CoStar Group Sales Bookings Rise 32% and Net Income Rises 44%, Year-over-Year in Second Quarter; Company Raises Full-Year Revenue Guidance

CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of commercial real estate information, analytics and online marketplaces, announced today that revenue for the quarter ended June 30, 2019, was $344 million, an increase of 16% over revenue of $297 million for the second quarter of 2018. Net income for the second quarter of 2019 was $63 million, an increase of 44% over net income of $44 million for the second quarter of 2018.

EBITDA for the second quarter of 2019 was $94 million, an increase of 45% versus EBITDA of $64 million for the second quarter of 2018. Adjusted EBITDA (which excludes stock-based compensation, acquisition and integration related costs and other items as described below) for the second quarter of 2019 was $110 million, an increase of 29% compared to adjusted EBITDA of $85 million for the second quarter of 2018.

“We achieved one of our best financial quarters in our history,” said Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group. “We generated our highest company-wide net new bookings with $59 million in the second quarter, an increase of 32% year-over-year. Apartments.com is showing exceptional momentum, with second quarter sales bookings surging 122% year-over-year. Apartments.com achieved record sales bookings in the fourth quarter of 2018, then beat that record again in the first quarter of 2019, and now has beaten the record yet again with second quarter 2019 bookings soaring 44% over the first quarter. CoStar Group profitability continues to be exceptional with year-over-year growth in net income of 44% in the second quarter of 2019. Given our very strong results in the first half of 2019, we plan to raise the level of marketing investment in Apartments.com in the second half of 2019 accelerating the rate at which we are capturing market share.”

Florance continued, “Our Apartments.com network continued to expand its leadership position in traffic in the second quarter of 2019 with our highest level ever of unique visitors and visits according to ComScore. Company-wide results were strong as well achieving 52 million unique visitors to our platform in the second quarter of 2019.”

 

Year 2018-2019 Quarterly Results - Unaudited

(in millions, except per share data)

2018

2019

Q1

Q2

Q3

Q4

Q1

Q2

Revenues

$

274

$

297

$

306

$

316

$

328

$

344

Net income

52

44

59

84

85

63

Net income per share - diluted

1.44

1.20

1.61

2.29

2.33

1.73

Weighted average outstanding shares - diluted

36.4

36.5

36.5

36.5

36.6

36.6

EBITDA

70

64

91

125

113

94

Adjusted EBITDA

84

85

110

139

125

110

Non-GAAP net income

60

60

79

102

92

82

Non-GAAP net income per share - diluted

1.65

1.66

2.16

2.81

2.53

2.23

 

“For CoStar Group, 82% of our revenue is highly visible subscription-based revenue with high renewal rates,” said Florance. “Our second quarter 2019 trailing 12-month subscription revenue grew 25% year-over-year compared to second quarter of 2018.”

As of June 30, 2019, the Company had approximately $1.3 billion in cash, cash equivalents and long-term investments, and no outstanding debt.

Non-GAAP net income for the second quarter of 2019 (which excludes amortization of acquired intangible assets, stock-based compensation and other items as described below) was $82 million or $2.23 per diluted share, an increase of $21 million or 35% versus the second quarter of 2018.

2019 Outlook

The Company is raising its revenue guidance to a range of $1.382 billion to $1.390 billion for the full year of 2019, an increase of $11 million at the midpoint of the range compared to the prior outlook. We expect revenue for the third quarter of 2019 in the range of $350 million to $354 million, representing revenue growth of 15% over the third quarter of 2018 at the midpoint of the range.

The Company is raising its adjusted EBITDA guidance to a range of $498 million to $505 million for the full year of 2019. For the third quarter of 2019, the Company expects adjusted EBITDA in a range of $123 million to $127 million.

We are raising our full-year 2019 non-GAAP net income per diluted share guidance to a range of $10.00 to $10.14, based on 36.6 million shares. For the third quarter of 2019, we expect non-GAAP net income per diluted share in a range of $2.44 to $2.52 based on 36.6 million shares. These ranges include a non-GAAP tax rate of 25%.

The preceding forward-looking statements reflect CoStar Group’s expectations as of July 23, 2019, including forward-looking non-GAAP financial measures on a consolidated basis. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. Other than in publicly available statements, the Company does not intend to update its forward-looking statements until its next quarterly results announcement.

Reconciliation of EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share and all of the disclosed non-GAAP financial measures to their GAAP basis results are shown in detail below, along with definitions for those terms. A reconciliation of forward-looking non-GAAP guidance to the most directly comparable GAAP measure, net income, can be found within the tables included in this release.

Non-GAAP Financial Measures

For information regarding the purpose for which management uses the non-GAAP financial measures disclosed in this release and why management believes they provide useful information to investors regarding the Company’s financial condition and results of operations, please refer to the Company’s latest periodic report.

EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group before interest and other income (expense), loss on debt extinguishment, income taxes, depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that represents EBITDA before stock-based compensation expense, acquisition- and integration-related costs, restructuring costs and settlements and impairments incurred outside the Company’s normal course of business.

Non-GAAP net income is a non-GAAP financial measure determined by adjusting GAAP net income attributable to CoStar Group for stock-based compensation expense, acquisition- and integration-related costs, restructuring costs, settlement and impairment costs incurred outside the Company's normal course of business and loss on debt extinguishment, as well as amortization of acquired intangible assets and other related costs, and then subtracting an assumed provision for income taxes. In 2019, the Company is assuming a 25% tax rate in order to approximate our statutory corporate tax rate excluding the impact of discrete items.

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. For periods with GAAP net losses and non-GAAP net income, the weighted average outstanding shares used to calculate non-GAAP net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.

Earnings Conference Call

Management will conduct a conference call at 5:00 PM EDT on Tuesday, July 23, 2019 to discuss earnings results for the second quarter and the Company’s outlook. The audio portion of the conference call will be broadcast live over the Internet at investors.costargroup.com. To join the conference call by telephone, please dial (800) 230-1085 (from the United States and Canada) or (612) 332-0107 (from all other countries) and refer to conference code 469773. An audio recording of the conference call will be available for replay approximately one hour after the call's completion and will remain available for a period of time following the call. To access the recorded conference call, please dial (800) 475-6701 (from the U.S. and Canada) or (320) 365-3844 (from all other countries) using access code 469773. The webcast replay will also be available in the Investors section of CoStar Group's website for a period of time following the call.

 

CoStar Group, Inc.

Condensed Consolidated Statements of Operations - Unaudited

(in thousands, except per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Revenues

$

343,760

$

297,018

$

672,185

$

570,736

Cost of revenues

71,918

67,136

143,071

129,613

Gross profit

271,842

229,882

529,114

441,123

Operating expenses:

Selling and marketing (excluding customer base amortization)

119,075

112,965

207,169

201,455

Software development

28,455

26,271

56,383

49,184

General and administrative

42,337

38,056

82,413

78,646

Customer base amortization

7,175

8,816

14,857

14,619

197,042

186,108

360,822

343,904

Income from operations

74,800

43,774

168,292

97,219

Interest and other income

5,913

2,652

10,858

5,639

Interest and other expense

(697

)

(728

)

(1,429

)

(1,418

)

Income before income taxes

80,016

45,698

177,721

101,440

Income tax expense

16,768

1,863

29,304

5,374

Net income

$

63,248

$

43,835

$

148,417

$

96,066

Net income per share - basic

$

1.74

$

1.22

$

4.09

$

2.67

Net income per share - diluted

$

1.73

$

1.20

$

4.06

$

2.64

Weighted average outstanding shares - basic

36,310

36,073

36,273

35,983

Weighted average outstanding shares - diluted

36,627

36,450

36,597

36,400

 

CoStar Group, Inc.

Reconciliation of Non-GAAP Financial Measures - Unaudited

(in thousands, except per share data)

Reconciliation of Net Income to Non-GAAP Net Income

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net income

$

63,248

$

43,835

$

148,417

$

96,066

Income tax expense

16,768

1,863

29,304

5,374

Income before income taxes

80,016

45,698

177,721

101,440

Amortization of acquired intangible assets

12,208

14,140

25,403

24,551

Stock-based compensation expense

13,816

11,228

25,845

21,640

Acquisition and integration related costs

492

9,506

741

13,028

Restructuring and related costs

2,180

2,248

Non-GAAP income before income taxes

108,712

80,572

231,958

160,659

Assumed rate for income tax expense *

25

%

25

%

25

%

25

%

Assumed provision for income tax expense

(27,178

)

(20,143

)

(57,989

)

(40,165

)

Non-GAAP net income

$

81,534

$

60,429

$

173,969

$

120,494

Net income per share - diluted

$

1.73

$

1.20

$

4.06

$

2.64

Non-GAAP net income per share - diluted

$

2.23

$

1.66

$

4.75

$

3.31

Weighted average outstanding shares - basic

36,310

36,073

36,273

35,983

Weighted average outstanding shares - diluted

36,627

36,450

36,597

36,400

* A 25% tax rate is assumed for 2019 and 2018, which approximates our statutory corporate tax rate.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net income

$

63,248

$

43,835

$

148,417

$

96,066

Amortization of acquired intangible assets in cost of revenues

5,033

5,324

10,546

9,932

Amortization of acquired intangible assets in operating expenses

7,175

8,816

14,857

14,619

Depreciation and other amortization

6,546

6,444

13,010

13,016

Interest and other income

(5,913

)

(2,652

)

(10,858

)

(5,639

)

Interest and other expense

697

728

1,429

1,418

Income tax expense

16,768

1,863

29,304

5,374

EBITDA

$

93,554

$

64,358

$

206,705

$

134,786

Stock-based compensation expense

13,816

11,228

25,845

21,640

Acquisition and integration related costs

492

9,506

741

13,028

Restructuring and related costs

2,180

2,248

Adjusted EBITDA

$

110,042

$

85,092

$

235,539

$

169,454

 

CoStar Group, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands)

June 30,
2019

December 31,
2018

ASSETS

Current assets:

Cash and cash equivalents

$

1,297,812

$

1,100,416

Accounts receivable, less allowance of $5,452 and $5,709 as of June 30, 2019 and December 31, 2018, respectively

95,583

89,192

Prepaid expenses and other current assets

20,367

23,690

Total current assets

1,413,762

1,213,298

Long-term investments

10,070

10,070

Deferred income taxes, net

5,670

7,469

Property and equipment, net

84,518

83,303

Lease right-of-use assets

111,004

Goodwill

1,617,853

1,611,535

Intangible assets, net

272,177

288,911

Deferred commission costs, net

83,874

76,031

Deposits and other assets

6,762

7,432

Income tax receivable

14,908

14,908

Total assets

$

3,620,598

$

3,312,957

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

6,996

$

6,327

Accrued wages and commissions

47,394

45,588

Accrued expenses

48,932

29,821

Deferred gain on the sale of building

2,523

Income taxes payable

8,551

14,288

Deferred rent

4,153

Lease liabilities

27,097

Deferred revenue

58,290

51,459

Total current liabilities

197,260

154,159

Deferred gain on the sale of building

13,669

Deferred rent

31,944

Deferred income taxes, net

77,452

69,857

Income taxes payable

17,540

17,386

Lease and other long-term liabilities

124,275

4,000

Total liabilities

$

416,527

$

291,015

Total stockholders’ equity

3,204,071

3,021,942

Total liabilities and stockholders’ equity

$

3,620,598

$

3,312,957

 

CoStar Group, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

 

 

Six Months Ended
June 30,

 

2019

2018

Operating activities:

 

Net income

 

$

148,417

$

96,066

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization

 

38,413

37,567

Amortization of deferred commissions costs

 

25,550

24,275

Amortization of debt issuance costs

 

438

436

Stock-based compensation expense

 

25,845

21,640

Deferred income taxes, net

 

6,359

4,291

Bad debt expense

 

5,224

2,857

Changes in operating assets and liabilities, net of acquisitions:

 

Accounts receivable

 

(10,898

)

(5,089

)

Prepaid expenses and other current assets

 

1,751

(17,655

)

Deferred commissions

 

(33,397

)

(29,554

)

Lease right-of-use and other assets

 

11,095

(1,444

)

Accounts payable and other liabilities

 

4,137

(16,619

)

Deferred revenue

 

10,633

2,546

Net cash provided by operating activities

 

233,567

119,317

 

Investing activities:

 

Purchases of property and equipment and other assets

 

(14,387

)

(15,851

)

Cash paid for acquisitions, net of cash acquired

 

(13,721

)

(340,074

)

Net cash used in investing activities

 

(28,108

)

(355,925

)

 

Financing activities:

 

Repurchase of restricted stock to satisfy tax withholding obligations

 

(24,225

)

(22,394

)

Proceeds from exercise of stock options and employee stock purchase plan

 

16,695

14,214

Other financing activities

 

(123

)

Net cash used in financing activities

 

(7,653

)

(8,180

)

 

Effect of foreign currency exchange rates on cash and cash equivalents

 

(410

)

(397

)

Net increase (decrease) in cash and cash equivalents

 

197,396

(245,185

)

Cash and cash equivalents at the beginning of period

 

1,100,416

1,211,463

Cash and cash equivalents at the end of period

 

$

1,297,812

$

966,278

  

CoStar Group, Inc.

Disaggregated Revenues - Unaudited

(in thousands)

Three Months Ended June 30,

2019

2018

North America

International

Total

North America

International

Total

Information and analytics

CoStar Suite

$

145,910

$

6,915

$

152,825

$

127,289

$

6,523

$

133,812

Information services

18,659

2,118

20,777

13,474

2,207

15,681

Online marketplaces

Multifamily

120,488

120,488

104,793

104,793

Commercial property and land

49,505

165

49,670

42,732

42,732

Total revenues

$

334,562

$

9,198

$

343,760

$

288,288

$

8,730

$

297,018

 

Six Months Ended June 30,

2019

2018

North America

International

Total

North America

International

Total

Information and analytics

CoStar Suite

$

286,883

$

13,643

$

300,526

$

251,176

$

12,997

$

264,173

Information services

35,250

4,377

39,627

26,234

4,656

30,890

Online marketplaces

Multifamily

234,756

234,756

192,476

192,476

Commercial property and land

96,910

366

97,276

83,197

83,197

Total revenues

$

653,799

$

18,386

$

672,185

$

553,083

$

17,653

$

570,736

 

CoStar Group, Inc.

Results of Segments - Unaudited

(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

EBITDA

North America

$

95,001

$

64,762

$

210,269

$

135,817

International

(1,447

)

(404

)

(3,564

)

(1,031

)

Total EBITDA

$

93,554

$

64,358

$

206,705

$

134,786

 
 

CoStar Group, Inc.

Reconciliation of Non-GAAP Financial Measures with 2018-2019 Quarterly Results - Unaudited

(in millions, except per share data)

Reconciliation of Net Income to Non-GAAP Net Income

2018

2019

Q1

Q2

Q3

Q4

Q1

Q2

Net income

$

52.2

$

43.8

$

58.8

$

83.5

$

85.2

$

63.2

Income tax expense

3.5

1.9

14.2

26.1

12.5

16.8

Income before income taxes

55.7

45.7

73.0

109.6

97.7

80.0

Amortization of acquired intangible assets

10.4

14.1

13.6

13.3

13.2

12.2

Stock-based compensation expense

10.4

11.2

9.0

12.1

12.0

13.8

Acquisition and integration related costs

3.5

9.5

7.2

1.5

0.2

0.5

Restructuring and related costs

2.3

0.1

2.2

Non-GAAP income before income taxes

80.1

80.6

105.1

136.5

123.2

108.7

Assumed rate for income tax expense *

25

%

25

%

25

%

25

%

25

%

25

%

Assumed provision for income tax expense

(20.0

)

(20.1

)

(26.3

)

(34.1

)

(30.8

)

(27.2

)

Non-GAAP net income

$

60.1

$

60.4

$

78.8

$

102.3

$

92.4

$

81.5

Non-GAAP net income per share - diluted

$

1.65

$

1.66

$

2.16

$

2.81

$

2.53

$

2.23

Weighted average outstanding shares - basic

35.9

36.1

36.1

36.1

36.2

36.3

Weighted average outstanding shares - diluted

36.4

36.5

36.5

36.5

36.6

36.6

* A 25% tax rate is assumed for 2019 and 2018, which approximates our statutory corporate tax rate.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

2018

2019

Q1

Q2

Q3

Q4

Q1

Q2

Net income

$

52.2

$

43.8

$

58.8

$

83.5

$

85.2

$

63.2

Amortization of acquired intangible assets

10.4

14.1

13.6

13.3

13.2

12.2

Depreciation and other amortization

6.6

6.4

6.8

6.5

6.5

6.5

Interest and other income

(3.0

)

(2.6

)

(3.0

)

(4.6

)

(4.9

)

(5.9

)

Interest and other expense

0.7

0.7

0.7

0.7

0.7

0.7

Income tax expense

3.5

1.9

14.2

26.1

12.5

16.8

EBITDA

$

70.4

$

64.3

$

91.1

$

125.5

$

113.2

$

93.5

Stock-based compensation expense

10.4

11.2

9.0

12.1

12.0

13.8

Acquisition and integration related costs

3.5

9.5

7.2

1.5

0.2

0.5

Restructuring and related costs

2.3

0.1

2.2

Adjusted EBITDA

$

84.4

$

85.1

$

109.6

$

139.0

$

125.5

$

110.0

 

CoStar Group, Inc.

Reconciliation of Forward-Looking Guidance - Unaudited

(in thousands, except per share data)

Reconciliation of Forward-Looking Guidance, Net Income to Non-GAAP Net Income

Guidance Range

Guidance Range

For the Three Months

For the Twelve Months

Ended September 30, 2019

Ended December 31, 2019

Low

High

Low

High

Net income

$

65,000

$

72,000

$

281,000

$

291,000

Income tax expense

22,000

24,000

94,000

97,000

Income before income taxes

87,000

96,000

375,000

388,000

Amortization of acquired intangible assets

12,000

12,000

49,000

49,000

Stock-based compensation expense

15,000

13,000

56,000

53,000

Acquisition and integration related costs

2,000

1,000

3,000

2,000

Restructuring and related costs

3,000

1,000

5,000

3,000

Non-GAAP income before income taxes

119,000

123,000

488,000

495,000

Assumed rate for income tax expense *

25

%

25

%

25

%

25

%

Assumed provision for income tax expense

(29,800

)

(30,800

)

(122,000

)

(123,800

)

Non-GAAP net income

$

89,200

$

92,200

$

366,000

$

371,200

Net income per share - diluted

$

1.78

$

1.97

$

7.68

$

7.95

Non-GAAP net income per share - diluted

$

2.44

$

2.52

$

10.00

$

10.14

Weighted average outstanding shares - diluted

36,600

36,600

36,600

36,600

* A 25% tax rate is assumed, which approximates our statutory corporate tax rate.

Reconciliation of Forward-Looking Guidance, Net Income to Adjusted EBITDA

Guidance Range

Guidance Range

For the Three Months

For the Twelve Months

Ended September 30, 2019

Ended December 31, 2019

Low

High

Low

High

Net income

$

65,000

$

72,000

$

281,000

$

291,000

Amortization of acquired intangible assets

12,000

12,000

49,000

49,000

Depreciation and other amortization

7,000

7,000

26,000

26,000

Interest and other expense, net

(3,000

)

(3,000

)

(16,000

)

(16,000

)

Income tax expense

22,000

24,000

94,000

97,000

Stock-based compensation expense

15,000

13,000

56,000

53,000

Acquisition and integration related costs

2,000

1,000

3,000

2,000

Restructuring and related costs

3,000

1,000

5,000

3,000

Adjusted EBITDA

$

123,000

$

127,000

$

498,000

$

505,000

 

About CoStar Group, Inc.

CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with 5.8 million monthly unique visitors. Realla is the UK’s most comprehensive commercial property digital marketplace. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. CoStar Group’s websites attracted an average of over 52 million unique monthly visitors in aggregate in the second quarter of 2019. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of over 3,900 worldwide, including the industry’s largest professional research organization. For more information, visit www.costargroup.com.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about CoStar Group's financial expectations, the Company's plans, objectives, expectations and intentions and other statements including words such as “hope,” "anticipate," "may," "believe," "expect," "intend," "will," "should," "plan," "estimate," "predict," "continue" and "potential" or the negative of these terms or other comparable terminology. Such statements are based upon the current beliefs and expectations of management of CoStar Group and are subject to significant risks and uncertainties. Actual results may differ materially from the results anticipated in the forward-looking statements. The following factors, among others, could cause or contribute to such differences: the risk that the trends stated or implied by this release cannot or will not be sustained at the current pace, including trends related to revenue, net income, non-GAAP net income, EBITDA, adjusted EBITDA, sales bookings and traffic; the risk that the Company is unable to sustain current revenue, earnings and bookings growth rates or increase them; the risk that the Company’s Apartments.com marketing investment plans change; the risk that additional marketing investments in Apartments.com do not produce the expected results, including acceleration of the rate at which the Company captures market share; the risk that revenues for the third quarter and full year 2019 will not be as stated in this press release; the risk that net income for the third quarter and full year 2019 will not be as stated in this press release; the risk that adjusted EBITDA for the third quarter and full year 2019 will not be as stated in this press release; the risk that non-GAAP net income and non-GAAP net income per diluted share for the third quarter and full year 2019 will not be as stated in this press release; and the risk that the tax rate estimates stated in this press release are incorrect or may change. Additional factors that could cause results to differ materially from those anticipated in the forward-looking statements can be found in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2018, and CoStar’s Quarterly Report on Form 10-Q for the period ended March 31, 2019, each of which is filed with the SEC, including in the “Risk Factors” section of those filings, and the Company’s other filings with the SEC available at the SEC’s website (www.sec.gov). CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contacts:

Scott Wheeler
Chief Financial Officer
(202) 336-6920
swheeler@costar.com

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