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
March 31, 2020, was $392 million, an increase of 19% over revenue
of $328 million for the first quarter of 2019. Traffic to CoStar
Group’s information and marketplace platforms, Apartments.com,
CoStar, LoopNet, Lands of America, Realla, and Belbex reached
record levels in the first quarter 2020 both individually and in
aggregate with an average of 55 million total, monthly unique
visitors, up from 49 million monthly unique visitors in the first
quarter of 2019.
“We are pleased with our very strong results in the first
quarter of 2020,” said Andrew C. Florance, Founder and Chief
Executive Officer of CoStar Group. “As with every business, the
COVID-19 pandemic has upended our normal operations. The pandemic
hit operations in CoStar’s Beijing office first giving us advance
warning and some time to prepare to transition 100% of our North
American and European operations to 100% digital remote work. We
believe that 95% of CoStar Group’s staff have successfully
transitioned to working remotely over the past six weeks at 90%
productivity. We believe that our products remain mission critical
to the vast majority of our clients as they deal with pandemic
driven market disruptions."
Florance continued, “We generated Company-wide net new sales
bookings of $48 million in the first quarter of 2020, which is an
outstanding achievement given the unprecedented events in March.
Demonstrating the value of our marketplaces, LoopNet had its best
sales quarter ever and Apartments.com turned in its second-best
sales quarter ever. As a result, we were able to achieve overall
revenue growth of 19% in the first quarter of 2020, with
Apartments.com growing revenue 20% and LoopNet revenues up 23%
year-over-year compared to the first quarter of 2019.”
Year 2019-2020 Quarterly
Results - Unaudited
(in millions, except per share
data)
2019
2020
Q1
Q2
Q3
Q4
Q1
Revenues
$328
$344
$353
$375
$392
Net income
85
63
79
88
73
Net income per share - diluted
2.33
1.73
2.15
2.39
1.98
Weighted average outstanding shares -
diluted
36.6
36.6
36.7
36.7
36.8
EBITDA
113
94
113
125
100
Adjusted EBITDA
125
110
129
142
124
Non-GAAP net income
92
82
96
103
90
Non-GAAP net income per share -
diluted
2.53
2.23
2.61
2.82
2.44
Net income for the first quarter of 2020 was $73 million or
$1.98 per diluted share. EBITDA for the first quarter of 2020 was
$100 million. Adjusted EBITDA (which excludes stock-based
compensation, acquisition and integration related costs and other
items as described below) for the first quarter of 2020 was $124
million.
Non-GAAP net income (which excludes amortization of acquired
intangible assets, stock-based compensation and other items as
described below) for the first quarter of 2020 was $90 million or
$2.44 per diluted share.
On March 25, 2020 the Company borrowed $745 million under its
revolving credit facility in order to provide increased liquidity
and financial flexibility. As of March 31, 2020, the Company had
approximately $1.9 billion in cash and cash equivalents, and $745
million in outstanding debt.
2020 Outlook
Due to the rapidly changing environment and continued
uncertainty resulting from the global impact of the pandemic, we
are withdrawing our previously announced guidance for the full year
2020, which was issued on February 25, 2020. The subscription
nature of our business model allows for greater visibility to
revenue in the near term within a reasonable range. Accordingly, we
will only be providing guidance for the second quarter of 2020 at
this time.
The Company expects revenue for the second quarter of 2020 in
the range of $387 million to $392 million, representing revenue
growth of 13% compared to the second quarter of 2019 at the
midpoint of the range.
The Company expects adjusted EBITDA in a range of $110 million
to $115 million for the second quarter of 2020, representing growth
of 2% year-over-year at the midpoint of the range.
We expect second quarter 2020 non-GAAP net income per diluted
share in a range of $2.02 to $2.12 based on 36.8 million shares.
This range includes a non-GAAP tax rate of 25%.
The preceding forward-looking statements reflect CoStar Group’s
expectations as of April 28, 2020, including forward-looking
non-GAAP financial measures on a consolidated basis, based on
current estimates, expectations 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, 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 other 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 for pending and completed acquisitions,
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 for pending and completed acquisitions,
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 2020, 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, April 28, 2020 to discuss earnings results for the first
quarter 2020 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 (866) 627-4249 (from the
United States and Canada) or (825) 312-2385 (from all other
countries) and refer to access code 1928919. The webcast replay
will also be available in the Investor 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 March 31,
2020
2019
Revenues
$
391,847
$
328,425
Cost of revenues
78,909
71,153
Gross profit
312,938
257,272
Operating expenses:
Selling and marketing (excluding customer
base amortization)
125,107
88,094
Software development
41,610
27,928
General and administrative
58,873
40,076
Customer base amortization
11,484
7,682
237,074
163,780
Income from operations
75,864
93,492
Interest and other income
4,518
4,945
Interest and other expense
(2,026
)
(732
)
Income before income taxes
78,356
97,705
Income tax expense
5,563
12,536
Net income
$
72,793
$
85,169
Net income per share - basic
$
2.00
$
2.35
Net income per share - diluted
$
1.98
$
2.33
Weighted average outstanding shares -
basic
36,471
36,237
Weighted average outstanding shares -
diluted
36,776
36,567
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 March 31,
2020
2019
Net income
$
72,793
$
85,169
Income tax expense
5,563
12,536
Income before income taxes
78,356
97,705
Amortization of acquired intangible
assets
17,489
13,195
Stock-based compensation expense
15,180
12,029
Acquisition and integration related
costs
8,713
249
Restructuring and related costs
—
68
Non-GAAP income before income taxes
119,738
123,246
Assumed rate for income tax expense *
25
%
25
%
Assumed provision for income tax
expense
(29,935
)
(30,812
)
Non-GAAP net income
$
89,804
$
92,434
Net income per share - diluted
$
1.98
$
2.33
Non-GAAP net income per share -
diluted
$
2.44
$
2.53
Weighted average outstanding shares -
basic
36,471
36,237
Weighted average outstanding shares -
diluted
36,776
36,567
* A 25% tax rate is assumed for 2020 and
2019, which approximates our statutory corporate tax rate.
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA
Three Months Ended March 31,
2020
2019
Net income
$
72,793
$
85,169
Amortization of acquired intangible assets
in cost of revenues
6,005
5,513
Amortization of acquired intangible assets
in operating expenses
11,484
7,682
Depreciation and other amortization
6,767
6,464
Interest and other income
(4,518
)
(4,945
)
Interest and other expense
2,026
732
Income tax expense
5,563
12,536
EBITDA
$
100,120
$
113,151
Stock-based compensation expense
15,180
12,029
Acquisition and integration related
costs
8,713
249
Restructuring and related costs
—
68
Adjusted EBITDA
$
124,013
$
125,497
CoStar Group, Inc.
Condensed Consolidated Balance
Sheets - Unaudited
(in thousands)
March 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash, cash equivalents and restricted
cash
$
1,927,923
$
1,070,731
Accounts receivable
120,559
96,788
Less: Allowance for credit losses
(8,311
)
(4,548
)
Accounts receivable, net
112,248
92,240
Prepaid expenses and other current
assets
30,219
36,194
Total current assets
2,070,390
1,199,165
Long-term investments
—
10,070
Deferred income taxes, net
4,762
5,408
Property and equipment, net
106,409
107,529
Lease right-of-use assets
112,811
115,084
Goodwill
1,873,987
1,882,020
Intangible assets, net
400,689
421,196
Deferred commission costs, net
91,000
89,374
Deposits and other assets
9,743
9,232
Income tax receivable
14,806
14,908
Total assets
$
4,684,597
$
3,853,986
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
22,486
$
7,640
Accrued wages and commissions
49,302
53,087
Accrued expenses
40,310
38,680
Income taxes payable
12,183
10,705
Lease liabilities
27,681
29,670
Deferred revenue
84,717
67,274
Total current liabilities
236,679
207,056
Long-term debt
745,000
—
Deferred income taxes, net
88,799
87,096
Income taxes payable
20,611
20,521
Lease and other long-term liabilities
130,697
133,720
Total liabilities
$
1,221,786
$
448,393
Total stockholders’ equity
3,462,811
3,405,593
Total liabilities and stockholders’
equity
$
4,684,597
$
3,853,986
CoStar Group, Inc.
Condensed Consolidated
Statements of Cash Flows - Unaudited
(in thousands)
Three Months Ended March 31,
2020
2019
Operating activities:
Net income
$
72,793
$
85,169
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
24,256
19,659
Amortization of deferred commissions
costs
14,747
12,407
Amortization of debt issuance costs
292
219
Realized loss on investments
541
—
Non-cash lease expense
6,261
5,197
Stock-based compensation expense
15,180
12,029
Deferred income taxes, net
2,825
3,702
Credit loss expense
6,183
2,185
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
(26,613
)
(5,835
)
Income taxes payable
1,624
8,311
Prepaid expenses and other current
assets
1,838
206
Deferred commissions
(16,523
)
(13,729
)
Other assets
1,215
(59
)
Accounts payable and other liabilities
15,564
15,068
Lease liabilities
(6,967
)
(4,743
)
Deferred revenue
18,248
8,708
Net cash provided by operating
activities
131,464
148,494
Investing activities:
Proceeds from sale and settlement of
investments
10,259
—
Purchases of property and equipment and
other assets
(7,133
)
(9,429
)
Cash paid for acquisitions, net of cash
acquired
(432
)
—
Net cash provided by (used in) investing
activities
2,694
(9,429
)
Financing activities:
Proceeds from long-term debt
745,000
—
Repurchase of restricted stock to satisfy
tax withholding obligations
(30,144
)
(18,679
)
Proceeds from exercise of stock options
and employee stock purchase plan
10,295
12,061
Net cash provided by (used in) financing
activities
725,151
(6,618
)
Effect of foreign currency exchange rates
on cash and cash equivalents
(2,117
)
(46
)
Net increase in cash, cash equivalents and
restricted cash
857,192
132,401
Cash, cash equivalents and restricted cash
at the beginning of period
1,070,731
1,100,416
Cash, cash equivalents and restricted cash
at the end of period
$
1,927,923
$
1,232,817
CoStar Group, Inc.
Disaggregated Revenues -
Unaudited
(in thousands)
Three Months Ended March 31,
2020
2019
North America
International
Total
North America
International
Total
Information and analytics
CoStar Suite
$
157,335
$
7,621
$
164,956
$
140,973
$
6,728
$
147,701
Information services
25,690
6,692
32,382
16,591
2,259
18,850
Online marketplaces
Multifamily
137,460
—
137,460
114,268
—
114,268
Commercial property and land
56,962
87
57,049
47,405
201
47,606
Total revenues
$
377,447
$
14,400
$
391,847
$
319,237
$
9,188
$
328,425
CoStar Group, Inc.
Results of Segments -
Unaudited
(in thousands)
Three Months Ended March 31,
2020
2019
EBITDA
North America
$
102,413
$
115,268
International
(2,293
)
(2,117
)
Total EBITDA
$
100,120
$
113,151
CoStar Group, Inc.
Reconciliation of Non-GAAP
Financial Measures with 2019-2020 Quarterly Results -
Unaudited
(in millions, except per share
data)
Reconciliation of Net Income
to Non-GAAP Net Income
2019
2020
Q1
Q2
Q3
Q4
Q1
Net income
$85.2
$63.2
$78.6
$87.9
$72.8
Income tax expense
12.5
16.8
20.3
26.4
5.6
Income before income taxes
97.7
80.0
98.9
114.3
78.4
Amortization of acquired intangible
assets
13.2
12.2
12.5
17.4
17.5
Stock-based compensation expense
12.0
13.8
13.1
13.3
15.2
Acquisition and integration related
costs
0.2
0.5
2.3
3.7
8.7
Restructuring and related costs
0.1
2.2
0.8
—
—
Settlements and impairments
—
—
—
(10.8)
—
Non-GAAP income before income taxes
123.2
108.7
127.6
137.9
119.8
Assumed rate for income tax expense *
25%
25%
25%
25%
25%
Assumed provision for income tax
expense
(30.8)
(27.2)
(31.9)
(34.5)
(30.0)
Non-GAAP net income
$92.4
$81.5
$95.7
$103.4
$89.8
Non-GAAP net income per share -
diluted
$2.53
$2.23
$2.61
$2.82
$2.44
Weighted average outstanding shares -
basic
36.2
36.3
36.3
36.4
36.5
Weighted average outstanding shares -
diluted
36.6
36.6
36.7
36.7
36.8
* A 25% tax rate is assumed for 2020 and
2019, which approximates our statutory corporate tax rate.
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA
2019
2020
Q1
Q2
Q3
Q4
Q1
Net income
$85.2
$63.2
$78.6
$87.9
$72.8
Amortization of acquired intangible
assets
13.2
12.2
12.5
17.4
17.5
Depreciation and other amortization
6.5
6.5
6.3
6.5
6.8
Interest and other income
(4.9)
(5.9)
(5.4)
(13.8)
(4.5)
Interest and other expense
0.7
0.7
0.7
0.5
2.0
Income tax expense
12.5
16.8
20.3
26.4
5.6
EBITDA
$113.2
$93.5
$113.0
$124.9
$100.2
Stock-based compensation expense
12.0
13.8
13.1
13.3
15.1
Acquisition and integration related
costs
0.2
0.5
2.3
3.7
8.7
Restructuring and related costs
0.1
2.2
0.8
—
—
Adjusted EBITDA
$125.5
$110.0
$129.2
$141.9
$124.0
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
For the Three Months
Ended June 30, 2020
Low
High
Net income
$
44,000
$
51,000
Income tax expense
13,000
13,000
Income before income taxes
57,000
64,000
Amortization of acquired intangible
assets
18,000
18,000
Stock-based compensation expense
16,000
15,000
Acquisition and integration related
costs
8,000
7,000
Non-GAAP income before income taxes
99,000
104,000
Assumed rate for income tax expense *
25
%
25
%
Assumed provision for income tax
expense
(24,800
)
(26,000
)
Non-GAAP net income
$
74,200
$
78,000
Net income per share - diluted
$
1.20
$
1.39
Non-GAAP net income per share -
diluted
$
2.02
$
2.12
Weighted average outstanding shares -
diluted
36,800
36,800
* 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
For the Three Months
Ended June 30, 2020
Low
High
Net income
$
44,000
$
51,000
Amortization of acquired intangible
assets
18,000
18,000
Depreciation and other amortization
7,000
7,000
Interest and other expense, net
4,000
4,000
Income tax expense
13,000
13,000
Stock-based compensation expense
16,000
15,000
Acquisition and integration related
costs
8,000
7,000
Adjusted EBITDA
$
110,000
$
115,000
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. STR provides premium data benchmarking,
analytics and marketplace insights for the global hospitality
sector. LoopNet is the most heavily trafficked commercial real
estate marketplace online with over 6 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 approximately 55 million
unique monthly visitors in aggregate in the first quarter of 2020.
Headquartered in Washington, DC, CoStar maintains offices
throughout the U.S. and in Europe, Canada and Asia with a staff of
over 4,200 worldwide, including the industry’s largest professional
research organization. For more information, visit www.costargroup.com.
This news release and the Company’s earnings conference call
contain “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's plans,
objectives, expectations, beliefs 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 and are subject to many risks and uncertainties. Actual
results may differ materially from the results anticipated in the
forward-looking statements and the assumptions and estimates used
as a basis for the forward-looking statements. The following
factors, among others, could cause or contribute to such
differences: uncertainty surrounding the impact of the COVID-19
outbreak, including volatility in the international and U.S.
economy, worker absenteeism, quarantines or other travel or
health-related restrictions; the length and severity of the
COVID-19 outbreak; the pace of recovery following the COVID-19
outbreak; government and private actions taken to control the
spread of COVID-19; the risk that the trends stated or implied by
this release or in the earnings conference call cannot or will not
be sustained at the current pace or may increase or decrease,
including trends related to revenue, net income, non-GAAP net
income, EBITDA, adjusted EBITDA, unique visitors, net new sales
bookings and renewal rates; the risk that the Company is unable to
sustain current revenue, earnings and net new sales bookings growth
rates or increase them; the risk that revenues for the second
quarter 2020 will not be as stated in this press release; the risk
that net income for the second quarter 2020 will not be as stated
in this press release; the risk that adjusted EBITDA for the second
quarter 2020 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 second quarter 2020 will not be as stated in this press
release; the risk that the tax rate estimate stated in this press
release is incorrect or may change; the possibility that the
Company’s investment plans or strategy may change; and the
possibility that the acquisition of RentPath does not close when
expected or at all. More information about potential factors that
could cause results to differ materially from those anticipated 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 in CoStar’s Annual
Report on Form 10-K for the year ended December 31, 2019, which is
filed with the SEC, including in the “Risk Factors” section of that
filing, as well as CoStar’s other filings with the SEC available at
the SEC’s website (www.sec.gov). All forward-looking statements are
based on information available to CoStar on the date hereof, and
CoStar assumes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200428005986/en/
Scott Wheeler Chief Financial Officer (202) 336-6920
swheeler@costar.com
Sarah Spray Vice President Investor Relations (202) 346-6394
sspray@costar.com
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