share in the second quarter of 2003.
Revenues for the second quarter of 2004 were $27.5 million, increasing sequentially by 4.5% for the second quarter of 2004 over the first quarter of 2004. CoStar has reported revenue increases in 24 consecutive quarters since its IPO.
"We have continued to produce strong revenue and earnings growth on the strength of our core product offerings while investing in and meeting the operational challenges of our 21-market expansion," stated CoStar President & CEO Andrew C. Florance. "Our new technology has been in place for 18 months and is clearly becoming an industry utility. We have continued to reach new customers, and our renewal rates have continued to increase."
The renewal rate for CoStar's subscription services increased approximately seven percentage points to approximately 92% in the second quarter of 2004 compared to approximately 85% in the second quarter of 2003.
"We are making solid progress on our planned expansion into 21 new U.S. markets in 2004 and 2005," Florance added. "We have collected information on and photographed over 27,000 properties since deploying our field research teams into these markets in May, and we added over 8,500 high-resolution images to our U.K. database in the second quarter of 2004."
"In addition, we are beginning advance sales activity in a handful of U.S. markets that could open by the end of 2004," Florance continued. "While we will not realize revenue from these customers until we deliver our service in these markets, we believe we can open some of these markets with enough monthly revenue from pre-sales to cover the monthly baseline operating costs of those markets."
PeerMark and Scottish Property Network were acquired during the second quarter of 2004, but did not materially impact revenues or earnings in the quarter. "These strategic acquisitions are an integral part of CoStar's expansion plans in the U.S. and U.K.," Florance commented. "The acquisition of these strong, local information providers gives additional momentum to the aggressive organic expansion efforts under way, and could help us reach revenue and earnings goals on a faster timetable."
For the quarter ended June 30, 2004, GAAP-basis net income increased to $1.7 million or $0.09 per share, compared to a net loss of $(367,000) or ($0.02) per share for the second quarter of 2003. Pro forma earnings improved to $3.4 million or $0.18 per share for the second quarter of 2004 compared to pro forma earnings of $1.5 million or $0.09 per share for the same quarter in 2003. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 60.9% to $4.6 million for the second quarter of 2004 compared to EBITDA of $2.9 million for the second quarter of 2003.
As of June 30, 2004, the Company had $107.3 million in cash, cash equivalents, and short-term investments, a net increase of $2.7 million compared to March 31, 2004 after the acquisition of PeerMark and Scottish Property Network and capital investments in equipment and photography to support the Company's 21-market expansion. This increase resulted from growing EBITDA, improved cash collections and $2.4 million of cash proceeds from stock option exercises of approximately 107,000 shares of common stock during the second quarter. The Company has no long-term debt.
"For the third quarter of 2004, we expect overall sequential quarterly revenue growth of approximately 4%, and pro forma earnings of approximately $0.20 per share," stated Frank A. Carchedi, CoStar's Chief Financial Officer. "Adjusting these pro forma amounts for purchase amortization and the related income tax benefit, which we expect to be consistent with the amounts for the second quarter of 2004, we expect diluted GAAP- basis net income of approximately $0.11 per share in the third quarter of 2004. In the third quarter, we expect continued investment in our expansion into 21 new U.S. markets and we plan to continue to focus on balancing that investment in long-term growth with expected earnings growth from existing operations," Carchedi stated.
"We now expect pro forma earnings for 2004 to grow by approximately 90% compared to 2003 and expect pro forma earnings of approximately $0.75 to $0.77 per share for 2004," Carchedi continued. "Adjusting these pro forma amounts for purchase amortization and the related income tax benefit which we expect to total approximately $6.5 million in 2004, the Company now expects diluted GAAP-basis net income of approximately $0.39 to $0.41 per share in 2004.
Management will conduct a conference call to discuss earnings results for the quarter ended June 30, 2004, and the financial outlook for 2004 at 11:00 am ET, Wednesday, July 21, 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 July 30, 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 8570092. 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 over 55 markets in the United States and the United Kingdom. Based in Bethesda, MD, the company has approximately 900 employees in 38 offices throughout the United States and the United Kingdom, including the largest professional research organization in the industry.