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CoStar Group Third Quarter 2021 Revenue Increased 17% Year-over-Year, CoStar Accelerated to Double-Digit Revenue Growth with Net Sales Reaching All-Time High

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  • CSGP

WASHINGTON, October 26, 2021--(BUSINESS WIRE)--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 September 30, 2021, was $499 million, an increase of 17% over revenue of $426 million for the third quarter of 2020.

Net income for the third quarter of 2021 was $64 million, or $0.16 per diluted share. Non-GAAP net income for the third quarter of 2021 (which excludes amortization of acquired intangible assets, stock-based compensation, and other items as described below) was $99 million or $0.25 per diluted share, an increase of $10 million or 11% versus the third quarter of 2020. EBITDA for the third quarter of 2021 was $123 million, an increase of 13% versus EBITDA of $108 million for the third quarter of 2020.

"We achieved another great quarter of strong results, with CoStar Group now at nearly $2 billion in run rate revenue and profit for the third quarter of 2021 well-ahead of our guidance," commented Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group. "CoStar performance continues to improve, with revenue returning to double-digit growth rates in the third quarter of 2021 and our CoStar sales team produced net sales bookings 57% higher quarter-over-quarter and 566% higher year-over-year," continued Florance. "I’m very happy with the performance of our Ten-X and Residential businesses as well, both of which delivered exceptional revenue growth of 27% for Ten-X and 38% for Homesnap, on a year-over-year and pro forma basis, respectively."

"With recent record levels of demand for apartments, vacancies have declined to the lowest levels in decades creating some headwinds for demand in apartment advertising. However, traffic to our network of sites increased 17% year-over-year in the third quarter of 2021," stated Florance, "with Apartments.com generating millions more high-quality leads for our customers year-over-year in a low-vacancy environment while our clients are increasing their rents to record levels. This tremendous growth in leads and rents has positioned Apartments.com to begin initiating pricing adjustments to better capture the value of the lead flow we are delivering to our clients. We are just beginning to implement the new pricing, and I am encouraged by the initial results of the price changes."

Companywide net bookings for the third quarter of 2021 were $47 million, which includes stronger than expected CoStar sales offset by sales results slowed by the ultra-low vacancy rates in Multifamily.

Year 2020-2021 Quarterly Results - Unaudited

(in millions, except per share data)

2020

2021

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Revenues

$392

$397

$426

$444

$458

$480

$499

Net income

73

60

58

36

74

61

64

Net income per share - diluted(1)

0.20

0.16

0.15

0.09

0.19

0.16

0.16

Weighted average outstanding shares - diluted(1)

368

377

394

394

394

394

394

EBITDA

100

109

108

88

136

133

123

Adjusted EBITDA

124

129

134

167

160

150

144

Non-GAAP net income

90

88

89

112

108

103

99

Non-GAAP net income per share - diluted(1)

0.24

0.23

0.23

0.29

0.27

0.26

0.25

__________________________

(1) Prior period amounts have been retroactively adjusted to reflect the ten-for-one stock split effected in the form of a stock dividend in June 2021.

As of September 30, 2021, the Company had approximately $3.8 billion in cash, cash equivalents and restricted cash and outstanding debt of approximately $988 million.

2021 Outlook

"In order to provide additional transparency and insight into the revenue performance of our most promising growth areas, we will now report revenue for both LoopNet and Residential services separately in our quarterly financial results," said CoStar Group Chief Financial Officer, Scott Wheeler. The Commercial Property and Land sector is being renamed Other Marketplaces and includes Ten-X and the Lands and Businesses for Sale marketplaces.

The Company is adjusting its revenue guidance for the full year of 2021 to a new range of $1.935 billion to $1.940 billion, representing growth of approximately 17% year-over-year at the midpoint of the range. The new guidance includes a reduction in expected revenue from Multifamily which is partially offset by stronger expected revenue from CoStar. Revenue for the fourth quarter of 2021 is expected to be in the range of $498 million to $503 million, representing year-over-year revenue growth of approximately 13% at the midpoint of the range.

The Company is raising its adjusted EBITDA guidance for the full year of 2021 to a new range of $615 million to $620 million, representing growth of approximately 12% at the midpoint of the range. For the fourth quarter of 2021, the Company expects adjusted EBITDA in a range of $161 million to $166 million.

The Company is raising its non-GAAP net income per diluted share guidance for full-year 2021 to a new range of $1.07 to $1.08 per share based on 394 million shares. For the fourth quarter of 2021, we expect non-GAAP net income per diluted share in a range of $0.29 to $0.30 per share based on 394 million shares. These ranges include an estimated non-GAAP tax rate of 25% for the full year and the fourth quarter of 2021.

The preceding forward-looking statements reflect CoStar Group’s expectations as of October 26, 2021, including forward-looking non-GAAP financial measures on a consolidated basis, based on current estimates, expectations, observations, and trends. Given the risk factors, rapidly evolving economic environment, and uncertainties and assumptions discussed in this release and in our quarterly reports on Form 10-Q and annual reports on Form 10-K, including uncertainties as a result of the COVID-19 pandemic and responses to it by, and the impact on, global economies and the commercial real estate industry, 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 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 (expense) income and other (expense) income, 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 2021, 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 to discuss third quarter 2021 results and the Company’s outlook at 5:00 PM EDT on Tuesday, October 26, 2021. A live audio webcast of the conference will be available in listen-only mode through the Investors section of the CoStar Group website: https://investors.costargroup.com. A replay of the webcast audio will also be available in the Investors section of our 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

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenues

$

499,319

$

425,620

$

1,437,349

$

1,214,626

Cost of revenues

92,597

77,865

270,911

230,814

Gross profit

406,722

347,755

1,166,438

983,812

Operating expenses:

Selling and marketing (excluding customer base amortization)

180,055

146,634

483,354

402,202

Software development

53,143

40,732

148,500

121,343

General and administrative

64,671

65,322

186,747

181,598

Customer base amortization

19,121

18,258

55,885

44,677

316,990

270,946

874,486

749,820

Income from operations

89,732

76,809

291,952

233,992

Interest expense, net

(7,943)

(7,537)

(23,698)

(9,482)

Other income (expense)

1,546

(338)

2,343

29

Income before income taxes

83,335

68,934

270,597

224,539

Income tax expense

19,031

10,748

70,933

33,200

Net income

$

64,304

$

58,186

$

199,664

$

191,339

Net income per share - basic(1)

$

0.16

$

0.15

$

0.51

$

0.51

Net income per share - diluted(1)

$

0.16

$

0.15

$

0.51

$

0.50

Weighted-average outstanding shares - basic(1)

392,419

391,586

392,101

377,177

Weighted-average outstanding shares - diluted(1)

394,295

394,013

394,036

379,704

__________________________

(1) Prior period amounts have been retroactively adjusted to reflect the ten-for-one stock split effected in the form of a stock dividend in June 2021.

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

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Net income

$

64,304

$

58,186

$

199,664

$

191,339

Income tax expense

19,031

10,748

70,933

33,200

Income before income taxes

83,335

68,934

270,597

224,539

Amortization of acquired intangible assets

26,330

24,870

77,450

63,348

Stock-based compensation expense

16,299

16,730

46,988

41,437

Acquisition and integration related costs

5,012

7,887

15,475

26,631

Restructuring and related costs

413

413

Other expense

934

113

2,791

113

Non-GAAP income before income taxes

131,910

118,947

413,301

356,481

Assumed rate for income tax expense(1)

25

%

25

%

25

%

25

%

Assumed provision for income tax expense

(32,978)

(29,737)

(103,325)

(89,120)

Non-GAAP net income

$

98,932

$

89,210

$

309,976

$

267,361

Net income per share - diluted(2)

$

0.16

$

0.15

$

0.51

$

0.50

Non-GAAP net income per share - diluted(2)

$

0.25

$

0.23

$

0.79

$

0.70

Weighted average outstanding shares - basic(2)

392,419

391,586

392,101

377,177

Weighted average outstanding shares - diluted(2)

394,295

394,013

394,036

379,704

__________________________

(1) A 25% tax rate is assumed for 2021 and 2020, which approximates our statutory federal and state corporate tax rate.

(2) Prior period amounts have been retroactively adjusted to reflect the ten-for-one stock split effected in the form of a stock dividend in June 2021.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Net income

$

64,304

$

58,186

$

199,664

$

191,339

Amortization of acquired intangible assets in cost of revenues

7,209

6,612

21,565

18,671

Amortization of acquired intangible assets in operating expenses

19,121

18,258

55,885

44,677

Depreciation and other amortization

6,610

6,806

22,138

20,563

Interest expense

7,943

7,537

23,698

9,482

Other (income) expense

(1,546)

338

(2,343)

(29)

Income tax expense

19,031

10,748

70,933

33,200

EBITDA

$

122,672

$

108,485

$

391,540

$

317,903

Stock-based compensation expense

16,299

16,730

46,988

41,437

Acquisition and integration related costs

5,012

7,887

15,475

26,631

Restructuring and related costs

413

413

Adjusted EBITDA

$

143,983

$

133,515

$

454,003

$

386,384

CoStar Group, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands)

September 30,
2021

December 31,
2020

ASSETS

Current assets:

Cash, cash equivalents and restricted cash

$

3,761,587

$

3,755,912

Accounts receivable

128,700

119,059

Less: Allowance for credit losses

(13,049)

(15,110)

Accounts receivable, net

115,651

103,949

Prepaid expenses and other current assets

37,599

28,651

Total current assets

3,914,837

3,888,512

Deferred income taxes, net

1,975

4,983

Property and equipment, net

238,866

126,325

Lease right-of-use assets

105,964

108,740

Goodwill

2,293,514

2,235,999

Intangible assets, net

447,900

426,745

Deferred commission costs, net

96,303

93,274

Deposits and other assets

16,971

15,856

Income tax receivable

14,986

14,986

Total assets

$

7,131,316

$

6,915,420

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

17,487

$

15,732

Accrued wages and commissions

82,905

80,998

Accrued expenses

86,788

110,305

Income taxes payable

11,828

16,316

Lease liabilities

29,878

32,648

Deferred revenue

92,631

74,851

Total current liabilities

321,517

330,850

Long-term debt, net

987,633

986,715

Deferred income taxes, net

83,399

72,991

Income taxes payable

26,188

25,282

Lease and other long-term liabilities

109,156

124,223

Total liabilities

$

1,527,893

$

1,540,061

Total stockholders’ equity

5,603,423

5,375,359

Total liabilities and stockholders’ equity

$

7,131,316

$

6,915,420

CoStar Group, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

Nine Months Ended

September 30,

2021

2020

Operating activities:

Net income

$

199,664

$

191,339

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

Depreciation and amortization

102,390

83,911

Amortization of deferred commissions costs

46,728

45,017

Amortization of Senior Notes discount and issuance costs

1,742

1,082

Non-cash lease expense

21,118

18,801

Stock-based compensation expense

46,988

40,783

Deferred income taxes, net

16,255

6,812

Credit loss expense

7,797

21,395

Other operating activities, net

10

(12)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(17,715)

(34,131)

Prepaid expenses and other current assets

(18,820)

4,145

Deferred commissions

(49,798)

(48,704)

Accounts payable and other liabilities

(27,912)

47,341

Lease liabilities

(23,596)

(21,247)

Income taxes payable

(3,583)

(9,838)

Deferred revenue

15,800

7,123

Other assets

2,150

1,521

Net cash provided by operating activities

319,218

355,338

Investing activities:

Proceeds from sale and settlement of investments

...

10,259

Proceeds from sale of property and equipment and other assets

245

Purchase of Richmond assets and other intangibles

(123,623)

Purchases of property and equipment and other assets

(21,533)

(42,137)

...