BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of information services to the U.S. commercial real estate industry, reported its ninth consecutive quarter of earnings improvement since the completion of its national platform in the second quarter of 2000.
Year 2001-2002 Quarterly Results:
(in millions, except per share data)
"We are excited about our current position," stated CoStar Group President & CEO Andrew C. Florance. "We have seen significant improvement in almost all areas of our business and believe the fundamentals for continued strong performance are very solid."
"In a few weeks we expect to begin converting customers to our new Internet platform, which is anchored by the first Web-based version of CoStar Property®, our flagship product," Florance continued. "In this new release we have developed powerful technology that addresses our customers' need for advanced productivity and control over the data. The initial feedback from customers and prospects has been very favorable."
The pro forma net income for the third quarter of 2002, which excludes purchase amortization and the related income tax benefit, was $418,000, or $0.03 per share, an improvement over a pro forma net loss of $(862,000) or $(0.06) per share in the third quarter of 2001. In addition, EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $1.6 million for the third quarter of 2002, compared to EBITDA of $212,000 in the same quarter a year ago. CoStar has produced positive EBITDA for five consecutive quarters.
Revenues for the third quarter of 2002 were $20.1 million, an increase of $1.6 million or 8.8 percent when compared to the third quarter of 2001. In addition, revenues increased sequentially by 2.7 percent for the third quarter of 2002 over the second quarter of 2002. The rate of sequential quarterly growth has now improved for three consecutive quarters. CoStar Group has reported revenue growth in every quarter since its initial public offering in July 1998.
As of September 30, 2002, the Company had $42.6 million in cash, cash equivalents and short-term investments, an increase of $500,000 from June 30, 2002.
"We are extremely encouraged by our continued improvement," commented Florance. "The fact that our revenue growth has accelerated as market conditions have weakened is a testament to the value and cost savings our customers recognize in our products. That recognition of value also is evident in the increase in renewal rates during the third quarter of 2002. Our overall subscription renewal rate increased to 89 percent for the third quarter of 2002 versus 85 percent for the third quarter of 2001. These results, combined with efforts to control costs, have contributed to the continued improvement in both EBITDA and pro forma profit. We are also making steady progress toward GAAP earnings as we grow our revenue over a relatively fixed cost structure."
Florance also attributed the positive trend in revenue and renewals to new initiatives instituted with the sales force in 2002. "We have changed the way we compensate our account executives to reward net revenue growth and customer retention rather than purely new sales. We have seen the benefits in higher net sales, and our customers are enjoying a much higher level of service," he noted.
In addition, the Company continues to secure endorsements from leading commercial real estate organizations. In August, Trammell Crow Company signed a multi-million-dollar, national agreement with renewal options that could extend the agreement for up to nine years. Year to date, CoStar has signed multi-year, multi-market renewal agreements with six major national clients representing an aggregate value in excess of $21 million.
"For the fourth quarter of 2002, we expect revenues to grow approximately 3 percent sequentially, and we expect pro forma net income of approximately $.04 per share, which would enable us to meet our goal of pro forma net income of $0.10 per share for 2002," stated Frank A. Carchedi, CoStar's Chief Financial Officer.
CoStar Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(a) Includes purchase amortization of $641 and $1,324 for the three month periods and $2,220 and $3,987 for the nine month periods ended September 30, 2002 and 2001, respectively.
(b) Includes depreciation and other amortization of $1,315 and $1,422 for the three month periods and $3,995 and $4,503 for the nine month periods ended September, 2002 and 2001, respectively.
(c) Pro forma net income (loss) equals net loss excluding purchase amortization in cost of revenues (see note (a), purchase amortization in operating expenses, and the related income tax benefit.
Management will conduct a conference call to discuss earnings results for the quarter ended September 30, 2002, at 11:00 am ET, Wednesday, October 23, 2002. 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 (888) 688-0419 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 live call concludes through midnight on November 1, 2002. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to Conference ID 5927542. The replay will also be available over the Internet through midnight on November 1, 2002.
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 to the most comprehensive, verified database of commercial real estate information in 50 U.S. markets. The company has approximately 800 employees in 32 offices nationally, including the industry's largest professional research organization.