CoStar Group, Inc. Announces Second Quarter 2009 Results

Acquisition of Global Real Estate Analytics Leader PPR Adds New Revenue Growth Opportunity

• Press Release
• Source: CoStar Group, Inc.
• On 4:05 pm EDT, Wednesday July 22, 2009

BETHESDA, Md., July 22, 2009 (GLOBE NEWSWIRE) -- CoStar Group, Inc. (Nasdaq:CSGP - News), the number one provider of information/marketing services to the commercial real estate industry, today announced that net income for the quarter ended June 30, 2009 was $4.6 million, or $0.24 per diluted share, compared to $5.4 million, or $0.28 per diluted share for the quarter ended June 30, 2008. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter ended June 30, 2009 was $11.6 million, compared to EBITDA of $12.8 million for the quarter ended June 30, 2008.

Related Quotes

Symbol	Price	Change
CSGP	40.91	-0.12

{"s" : "csgp","k" : "c10,l10,p20,t10","o" : "","j" : ""}

As of June 30, 2009, the company had $243.8 million in cash, cash equivalents, short-term and long-term investments, an increase of $10.3 million since March 31, 2009, and no long-term debt.

"In this economic environment, demand for commercial real estate analysis and forecasting supported by comprehensive and accurate property and market data is extraordinarily high," said CoStar Group President and CEO Andrew C. Florance. "The acquisition of Property and Portfolio Research (PPR) offered an exceptional opportunity to acquire the leading provider of global real estate investment analysis and market forecasting, an area we believe holds significant opportunity for revenue growth."

            Year 2008-2009 Quarterly Results - Unaudited
                 (in millions, except per share data)

                                  2008                         2009
                      -----------------------------      -------------
                        Q1      Q2      Q3      Q4         Q1      Q2
                      -----------------------------      -------------
 Total Revenues       $52.3   $53.5   $53.8   $52.9      $51.4   $50.1
 EBITDA                11.5    12.8    15.5    16.7       14.4    11.6
 Net income             5.0     5.4     6.6     7.5        6.1     4.6
 Net income per
  share - diluted      0.26    0.28    0.34    0.38       0.31    0.24
 Weighted average
  outstanding
  shares - diluted     19.4    19.5    19.6    19.5       19.6    19.6

"By augmenting PPR's expert real estate investment analysis with CoStar's comprehensive database of commercial property information, we expect to meet the strong demand from commercial real estate investors and lenders for high quality forecasting and investment risk analysis," Florance added. "And by marketing PPR's analytic tools and services through our much-larger distribution channel to the thousands of firms in CoStar's client base, we expect to dramatically accelerate PPR's growth and substantially increase revenue in this product area."

The acquisition of PPR is part of a larger strategy on the part of CoStar to leverage its strong financial position and experienced acquisition team to acquire additional commercial real estate information and technology companies.

"CoStar's acquisition of PPR provides a model for how we intend to acquire successful companies that can leverage CoStar's strategic assets, including our database of research-verified commercial property information, strong balance sheet, extensive client base, advanced technology platform and highly effective sales and marketing channel, to become even more successful and reach their full revenue potential," stated Florance. "CoStar has identified over 40 companies as possible acquisitions."

CoStar acquired PPR from DMG Information, Inc. (DMGI), a division of U.K.-based Daily Mail and General Trust, plc, in exchange for approximately $22.0 million payable in CoStar Group common stock in the aggregate amount of approximately 575,000 shares. The company expects PPR to be accretive to earnings in 2010 as a result of expected revenue growth.

Revenues for the quarter ended June 30, 2009 were $50.1 million, compared to revenues of $53.5 million for the quarter ended June 30, 2008. Subscription-based revenue accounts for more than 95% of the company's total revenue. The 12-month trailing customer renewal rate for CoStar's subscription-based services was approximately 86%.

U.S. revenues in the second quarter of 2009 totaled $45.7 million, compared to $47.5 million in the second quarter of 2008, and International revenues totaled GBP 2.9 million in the second quarter of 2009, as compared to GBP 3.1 million in the second quarter of 2008.

Third Quarter 2009 Outlook

"For the third quarter of 2009, we expect approximately $51.0 to $52.5 million in revenues, which includes $2.5 to $3.0 million of prorated PPR revenue in the quarter, and fully diluted net income per share of approximately $0.19 to $0.21," stated CoStar Group Chief Financial Officer Brian J. Radecki. "Our third quarter outlook includes approximately $500,000 of deal-related costs, approximately $200,000 to $300,000 of purchase amortization, and approximately $150,000 of equity compensation related to the acquisition of PPR," said Radecki.

"For the full year of 2009, we expect approximately $205.0 to $208.5 million in revenues, which includes $7.0 to $7.5 million of prorated PPR revenue for the year, and fully diluted net income per share of approximately $0.95 to $1.00," Radecki added. "Our full year outlook also includes approximately $500,000 of deal-related costs, approximately $500,000 of purchase amortization, and approximately $300,000 of equity compensation related to the acquisition of PPR. In total, our full year guidance includes approximately $6.5 million in pre-tax, non-cash equity compensation charges related to the vesting of restricted stock and stock option grants," said Radecki. For 2009, the company expects an overall effective tax rate of approximately 45% to 47%, and an interest rate of approximately 0.25% to 0.5% for interest income.

Management will conduct a conference call to discuss earnings results for the second quarter ended June 30, 2009, and the financial outlook for the third quarter of 2009 at 11:00 a.m. ET on Thursday, July 23, 2009. 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) 230-1766 from within the United States and Canada, or (612) 332-0820 from outside the United States and Canada. Refer to conference reservation number 106464. A replay of the conference call will be available approximately one hour after the live call concludes and remain available through midnight on August 6, 2009. 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 106464. The replay will also be available over the Internet at http://www.costar.com/corporate/investor/ for a period of time following the call.

                              CoStar Group, Inc.
       Condensed Consolidated Statements of Operations-Unaudited
                 (in thousands, except per share data)


                           For the Three Months    For the Six Months
                               Ended June 30,         Ended June 30,
                             2009        2008        2009       2008
                           --------    --------    --------   --------


 Revenues                  $ 50,064    $ 53,478    $101,434   $105,742
 Cost of revenues            16,744      18,341      33,638     38,062
                           --------    --------    --------   --------
 Gross margin                33,320      35,137      67,796     67,680

 Operating expenses:
  Selling and marketing       9,751      12,121      18,912     22,994
  Software development        3,065       3,141       6,243      6,555
  General and
   administrative            11,571      10,099      22,021     19,904
  Purchase amortization         742       1,266       1,688      2,487
                           --------    --------    --------   --------
                             25,129      26,627      48,864     51,940
                           --------    --------    --------   --------

 Income from operations       8,191       8,510      18,932     15,740
 Interest and other
  income, net                   322       1,243         764      3,181
                           --------    --------    --------   --------
 Income before income
  taxes                       8,513       9,753      19,696     18,921
 Income tax expense, net      3,897       4,318       8,974      8,444
                           --------    --------    --------   --------
 Net income                $  4,616    $  5,435    $ 10,722   $ 10,477
                           ========    ========    ========   ========

 Net income per share -
  basic                    $   0.24    $   0.28    $   0.55   $   0.54
                           ========    ========    ========   ========
 Net income per share -
  diluted                  $   0.24    $   0.28    $   0.55   $   0.54
                           ========    ========    ========   ========

 Weighted average
  outstanding shares -
  basic                      19,479      19,311      19,481     19,280
                           ========    ========    ========   ========
 Weighted average
  outstanding shares -
  diluted                    19,638      19,508      19,599     19,470
                           ========    ========    ========   ========

 Reconciliation of
  Non-GAAP Financial
  Measures with Net Income

 Net income                $  4,616    $  5,435    $ 10,722   $ 10,477
 Purchase amortization
  in cost of revenues           503         604         982      1,187
 Purchase amortization
  in operating expenses         742       1,266       1,688      2,487
 Depreciation and other
  amortization                2,213       2,464       4,464      4,942
 Interest income, net          (322)     (1,243)       (764)    (3,181)
 Income tax expense, net      3,897       4,318       8,974      8,444
                           --------    --------    --------   --------
 EBITDA                    $ 11,649    $ 12,844    $ 26,066   $ 24,356
                           ========    ========    ========   ========

                          CoStar Group, Inc.
                 Condensed Consolidated Balance Sheets
                            (in thousands)

                                         June 30,          December 31,
                                           2009                2008
                                        -----------        -----------
                                        (Unaudited)
 ASSETS
 Current assets:
   Cash and cash equivalents              $ 183,361          $ 159,982
   Short-term investments                    30,282             35,268
   Accounts receivable, net                  12,106             12,294
   Deferred income taxes                      2,546              2,036
   Prepaid and other current
    assets                                    3,152              2,903
                                        -----------        -----------
 Total current assets                       231,447            212,483

 Long-term investments                       30,110             29,340
 Deferred income taxes                        3,187              3,392
 Property and equipment, net                 15,274             16,876
 Intangible and other assets, net            72,292             70,749
 Deposits and other assets                    1,598              1,544
                                        -----------        -----------
 Total assets                             $ 353,908          $ 334,384
                                        ===========        ===========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable and accrued
    expenses                              $  18,378          $  19,694
   Deferred revenue                           9,075              9,442
                                        -----------        -----------
 Total current liabilities                   27,453             29,136

 Deferred income taxes                           63                132
 Income taxes payable                         1,703              1,695

 Stockholders' equity                       324,689            303,421
                                        -----------        -----------
 Total liabilities and stockholders' 
  equity                                  $ 353,908          $ 334,384
                                        ===========        ===========

                          CoStar Group, Inc.
                     Results of Segments-Unaudited
                            (in thousands)

                           For the Three Months    For the Six Months
                               Ended June 30,        Ended June 30,
                             2009        2008        2009      2008
                          ---------   ---------   ---------  ---------
 Revenues
 United States             $ 45,651    $ 47,459    $ 92,783   $ 93,862
 International                4,413       6,019       8,651     11,880
                          ---------   ---------   ---------  ---------
 Total Revenues            $ 50,064    $ 53,478    $101,434   $105,742
                          =========   =========   =========  =========

 EBITDA
 United States             $ 11,970    $ 13,762    $ 26,556   $ 26,332
 International*                (321)       (918)       (490)    (1,976)
                          ---------   ---------   ---------  ---------
 Total EBITDA              $ 11,649    $ 12,844    $ 26,066   $ 24,356
                          =========   =========   =========  =========


 *   International EBITDA includes a corporate allocation of
     approximately $81,000 and $285,000 for the three months ended
     June 30, 2009 and 2008, respectively, and $181,000 and $610,000
     for the six months ended June 30, 2009 and 2008, respectively.


 Reconciliation of Non-GAAP Financial Measures with 2008-2009
 Quarterly Results - Unaudited
 (in millions)
                                  2008                       2009
                     ------------------------------     --------------
                       Q1      Q2      Q3     Q4          Q1       Q2
                     ------------------------------     --------------

 Net income           $ 5.0   $ 5.4   $ 6.6   $ 7.5      $ 6.1   $ 4.6
 Purchase
  amortization          1.8     1.9     1.8     1.7        1.4     1.2
 Depreciation
  and other
  amortization          2.5     2.5     2.4     2.3        2.2     2.2
 Interest income,
  net                  (1.9)   (1.3)   (0.9)   (0.8)      (0.4)   (0.3)
 Income tax
  expense, net          4.1     4.3     5.6     6.0        5.1     3.9
                     ------  ------  ------  ------     --------------
 EBITDA              $ 11.5  $ 12.8  $ 15.5  $ 16.7     $ 14.4  $ 11.6
                     ======  ======  ======  ======     ==============

About CoStar Group, Inc.

CoStar Group, Inc. (Nasdaq:CSGP - News) 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 1,400 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, 2008, and CoStar's Form 10-Q for the quarter ended March 31, 2009, under the heading "Risk Factors." In addition to these statements, there can be no assurance that global real estate investment analysis and market forecasting holds significant opportunity for revenue growth; that by augmenting PPR's expert real estate investment analysis with CoStar's comprehensive database of commercial property information, CoStar will meet the strong demand from commercial real estate investors and lenders for high quality forecasting and investment risk analysis; that by marketing PPR's analytic tools and services through CoStar's much-larger distribution channel to the thousands of firms in CoStar's client base, CoStar will dramatically accelerate PPR's growth and substantially increase revenue in this product area; that CoStar will acquire additional commercial real estate information and technology companies or any of the over 40 companies identified as possible acquisitions and, if it does, there is no assurance as to when any one or more of those acquisitions will close; that CoStar will acquire successful companies that can leverage CoStar's strategic assets to become even more successful and reach their full revenue potential; that PPR will be accretive to earnings in 2010 as a result of expected revenue growth; that quarterly revenue for the third quarter 2009 and revenue for the full year 2009 will be as stated in this press release; that fully diluted net income for the third quarter of 2009 and full year 2009 will be as stated in this press release; that deal-related costs, purchase amortization and equity compensation related to the acquisition of PPR for the third quarter of 2009 and full year 2009 will be as stated in this press release; that the equity compensation charges for the full year 2009 will be as stated in this press release; and that the overall effective tax rate and the interest rate for our interest income for 2009 will be as stated 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.

CoStar Group, Inc.
Investors/Analysts:
Brian J. Radecki, Chief Financial Officer
(301) 664-9132
bradecki@costar.com
Media:
Timothy J. Trainor, Communications Director
(301) 280-7695
ttrainor@costar.com