PRESS RELEASE DETAIL


Jul 22, 2009

CoStar Group, Inc. Announces Second Quarter 2009 Results

2009-07-22 2009 CoStar Group, Inc. Announces Second Quarter 2009 Results Acquisition of Global Real Estate Analytics Leader PPR Adds New Revenue Growth Opportunity

2009-07-22 2009 CoStar Group, Inc. Announces Second Quarter 2009 Results Acquisition of Global Real Estate Analytics Leader PPR Adds New Revenue Growth Opportunity

Print Release (PDF)

BETHESDA, MD – July 22, 2009 – CoStar Group, Inc. (NASDAQ: CSGP), the number one provider of information/marketing services to the commercial real estate industry, today announced that net income for the quarter ended June 30, 2009 was $4.6 million, or $0.24 per diluted share, compared to $5.4 million, or $0.28 per diluted share for the quarter ended June 30, 2008.  EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter ended June 30, 2009 was $11.6 million, compared to EBITDA of $12.8 million for the quarter ended June 30, 2008.

As of June 30, 2009, the company had $243.8 million in cash, cash equivalents, short-term and long-term investments, an increase of $10.3 million since March 31, 2009, and no long-term debt.

“In this economic environment, demand for commercial real estate analysis and forecasting supported by comprehensive and accurate property and market data is extraordinarily high,” said CoStar Group President and CEO Andrew C. Florance. “The acquisition of Property and Portfolio Research (PPR) offered an exceptional opportunity to acquire the leading provider of global real estate investment analysis and market forecasting, an area we believe holds significant opportunity for revenue growth.”

“By augmenting PPR’s expert real estate investment analysis with CoStar’s comprehensive database of commercial property information, we expect to meet the strong demand from commercial real estate investors and lenders for high quality forecasting and investment risk analysis,” Florance added. “And by marketing PPR’s analytic tools and services through our much-larger distribution channel to the thousands of firms in CoStar’s client base, we expect to dramatically accelerate PPR’s growth and substantially increase revenue in this product area.”

The acquisition of PPR is part of a larger strategy on the part of CoStar to leverage its strong financial position and experienced acquisition team to acquire additional commercial real estate information and technology companies.

“CoStar’s acquisition of PPR provides a model for how we intend to acquire successful companies that can leverage CoStar’s strategic assets, including our database of research-verified commercial property information, strong balance sheet, extensive client base, advanced technology platform and highly effective sales and marketing channel, to become even more successful and reach their full revenue potential,” stated Florance. “CoStar has identified over 40 companies as possible acquisitions.”

CoStar acquired PPR from DMG Information, Inc. (DMGI), a division of U.K.-based Daily Mail and General Trust, plc, in exchange for approximately $22.0 million payable in CoStar Group common stock in the aggregate amount of approximately 575,000 shares. The company expects PPR to be accretive to earnings in 2010 as a result of expected revenue growth.

Revenues for the quarter ended June 30, 2009 were $50.1 million, compared to revenues of $53.5 million for the quarter ended June 30, 2008. Subscription-based revenue accounts for more than 95% of the company’s total revenue. The 12-month trailing customer renewal rate for CoStar’s subscription-based services was approximately 86%.

U.S. revenues in the second quarter of 2009 totaled $45.7 million, compared to $47.5 million in the second quarter of 2008, and International revenues totaled £2.9 million in the second quarter of 2009, as compared to £3.1 million in the second quarter of 2008.

Third Quarter 2009 Outlook 

“For the third quarter of 2009, we expect approximately $51.0 to $52.5 million in revenues, which includes $2.5 to $3.0 million of prorated PPR revenue in the quarter, and fully diluted net income per share of approximately $0.19 to $0.21,” stated CoStar Group Chief Financial Officer Brian J. Radecki.  “Our third quarter outlook includes approximately $500,000 of deal-related costs, approximately $200,000 to $300,000 of purchase amortization, and approximately $150,000 of equity compensation related to the acquisition of PPR,” said Radecki.

“For the full year of 2009, we expect approximately $205.0 to $208.5 million in revenues, which includes $7.0 to $7.5 million of prorated PPR revenue for the year, and fully diluted net income per share of approximately $0.95 to $1.00,” Radecki added.  “Our full year outlook also includes approximately $500,000 of deal-related costs, approximately $500,000 of purchase amortization, and approximately $300,000 of equity compensation related to the acquisition of PPR.  In total, our full year guidance includes approximately $6.5 million in pre-tax, non-cash equity compensation charges related to the vesting of restricted stock and stock option grants,” said Radecki.  For 2009, the company expects an overall effective tax rate of approximately 45% to 47%, and an interest rate of approximately 0.25% to 0.5% for interest income.

Management will conduct a conference call to discuss earnings results for the second quarter ended June 30, 2009, and the financial outlook for the third quarter of 2009 at 11:00 a.m. ET on Thursday, July 23, 2009. The audio portion of the conference call will be broadcast live over the Internet at http://www.costar.com/corporate/investor/. To join the conference call by telephone, please call (800) 230-1766 from within the United States and Canada, or (612) 332-0820 from outside the United States and Canada. Refer to conference reservation number 106464. A replay of the conference call will be available approximately one hour after the live call concludes and remain available through midnight on August 6, 2009. The replay telephone number is (800) 475-6701 within the United States and Canada, or (320) 365-3844 outside the United States and Canada.  Refer to Conference reservation number 106464. 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

CoStar Group, Inc. (Nasdaq:CSGP) is the number one provider of information/marketing services to commercial real estate professionals in the United States as well as the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information throughout the U.S. as well as in the United Kingdom and France. Headquartered in Bethesda, MD, CoStar has approximately 1,400 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com.

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including CoStar's Form 10-K for the year ended December 31, 2008, and CoStar’s Form 10-Q for the quarter ended March 31, 2009, under the heading "Risk Factors.” In addition to these statements, there can be no assurance that global real estate investment analysis and market forecasting holds significant opportunity for revenue growth; that by augmenting PPR’s expert real estate investment analysis with CoStar’s comprehensive database of commercial property information, CoStar will meet the strong demand from commercial real estate investors and lenders for high quality forecasting and investment risk analysis; that by marketing PPR’s analytic tools and services through CoStar’s much-larger distribution channel to the thousands of firms in CoStar’s client base, CoStar will dramatically accelerate PPR’s growth and substantially increase revenue in this product area; that CoStar will acquire additional commercial real estate information and technology companies or any of the over 40 companies identified as possible acquisitions and, if it does, there is no assurance as to when any one or more of those acquisitions will close; that CoStar will acquire successful companies that can leverage CoStar’s strategic assets to become even more successful and reach their full revenue potential; that PPR will be accretive to earnings in 2010 as a result of expected revenue growth; that quarterly revenue for the third quarter 2009 and revenue for the full year 2009 will be as stated in this press release; that fully diluted net income for the third quarter of 2009 and full year 2009 will be as stated in this press release; that deal-related costs, purchase amortization and equity compensation related to the acquisition of PPR for the third quarter of 2009 and full year 2009 will be as stated in this press release; that the equity compensation charges for the full year 2009 will be as stated in this press release; and that the overall effective tax rate and the interest rate for our interest income for 2009 will be as stated in this press release. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.

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