BETHESDA, MD-- CoStar Group, Inc. (NASDAQ: CSGP) revenues increased 19.7% in the second quarter of 2005 over the second quarter of 2004, the Company announced today.
"The second quarter earnings results reflect the significant investment we are making in 2005 to position the Company for future revenue growth," stated CoStar Group President & CEO Andrew C. Florance. "We are making solid progress on our expansion initiatives, and believe the investments we are making in 2005 will begin to contribute to revenue in the second half of 2005, and create significant earnings leverage for the Company in 2006."
Revenues for the second quarter of 2005 were $32.9 million, increasing sequentially by 4.9% over the first quarter of 2005. This is the highest organic sequential quarterly revenue growth rate the Company has achieved in over four years. Approximately 96% of that growth was driven by CoStar's core markets, specifically excluding the expansion markets added to the platform in 2005. In addition, the Company had EBITDA (earnings before interest, taxes, depreciation and amortization) of $4.2 million and net income of $1.1 million or $0.06 per share in the second quarter of 2005.
As of June 30, 2005, the Company had $113.4 million in cash, cash equivalents and short-term investments. The Company has no long-term debt.
The renewal rate for CoStar's subscription services increased to 93.5% in the second quarter of 2005, compared to 91.6% in the second quarter of 2004.
CoStar is continuing to invest in a major expansion program that is expected to add over 500,000 properties to its extensively researched and photographed North American database by the end of 2006. Under the expansion program, which began in May 2004, the Company has added approximately 208,000 properties and seven new geographic markets to its database. CoStar recently added Hampton Roads (VA), Las Vegas, San Antonio and Tucson to its U.S. coverage. The Company expects to open up to eight new markets in the third quarter of 2005.
"Our revenue growth in the second quarter exceeded our expectations and is attributable to recent strong growth in the productivity of our sales force in the core business," stated CoStar Group Chief Financial Officer Frank A. Carchedi. "For the third quarter of 2005, we expect to add approximately $1.5 million of organic revenues, for approximately a 4.5% to 5.0% sequential revenue increase over the second quarter of 2005. We expect sequential revenue growth to increase further during the fourth quarter of 2005 as new markets continue to open."
The Company is continuously developing new research methodologies and technologies to improve the quality and timeliness of its information while at the same time reducing costs. The recent upgrade of the Company's research software system and the adoption of new tenant research methodologies have had a very favorable impact on the potential quality and efficiency of its tenant research process. After a detailed analysis and careful consideration, the Company has concluded that its research center in Mason, Ohio, which focuses predominately on tenant research, is no longer required. As a result, the Board of Directors has approved the termination of this operation, which represents approximately 5% of the Company's total headcount, effective July 21, 2005. While the Company plans to reinvest a portion of the savings from this restructuring into its other research centers, the Company expects to realize significant overall cost savings from the Mason office closing.
The closing of the Mason operation is expected to result in a one-time pre-tax charge of approximately $2.0 million to $2.5 million in the third quarter of 2005. After closing the operation and restructuring the related research processes over the next several quarters, we believe that the resulting ongoing annual pre-tax savings will approximate $1.0 million annually. The estimated third quarter restructuring charge includes amounts for wages, severance, occupancy and other costs. "Including these charges, for the third quarter of 2005 we expect fully diluted net income per share of approximately $0.03 to $0.04 and for the fourth quarter of 2005 we expect fully diluted net income per share of approximately $0.14," Carchedi stated.
Management will conduct a conference call to discuss earnings results for the quarter ended June 30, 2005, and the financial outlook for 2005 at 11:00 am EDT, Thursday, July 21, 2005. 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 28, 2005. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to Conference ID 7529485. 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 60 major U.S. markets, London and the United Kingdom. Based in Bethesda, MD, the company has approximately 1,000 employees throughout the United States and the United Kingdom, including the largest professional research organization in the industry.