BETHESDA, MD -- CoStar Group, Inc. (NASDAQ: CSGP) revenues increased 20.0% in the third quarter of 2005 over the third quarter of 2004, the Company announced today.
"Our third quarter 2005 financial results reflect strong subscription revenue growth in our core markets, while we focus on establishing new growth platforms for 2006," stated CoStar Group President & CEO Andrew C. Florance. "We are making solid progress on our expansion efforts as we have signed 175 companies in the course of the last 15 months in the 21 expansion markets."
The Company is aggressively expanding its geographical coverage within the United States and adding comprehensive retail coverage of the U.S. commercial real estate market.
During the third quarter of 2005, the Company signed 63 top commercial real estate firms in expansion markets. Expansion market customers include such leading firms as Advantis/GVA, Carlson, CB Richard Ellis, Coldwell Banker Commercial NRT, Colliers Arnold, Cross & Company, Commerce CRG, NAI/Rhode Ottmers & Siegel, Staubach, Trammell Crow and Transwestern Commercial Services.
The Company opened six new markets during the third quarter of 2005, including Greensboro/Winston Salem, Greenville/Spartanburg, Providence, Salt Lake City, Toledo and Tulsa. CoStar's coverage in these six markets represents 66,000 properties with 1.26 billion square feet representing 109 million square feet of space available. CoStar believes the databases released in these markets are the most comprehensive databases available in each of these markets. "The Company is focused on ensuring that each expansion market delivered meets the highest standards of quality even if that means slightly more pre-release work," stated Florance. In total, CoStar has delivered 14 new markets within the past year with more than 122,700 properties combined and more than 2.6 billion square feet.
In addition to database growth associated with the new markets, the Company has seen unprecedented growth in the number of commercial properties listed for sale on the Company's Web site. As of January 1, 2005, the Company had nearly 53,000 properties listed for sale in the United States. That number has soared 61% year to date to 85,200 properties listed for sale currently. For the markets CoStar covers, the company believes it now has the most commercial real estate for-sale listings in aggregate of any information service. The Company believes the increase is due to the greater exposure these listings receive now that all for-sale listings are available to all CoStar subscribers nationwide. "We are very excited about our successes in growing our for-sale property database offerings," said Florance. Based upon these successes, the Company intends to increase its presence in the "for- sale" listing product area in 2006. This market segment has historically been occupied by low-cost listing Web sites such as LoopNet.
Revenues for the third quarter of 2005 were $34.3 million, increasing sequentially by 4.4% over the second quarter of 2005. "We continue to experience solid growth in our core U.S. subscription-based revenue, which increased by approximately 5% sequentially from the second quarter of 2005 to the third quarter of 2005. Our non-subscription revenue area, which accounts for only about 5% of total revenue, did not perform as well as expected and affected our overall top line results. We were pleased with our earnings results, which included the expected charge for the closing of our Mason, OH, office. Overall, we were ahead of our expectations for earnings for the third quarter," stated Chief Financial Officer Frank A. Carchedi. "For the fourth quarter of 2005, we expect to achieve approximately 4.5% sequential revenue growth over the third quarter of 2005. Additionally, we expect fully diluted net income per share of approximately $0.15 for the fourth quarter of 2005."
The one-time pre-tax restructuring charge of $2.2 million, resulting from the closing of the Mason, OH, operation was recorded in the third quarter. This restructuring charge includes amounts for wages, severance, occupancy and other costs. The Company expects this to result in ongoing annual pre-tax savings of approximately $1.0 million.
As of September 30, 2005, the Company had $124.8 million in cash, cash equivalents and short-term investments. The Company has no long-term debt.
Management will conduct a conference call to discuss earnings results for the quarter ended September 30, 2005, and the financial outlook for 2005 at 11 a.m. EDT, Thursday, October 20, 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 October 27, 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 9301713. 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 59 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.