Attached files
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8-K - CURRENT REPORT, ITEMS 2.02 AND 9.01 - COSTAR GROUP, INC. | form_8-k.htm |
NEWS
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Contacts:
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Investors/Analysts:
Brian
J. Radecki
Chief
Financial Officer
(301)
664-9132
bradecki@costar.com
Media:
Vikki
Kayne
Senior
Director, Media Relations
(301)
280-3858
vkayne@costar.com
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CoStar
Group, Inc. Announces First Quarter 2010 Results
Company
Posts Record Quarterly Revenue of $55.1 Million,
Quarter-over-Quarter
Increase Driven by Organic Revenue Growth
BETHESDA,
MD – April 21, 2010 – CoStar Group, Inc. (NASDAQ: CSGP), the number one
provider of information, marketing and analytic services to the commercial real
estate industry, today announced that revenues for the first quarter of 2010
were $55.1 million, an increase of $0.5 million compared to revenues of $54.6
million for the fourth quarter of 2009, with organic revenue growth driving the
quarterly revenue increase.
Net
income for the quarter ended March 31, 2010 was $2.9 million, or $0.14 per
diluted share, compared to $3.6 million, or $0.18 per diluted share for the
quarter ended December 31, 2009. EBITDA (earnings before interest,
taxes, depreciation and amortization) for the quarter ended March 31, 2010 was
$8.8 million, compared to EBITDA of $9.9 million for the quarter ended December
31, 2009.
As of
March 31, 2010, the Company had $218.5 million in cash, cash equivalents, and
short-term and long-term investments, compared to $255.7 million on December 31,
2009. On February 5, 2010, the Company purchased an office building
at 1331 L Street, N.W. in Washington, D.C., where it plans to relocate its
headquarters, for $41.25 million in cash. The Company has no
long-term debt.
Year
2009-2010 Quarterly Results - Unaudited
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||||||||||||||||||||
(in
millions, except per share data)
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2009
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2010
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|||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
Revenues
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$ | 51.4 | $ | 50.1 | $ | 53.6 | $ | 54.6 | $ | 55.1 | ||||||||||
EBITDA
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14.4 | 11.6 | 10.6 | 9.9 | 8.8 | |||||||||||||||
Net
income
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6.1 | 4.6 | 4.3 | 3.6 | 2.9 | |||||||||||||||
Net
income per share - diluted
|
0.31 | 0.24 | 0.22 | 0.18 | 0.14 | |||||||||||||||
Weighted
average outstanding shares - diluted
|
19.6 | 19.6 | 20.1 | 20.4 | 20.6 |
“I am
very encouraged by the continued improvement in leasing activity throughout the
commercial real estate market and the corresponding strong demand for CoStar's
commercial real estate information, marketing and analytic services,” said
CoStar Group CEO Andrew C. Florance. “During the first quarter, office-based
employment continued to grow and office leasing activity throughout the U.S.
increased for the fourth consecutive quarter, two very positive indicators that
I believe point to an economy that is beginning to grow again. I am also pleased
to report that CoStar’s overall business continued to strengthen in this
improving environment, demonstrating strong organic quarterly sales and a new
record in quarterly revenue.”
“Over the
past 12 months, CoStar took advantage of our strong financial position to invest
in our business ahead of the economic recovery,” said Florance. “These
investments included growing our sales force by approximately 25% and our
research organization by approximately 10% to capture the revenue opportunities
expected to accompany increased leasing and sales activity. We also added
personnel to our expanded Analytics service and made two key acquisitions –
acquiring Property and Portfolio Research in the third quarter of 2009 and
Resolve Technology in the fourth quarter of 2009. Finally, we took steps to
reduce our facilities costs by restructuring lease agreements for several
offices and acquiring a new building to serve as our corporate headquarters,
which together we expect will save us millions of dollars in long-term occupancy
costs. While these investments are affecting earnings in the near term, we
believe they position the Company for accelerated high-margin revenue growth as
the commercial real estate market recovers.”
Also
during the first quarter, CoStar continued to capture market share in the
Internet lead-generation market. The number of brokers who are marketing
listings on SHOWCASE.com® (http://www.showcase.com) is now approximately 9,750.
In February, CoStar successfully launched the SHOWCASE.com service in the
U.K.
CoStar’s
12-month trailing renewal rate for subscription-based services improved to
approximately 86% in the first quarter of 2010 from approximately 85% in the
fourth quarter of 2009. Subscription-based revenue accounted for
approximately 95% of the Company’s total revenue in the first quarter of
2010. In addition, the number of net new paying subscribers increased
by 1,265 during the first quarter of 2010 to 86,590.
2010
Outlook
“For the
second quarter of 2010, we expect approximately $54.5 million to $55.5 million
in revenues, and for the full year of 2010, we continue to expect approximately
$218.0 million to $222.0 million in revenues,” stated CoStar Group Chief
Financial Officer Brian J. Radecki. “We continue to expect organic
revenue growth in 2010, with our renewal rates moving back toward our 90%
historical average. After a strong first quarter, we are confident that we are
tracking towards the middle to upper end of our annual revenue guidance range
and we expect we will continue to do so,” said Radecki.
For the
second quarter of 2010, the Company expects GAAP net income per diluted share of
approximately $0.13 to $0.15 and non-GAAP net income per diluted share (defined
below) of approximately $0.22 to $0.24. The second quarter outlook
includes increased costs related to the transition of the Company’s new
corporate headquarters in Washington, D.C. and higher selling and marketing
expenses associated with the annual International Council of Shopping Centers
trade show in May.
2
“For the
full year of 2010, we continue to expect GAAP net income per diluted share of
approximately $0.60 to $0.65 and non-GAAP net income per diluted share of
approximately $1.06 to $1.22,” said Radecki. “Given our improving sales
performance, we expect to grow revenues organically for the full year of 2010
and grow earnings in the second half of 2010. We expect to achieve our earnings
outlook even with the short term dilution to net income resulting from our
investments in a larger sales force, an expanded research organization, and the
recent acquisitions of PPR and Resolve, as well as ongoing efforts to reduce
long-term facilities costs.”
The
preceding forward-looking statements, including forward-looking non-GAAP
financial measures, reflect CoStar’s expectations as of April 21, 2010. We are
not able to forecast with certainty whether or when certain events, such as
acquisition-related costs, restructuring, settlements or impairments will occur
in any given period. Given the risk factors, uncertainties and assumptions
discussed above, actual results may differ materially. The Company does not
intend to update its forward-looking statements until its next quarterly results
announcement, other than in publicly available statements.
Reconciliation
of Forward-Looking Guidance, Net Income to Non-GAAP Net
Income
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(in
thousands, except per share data)
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Guidance
Range
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For
the Twelve Months
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Ended
December 31, 2010
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Low
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High
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Net
income
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$ | 12,100 | $ | 13,200 | ||||
Income
tax expense, net
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8,067 | 10,371 | ||||||
Income
before income taxes
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20,167 | 23,571 | ||||||
Purchase
amortization and other related costs
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3,750 | 4,000 | ||||||
Stock-based
compensation expense
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7,500 | 8,500 | ||||||
Acquisition
related costs
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- | - | ||||||
Restructuring
and related costs
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1,500 | 1,750 | ||||||
Headquarters acquisition and transition related costs | 3,000 | 3,500 | ||||||
Settlements
and Impairments
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- | - | ||||||
Non-GAAP
Income before income taxes
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35,917 | 41,321 | ||||||
Assumed
rate for income tax expense, net *
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40 | % | 40 | % | ||||
Assumed
provision for income tax expense, net
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(14,367 | ) | (16,528 | ) | ||||
Non-GAAP
Net Income
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$ | 21,550 | $ | 24,793 | ||||
Net
Income per share - diluted
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$ | 0.60 | $ | 0.65 | ||||
Non-GAAP
Net Income per share - diluted
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$ | 1.06 | $ | 1.22 | ||||
Weighted
average outstanding shares - diluted
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20,300 | 20,300 | ||||||
* A
40% tax rate is assumed in order to approximate the Company's long-term
effective corporate tax rate.
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Non-GAAP
Financial Measures
In this
press release, we disclose certain non-GAAP financial measures to supplement our
consolidated financial statements presented in accordance with GAAP, including
EBITDA, adjusted-EBITDA, non-GAAP net income, and non-GAAP net income per
diluted share. The presentation of these non-GAAP financial measures
is not intended to be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in accordance with
GAAP. Management believes that these non-GAAP financial measures,
when viewed with our GAAP financial measures, are useful to investors because
they permit investors to assess the Company's operating performance, or to gain
an understanding of factors and trends affecting our business, using the same
tools that management uses to internally measure the Company’s operating
performance and to understand factors and trends
3
affecting
our business. We believe these non-GAAP financial measures are useful to
investors because they isolate non-cash charges and non-operating items, thereby
providing additional information about our cost structure and allow for
meaningful evaluation and comparison of our performance from quarter to quarter
and from year to year. These non-GAAP financial measures are also useful as they
are sometimes used by securities analysts, investors and other interested
parties to facilitate the evaluation of our business performance on a comparable
basis to other companies.
EBITDA is
a non-GAAP financial measure that represents GAAP net income attributable to
CoStar Group, Inc. before (i) interest income (expense), (ii) provision for
income taxes, and (iii) depreciation and amortization.
Adjusted-EBITDA
is a non-GAAP financial measure that represents EBITDA before (i) stock-based
compensation expense, (ii) acquisition-related costs, (iii) restructuring
charges and related costs, (iv) costs related to the acquisition and transition
of the Company’s corporate headquarters, and (v) settlements and impairments
incurred outside the Company’s normal business operations.
Non-GAAP
net income is a non-GAAP financial measure that represents GAAP net income
attributable to CoStar Group, Inc. before (i) purchase amortization and other
related costs, (ii) stock-based compensation expense, (iii) acquisition-related
costs, (iv) restructuring charges and related costs, (v) costs related to the
acquisition and transition of the Company’s corporate headquarters, and (vi)
settlements and impairments. From this figure, we then subtract an assumed
provision for income taxes to arrive at Non-GAAP net income. We assume a 40% tax
rate in order to approximate our long-term effective corporate tax
rate.
Non-GAAP
net income per diluted share is a non-GAAP financial measure that represents
Non-GAAP net income divided by the number of diluted shares outstanding for the
period used in the calculation of GAAP net income per diluted
share.
Earnings
Conference Call
Management
will conduct a conference call to discuss earnings results for the first quarter
ended March 31, 2010, and the Company’s outlook for 2010 at 11:00 a.m. ET on
Thursday, April 22, 2010. The audio portion of the conference call will be
broadcast live over the Internet at http://www.costar.com/investors.aspx.
To join the conference call by telephone, please call (800) 398-9379 from within
the United States and Canada, or (612) 332-0345 from outside the United States
and Canada. Refer to conference reservation number 152943. A replay of the
conference call will be available approximately one hour after the live call
concludes and remain available for a period of time following the call. 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 152943. The replay will also be available over the
Internet at http://www.costar.com/investors.aspx
for a period of time following the call.
4
CoStar
Group, Inc.
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Condensed
Consolidated Statements of Operations-Unaudited
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(in
thousands, except per share data)
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For
the Three Months
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Ended
March 31,
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2010
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2009
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Revenues
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$ | 55,093 | $ | 51,370 | ||||
Cost
of revenues
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21,200 | 16,894 | ||||||
Gross
margin
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33,893 | 34,476 | ||||||
Operating
expenses:
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Selling
and marketing
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12,629 | 9,161 | ||||||
Software
development
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4,197 | 3,178 | ||||||
General
and administrative
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11,275 | 10,450 | ||||||
Purchase
amortization
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690 | 946 | ||||||
28,791 | 23,735 | |||||||
Income
from operations
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5,102 | 10,741 | ||||||
Interest
and other income, net
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238 | 442 | ||||||
Income
before income taxes
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5,340 | 11,183 | ||||||
Income
tax expense, net
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2,451 | 5,077 | ||||||
Net
income
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$ | 2,889 | $ | 6,106 | ||||
Net
income per share - basic
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$ | 0.14 | $ | 0.31 | ||||
Net
income per share - diluted
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$ | 0.14 | $ | 0.31 | ||||
Weighted
average outstanding shares - basic
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20,249 | 19,468 | ||||||
Weighted
average outstanding shares - diluted
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20,602 | 19,562 |
5
Reconciliation
of Non-GAAP Financial Measures-Unaudited
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(in
thousands, except per share data)
|
||||||||
Reconciliation
of Net Income to Non-GAAP Net Income
|
||||||||
For
the Three Months
|
||||||||
Ended
March 31,
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||||||||
2010
|
2009
|
|||||||
Net
income
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$ | 2,889 | $ | 6,106 | ||||
Income
tax expense, net
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2,451 | 5,077 | ||||||
Income
before income taxes
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5,340 | 11,183 | ||||||
Purchase
amortization and other related costs
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1,190 | 1,425 | ||||||
Stock-based
compensation expense
|
2,007 | 1,587 | ||||||
Acquisition
related costs
|
- | - | ||||||
Restructuring
and related costs
|
- | - | ||||||
Headquarters
acquisition and transition related costs *
|
199 | - | ||||||
Settlements
and Impairments
|
- | - | ||||||
Non-GAAP
Income before income taxes
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8,736 | 14,195 | ||||||
Assumed
rate for income tax expense, net **
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40 | % | 40 | % | ||||
Assumed
provision for income tax expense, net
|
(3,494 | ) | (5,678 | ) | ||||
Non-GAAP
Net Income
|
$ | 5,242 | $ | 8,517 | ||||
Net
Income per share - diluted
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$ | 0.14 | $ | 0.31 | ||||
Non-GAAP
Net Income per share - diluted
|
$ | 0.25 | $ | 0.44 | ||||
Weighted
average outstanding shares - diluted
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20,602 | 19,562 | ||||||
*
Includes building depreciation of approximately $184,000.
|
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**
A 40% tax rate is assumed in order to approximate the Company's long-term
effective corporate tax rate.
|
||||||||
Reconciliation
of Net Income to EBITDA and Adjusted EBITDA
|
||||||||
For
the Three Months
|
||||||||
Ended
March 31,
|
||||||||
2010 | 2009 | |||||||
Net
income
|
$ | 2,889 | $ | 6,106 | ||||
Purchase
amortization in cost of revenues
|
500 | 479 | ||||||
Purchase
amortization in operating expenses
|
690 | 946 | ||||||
Depreciation
and other amortization
|
2,458 | 2,251 | ||||||
Interest
income, net
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(238 | ) | (442 | ) | ||||
Income
tax expense, net
|
2,451 | 5,077 | ||||||
EBITDA
|
$ | 8,750 | $ | 14,417 | ||||
Stock-based
compensation expense
|
2,007 | 1,587 | ||||||
Acquisition
related costs
|
- | - | ||||||
Restructuring
and related costs
|
- | - | ||||||
Headquarters
acquisition and transition related costs ***
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15 | - | ||||||
Settlements
and Impairments
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- | - | ||||||
Adjusted
EBITDA
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$ | 10,772 | $ | 16,004 | ||||
***
Does not include building depreciation of approximately
$184,000.
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6
CoStar
Group, Inc.
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Condensed
Consolidated Balance Sheets
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(in
thousands)
|
||||||||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
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ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 170,206 | $ | 205,786 | ||||
Short-term
investments
|
18,700 | 20,188 | ||||||
Accounts
receivable, net
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12,746 | 12,855 | ||||||
Deferred
income taxes
|
3,279 | 3,450 | ||||||
Prepaid
and other current assets
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7,649 | 5,128 | ||||||
Total
current assets
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212,580 | 247,407 | ||||||
Long-term
investments
|
29,549 | 29,724 | ||||||
Deferred
income taxes
|
2,350 | 1,978 | ||||||
Fixed
assets, net
|
60,684 | 19,162 | ||||||
Goodwill
|
78,975 | 80,321 | ||||||
Intangible
and other assets, net
|
21,607 | 23,390 | ||||||
Deposits
and other assets
|
2,119 | 2,597 | ||||||
Total
assets
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$ | 407,864 | $ | 404,579 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 26,894 | $ | 28,907 | ||||
Deferred
revenue
|
16,766 | 14,840 | ||||||
Total
current liabilities
|
43,660 | 43,747 | ||||||
Income
taxes payable
|
1,845 | 1,826 | ||||||
Stockholders'
equity
|
362,359 | 359,006 | ||||||
Total
liabilities and stockholders' equity
|
$ | 407,864 | $ | 404,579 |
7
CoStar
Group, Inc.
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Results
of Segments-Unaudited
|
||||||||
(in
thousands)
|
||||||||
For
the Three Months
|
||||||||
Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
||||||||
United
States
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$ | 50,617 | $ | 47,132 | ||||
International
|
||||||||
External
customers
|
4,476 | 4,238 | ||||||
Intersegment
revenue *
|
332 | - | ||||||
Total
international revenue
|
4,808 | 4,238 | ||||||
Intersegment
eliminations
|
(332 | ) | - | |||||
Total
Revenues
|
$ | 55,093 | $ | 51,370 | ||||
EBITDA
|
||||||||
United
States
|
$ | 9,412 | $ | 14,586 | ||||
International
**
|
(662 | ) | (169 | ) | ||||
Total
EBITDA
|
$ | 8,750 | $ | 14,417 | ||||
*
Intersegment revenue is attributable to services performed by Property and
Portfolio Research Ltd., a wholly owned subsidiary of PPR, for
PPR. Intersegment revenue is recorded at what the Company believes
approximates fair value. U.S. EBITDA includes a corresponding cost
for the services performed by Property and Portfolio Research Ltd. for
PPR.
|
||||||||
**
International EBITDA includes a corporate allocation of approximately
$200,000 and $100,000 for the three months ended March 31, 2010 and 2009,
respectively.
|
Reconciliation
of Non-GAAP Financial Measures with 2009-2010 Quarterly Results -
Unaudited
|
||||||||||||||||||||
(in
millions)
|
||||||||||||||||||||
2009
|
2010
|
|||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | ||||||||||||||||
Net
income
|
$ | 6.1 | $ | 4.6 | $ | 4.3 | $ | 3.6 | $ | 2.9 | ||||||||||
Purchase
amortization
|
1.4 | 1.2 | 1.5 | 1.6 | 1.2 | |||||||||||||||
Depreciation
and other amortization
|
2.2 | 2.2 | 2.1 | 2.3 | 2.4 | |||||||||||||||
Interest
income, net
|
(0.4 | ) | (0.3 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | ||||||||||
Income
tax expense, net
|
5.1 | 3.9 | 2.9 | 2.6 | 2.5 | |||||||||||||||
EBITDA
|
$ | 14.4 | $ | 11.6 | $ | 10.6 | $ | 9.9 | $ | 8.8 |
8
About
CoStar Group, Inc.
CoStar
Group, Inc. (Nasdaq:CSGP) is the number one provider of information, marketing
and analytic 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, 2009, under the heading "Risk
Factors." In addition to these statements, there can be no assurance
that demand for CoStar’s commercial real estate information will continue to
track the improvement in leasing activity; the positive indicators discussed in
this press release actually point to an economy that is beginning to grow again;
the economy is emerging from the recent downturn; that revenue opportunities
will accompany increased leasing and sales activity; that the restructuring of
lease agreements and the acquisition of the building to serve as the Company’s
corporate headquarters will save millions of dollars in occupancy costs; that
the investments discussed in this press release will position the Company for
accelerated high-margin revenue growth as the commercial real estate market
recovers; that revenues for the second quarter of 2010 and full year 2010 will
be as stated in this press release; that CoStar will experience organic revenue
growth in 2010; that CoStar’s renewal rates will continue to move back towards
its 90% historical average; that CoStar will track towards the middle to upper
end of its annual revenue guidance range; that GAAP and non-GAAP net income per
diluted share for the second quarter of 2010 and full year 2010 will be as
stated in this press release; that revenues will grow organically for the full
year of 2010; that earnings will grow in the second half of 2010; that the
Company will achieve its earnings outlook even with the short term dilution to
net income discussed in this press release; and that CoStar’s effective
corporate tax rate will be as assumed 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.
9