BETHESDA, MD – October 24, 2007 – CoStar Group, Inc. (NASDAQ: CSGP), the number one provider of information services to the commercial real estate industry, today announced that revenues for the third quarter of 2007 were $49.3 million, a 21.6% increase compared to $40.6 million in revenue for the third quarter of 2006. Net income increased 177% from $1.2 million in the second quarter of 2007 to $3.3 million in the third quarter of 2007 as a result of continued core revenue growth and improved operational efficiencies. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 88% from $4.2 million in the second quarter of 2007 to $8.0 million in the third quarter of 2007.
"Our third quarter results reflect the growth in earnings we expect following the investments we made to create value for our customers and stockholders," said Andrew C. Florance, CoStar Group President and CEO. "As we previously announced, CoStar Group made significant investments over the last four quarters to expand our commercial real estate market coverage in the U.S., to grow the sales force, and to improve product quality. Going forward, we expect revenues to continue to grow over what is now a relatively fixed cost base for our U.S. research operations. As a result, the company believes it is well positioned to generate continued, sustained earnings leverage through the end of 2008."
"The management team at CoStar is focused on aggressively executing our earnings growth strategy," Florance continued. "We are fully committed to achieving a 30% EBITDA margin in our U.S. operations by the end of 2008."
Revenues for the third quarter of 2007 were up sequentially by 3.2% over second quarter 2007 and up 4.2% during the same period for core U.S. subscription-based services. The top line results were partially offset during the third quarter by lower than expected revenue from non-subscription services, which account for less than 5% of total revenue. International revenues decreased from $5.9 million in the second quarter to $5.8 million in the third quarter of 2007, primarily due to lower consulting fees and the consolidation of duplicative services. International operations contributed approximately 11.8% of total revenue for the third quarter of 2007.
CoStar Group’s rate of renewal for subscription services was approximately 91% during the third quarter of 2007. The company has reported sequential revenue increases in every quarter since its IPO in 1998.
Net income was $3.3 million, or $0.17 per share, for the third quarter of 2007 compared to net income of $4.7 million, or $0.25 per share, for the third quarter of 2006. The third quarter 2007 results include non-cash charges for equity compensation of approximately $1.4 million, primarily included in general and administrative expenses, selling and marketing expenses, and cost of revenues. By comparison, non-cash charges for equity compensation were $1.0 million for the third quarter of 2006. The company expects 2007 non-cash equity compensation expense to be approximately $5.8 million.
As of September 30, 2007, CoStar Group had $164.2 million in cash, cash equivalents and short-term investments. The company has no long-term debt.
Fourth Quarter 2007 Outlook
“We expect a sequential quarterly increase in revenue of 3.0% to 5.0% and fully diluted net income per share of approximately $0.19 to $0.21 for the fourth quarter of 2007," said CoStar Group Chief Financial Officer Brian J. Radecki. "In addition, we expect to continue to leverage and grow earnings from U.S. operations through 2008 as a result of nearly completing earlier reported step-ups in investment activity combined with consistent core revenue growth," said Radecki.
Management will conduct a conference call to discuss earnings results for the third quarter ended September 30, 2007, and the financial outlook for the fourth quarter of 2007 at 11:00 a.m. EDT on Thursday, October 25, 2007.
The audio portion of the 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 telephonic replay of the conference call will be available two hours after the live call concludes through midnight on November 8, 2007. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to Conference ID 20100647. The replay will also be available over the Internet at http://www.costar.com/corporate/investor/ for a period of time following the call.
Analysts/Investors: Brian J. Radecki - Chief Financial Officer, (301) 664-9132, firstname.lastname@example.org
Media: Timothy J. Trainor - Communications Director, (301) 280-7695, email@example.com
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ - CSGP) is the number one provider of information 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, the company has approximately 1,300 employees, including the largest professional research organization in the industry. For more information, visit www.costar.com.