BETHESDA, Md., Oct. 29, 2008 -- CoStar Group, Inc. (Nasdaq: CSGP ), the number one provider of information/marketing services to the commercial real estate industry, today announced that its third quarter 2008 net income increased 104% to $6.6 million, or $0.34 per diluted share, compared to $3.3 million, or $0.17 per diluted share for the same period a year ago. EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of 2008 was $15.5 million, an increase of 95% compared to EBITDA of $8.0 million for the third quarter of 2007. Revenues for the third quarter of 2008 increased 9.0% to $53.8 million compared to $49.3 million for the third quarter of 2007. U.S. subscription revenue increased 1.2% from the second quarter to the third quarter of 2008.
As of September 30, 2008, the company had $213.2 million in cash, cash equivalents, short-term and long-term investments, an increase of $14.9 million since June 30, 2008, and no long-term debt.
"Market conditions have clearly deteriorated as a result of the ongoing global financial crisis and have produced volatility in our business," said CoStar Group President and CEO Andrew C. Florance. "However, current market conditions are also creating significant new demand for high quality, research-verified information to evaluate, assess and quantify risk throughout commercial real estate portfolios."
"Following the investments we made over the past several years expanding our market coverage in the U.S. and U.K., we continue to see a huge potential market for CoStar's information services," Florance continued. "With our relatively fixed cost structure already in place, we believe there is significant opportunity for additional high-margin revenue growth."
As of the end of the third quarter of 2008, demand for CoStar's subscription-based information services remained strong as the company added 5,144 net new paying subscribers for a total of 92,199, compared to 87,055 for the third quarter 2007. The 12-month trailing customer renewal rate for CoStar's subscription-based services was approximately 90%.
"In the second quarter of 2007, we set a goal to dramatically increase our then-companywide EBITDA margin of 9% to a 30% EBITDA margin in our U.S. operations by the end of 2008," stated Florance. "I am pleased to announce that we exceeded that goal ahead of schedule with this past quarter's results of a 33% EBITDA margin in the U.S. We expect to maintain or exceed the 30% U.S. EBITDA margin through the rest of this year, 2009 and 2010. We are also well on our way of achieving our goal of break-even in our international operations."
"We continue to believe our goal of $100 million of annualized EBITDA for the company by the end of 2010 is achievable based on the current economic and commercial real estate environments. However, the weakening economic outlook and ongoing financial instability may result in a slower rate of revenue growth in the near-term," he added. "We fully expect to manage our business through the current environment and to capitalize on our stable subscription-based business model to achieve our earnings goal."
Slower third quarter revenue growth was a result of unfavorable foreign currency exchange rates, declining non-subscription-based revenue combined with slower revenue growth for subscription-based services during the quarter. Non-subscription-based revenue, mostly related to products that facilitate the buying and selling of commercial buildings, performed poorly during the quarter and is not expected to improve for several quarters. Unlike other competitors, non-subscription-based revenue for CoStar accounts for less than 5% of the company's total revenue.
Fourth Quarter and Full-Year 2008 Outlook
"CoStar continues to anticipate earnings growth from U.S. operations through 2008 as a result of consistent subscription-based revenue growth over a relatively fixed or slightly declining cost base," said CoStar Group Chief Financial Officer Brian J. Radecki. "Our third quarter results demonstrate our ability to manage our cost structure carefully in a difficult economic environment."
"Based on strong results from the past three quarters and continued execution of our plan, we are raising the outlook for fully diluted net income per share for the full year 2008 to approximately $1.22 to $1.24," added Radecki. "In addition, we now expect fully diluted net income per share for the fourth quarter of 2008 of approximately $0.34 to $0.36."
For the fourth quarter of 2008, the company anticipates quarterly revenue of approximately $53.8 million to $54.3 million. Given the unprecedented current economic environment, including significant foreign currency exchange rate fluctuations negatively affecting International revenue, our actual fourth quarter revenue results could differ from our guidance.
Management will conduct a conference call to discuss earnings results for the third quarter ended September 30, 2008, and the financial outlook for the fourth quarter of 2008 at 11:00 a.m. EDT on Thursday, October 30, 2008. 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) 230-1074 from within the United States and Canada, or (612) 234-9960 from outside the United States and Canada. Refer to Conference reservation number 964778. A replay of the conference call will be available approximately one hour after the live call concludes and remain available through midnight on November 13, 2008. 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 964778. 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 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 1,300 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com .