TechDogs-"CoStar Group Second Quarter 2023 Revenue Increased 13% Year-Over-Year And Net New Bookings"

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CoStar Group Second Quarter 2023 Revenue Increased 13% Year-Over-Year And Net New Bookings

By Business Wire

Business Wire
Overall Rating

WASHINGTON--(BUSINESS WIRE)--CoStar Group, Inc. (NASDAQ: CSGP), a leading provider of online real estate marketplaces, information and analytics in the property markets, announced today that revenue for the quarter ended June 30, 2023 was $606 million, 13% over revenue of $536 million for the quarter ended June 30, 2022. Net income was $101 million in the second quarter, an increase of 20% over prior year.

“We achieved another great quarter of very strong results in terms of revenue, sales and traffic to our websites,” said Andy Florance, Founder and Chief Executive Officer of CoStar Group. "Overall revenue grew an impressive 13% year-over-year, with Apartments.com revenue growth accelerating to 23% in the second quarter. Our sales team delivered $82 million net new bookings, which is the second highest quarter in our company's history. The Apartments.com team produced record results for the third quarter in a row, with net new bookings up 84% over prior year. Achieving these results despite commercial property transactions plummeting 63% in the second quarter, demonstrates the resilience of our platforms,” continued Florance.

Traffic to all of CoStar Group’s web sites reached a new high of 105 million unique visitors in June, according to Google Analytics, exceeding 100 million in the second quarter for the first time. Traffic to our residential network in the second quarter was 84 million average monthly unique visitors, according to Google Analytics. Homes.com network traffic grew 130% year over year in June to 38 million monthly unique visitors. “I believe we crossed a monumental milestone in June when our residential network became the second most heavily trafficked residential network. We crossed into third place in the first quarter of this year, surpassing Redfin’s first quarter self-reported traffic and estimated rental site traffic. In the second quarter we moved into second place surpassing Realtor.com’s self-reported traffic for their fiscal third quarter. I’m very encouraged by the progress we are making with our Homes.com strategy, as our traffic growth continues ahead of our initial expectations,” said Florance.

CoStar Group’s residential network combines residential rental site and homes for sale site traffic.

Year 2022-2023 Quarterly Results - Unaudited

(in millions, except per share data)

2022

2023

Q1

Q2

Q3

Q4

Q1

Q2

Revenues

$516

$536

$557

$573

$584

$606

Net income

89

83

72

124

87

101

Net income per share - diluted

0.23

0.21

0.18

0.31

0.21

0.25

Weighted average outstanding shares - diluted

394

394

396

406

406

407

EBITDA

158

140

129

155

98

105

Adjusted EBITDA

178

159

153

182

123

127

Non-GAAP net income

123

112

118

153

118

127

Non-GAAP net income per share - diluted

0.31

0.28

0.30

0.38

0.29

0.31

2023 Outlook

The Company expects revenue in the range of $2.45 billion to $2.46 billion for the full year of 2023, representing year-over-year growth of approximately 13% at the midpoint of the range. The revenue forecast is lower than prior guidance to reflect lower property transaction volume expectations in the second half of 2023, and the related impact on Ten-X revenue. The Company expects revenue for the third quarter of 2023 in the range of $622 million to $627 million, representing revenue growth of approximately 12% year-over-year at the midpoint of the range.

The Company expects adjusted EBITDA in the range of $510 million to $520 million for the full year of 2023. For the third quarter of 2023, the Company expects adjusted EBITDA in the range of $115 million to $120 million.

The Company expects full year 2023 non-GAAP net income per diluted share in a range of $1.24 to $1.26 based on 407 million shares. For the third quarter of 2023, the Company expects non-GAAP net income per diluted share in a range of $0.29 to $0.30 based on 407 million shares. These ranges include an estimated non-GAAP tax rate of 26% for the full year and the third quarter of 2023.

The preceding forward-looking statements reflect CoStar Group’s expectations as of July 25, 2023, 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, 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.

Reconciliations of EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share to the most directly comparable GAAP measures 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 income or expense, net and other income or expense, net; 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 ordinary course of business. Adjusted EBITDA margin represents adjusted EBITDA divided by revenues for the period.

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 ordinary 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 2023, the Company is assuming a 26% tax rate in order to approximate its 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.

Operating Metrics

Net new bookings is calculated based on the annualized amount of change in the Company's sales bookings resulting from new subscription-based contracts, changes to existing subscription-based contracts and cancellations of subscription-based contracts for the period reported. Information regarding net new bookings is not comparable to, nor should it be substituted for, an analysis of the Company's revenues over time.

Earnings Conference Call

Management will conduct a conference call to discuss the second quarter 2023 results and the Company’s outlook at 5:00 PM ET on Tuesday, July 25, 2023. 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
June 30,

Six Months Ended
June 30,

2023

2022

2023

2022

Revenues

$

605,906

$

536,308

$

1,190,272

$

1,052,133

Cost of revenues

112,362

100,971

231,558

196,450

Gross profit

493,544

435,337

958,714

855,683

Operating expenses:

Selling and marketing (excluding customer base amortization)

250,026

181,344

476,260

325,341

Software development

63,369

51,587

129,959

105,608

General and administrative

90,563

77,345

180,071

155,306

Customer base amortization

10,440

14,878

21,057

30,970

414,398

325,154

807,347

617,225

Income from operations

79,146

110,183

151,367

238,458

Interest income (expense), net

51,911

(3,399

)

95,459

(11,117

)

Other income, net

609

1,343

1,190

2,207

Income before income taxes

131,666

108,127

248,016

229,548

Income tax expense

31,146

24,654

60,365

56,757

Net income

$

100,520

$

83,473

$

187,651

$

172,791

Net income per share - basic

$

0.25

$

0.21

$

0.46

$

0.44

Net income per share - diluted

$

0.25

$

0.21

$

0.46

$

0.44

Weighted-average outstanding shares - basic

405,429

393,342

404,960

393,119

Weighted-average outstanding shares - diluted

406,751

394,478

406,454

394,356

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,

2023

2022

2023

2022

Net income

$

100,520

$

83,473

$

187,651

$

172,791

Income tax expense

31,146

24,654

60,365

56,757

Income before income taxes

131,666

108,127

248,016

229,548

Amortization of acquired intangible assets

17,976

22,815

35,657

46,005

Stock-based compensation expense

21,826

18,112

41,871

35,959

Acquisition and integration related costs

(179

)

504

1,476

2,143

Restructuring and related costs

(51

)

3,371

Settlements and impairments

(30

)

(107

)

Other expense, net

2,063

4,099

Non-GAAP income before income taxes

171,208

151,621

330,284

317,754

Assumed rate for income tax expense(1)

26

%

26

%

26

%

26

%

Assumed provision for income tax expense

(44,514

)

(39,421

)

(85,874

)

(82,616

)

Non-GAAP net income

$

126,694

$

112,200

$

244,410

$

235,138

Net income per share - diluted

$

0.25

$

0.21

$

0.46

$

0.44

Non-GAAP net income per share - diluted

$

0.31

$

0.28

$

0.60

$

0.60

Weighted average outstanding shares - basic

405,429

393,342

404,960

393,119

Weighted average outstanding shares - diluted

406,751

394,478

406,454

394,356

__________________________

(1) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended
June 30,

Six Months Ended
June 30,

2023

2022

2023

2022

Net income

$

100,520

$

83,473

$

187,651

$

172,791

Amortization of acquired intangible assets in cost of revenues

7,536

7,937

14,600

15,035

Amortization of acquired intangible assets in operating expenses

10,440

14,878

21,057

30,970

Depreciation and other amortization

8,087

7,010

16,033

13,975

Interest (income) expense, net

(51,911

)

3,399

(95,459

)

11,117

Other income, net

(609

)

(1,343

)

(1,190

)

(2,207

)

Income tax expense

31,146

24,654

60,365

56,757

EBITDA

$

105,209

$

140,008

$

203,057

$

298,438

Stock-based compensation expense

21,826

18,112

41,871

35,959

Acquisition and integration related costs

(179

)

504

1,476

2,143

Restructuring and related costs

(51

)

3,371

Settlements and impairments

(30

)

(107

)

Adjusted EBITDA

$

126,775

$

158,624

$

249,668

$

336,540

CoStar Group, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands)

June 30,
2023

December 31,
2022

ASSETS

Current assets:

Cash and cash equivalents

$

5,205,295

$

4,967,970

Accounts receivable

196,255

166,140

Less: Allowance for credit losses

(15,042

)

(12,195

)

Accounts receivable, net

181,213

153,945

Prepaid expenses and other current assets

58,376

63,952

Total current assets

5,444,884

5,185,867

Deferred income taxes, net

9,724

9,722

Property and equipment, net

359,455

321,250

Lease right-of-use assets

79,491

80,392

Goodwill

2,321,205

2,314,759

Intangible assets, net

295,022

329,306

Deferred commission costs, net

162,391

142,482

Deposits and other assets

17,497

16,687

Income tax receivable

2,005

2,005

Total assets

$

8,691,674

$

8,402,470

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

61,546

$

28,460

Accrued wages and commissions

100,915

104,988

Accrued expenses

115,654

89,113

Income taxes payable

11,100

10,438

Lease liabilities

40,329

36,049

Deferred revenue

113,231

103,567

Total current liabilities

442,775

372,615

Long-term debt, net

989,858

989,210

Deferred income taxes, net

69,280

76,202

Income taxes payable

16,978

14,001

Lease and other long-term liabilities

71,711

80,321

Total liabilities

$

1,590,602

$

1,532,349

Total stockholders' equity

7,101,072

6,870,121

Total liabilities and stockholders' equity

$

8,691,674

$

8,402,470

CoStar Group, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

Six months ended
June 30,

2023

2022

Operating activities:

Net income

$

187,651

$

172,791

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

Depreciation and amortization

51,690

64,127

Amortization of deferred commissions costs

45,267

35,996

Amortization of Senior Notes discount and issuance costs

1,197

1,178

Non-cash lease expense

14,147

15,080

Stock-based compensation expense

41,871

35,959

Deferred income taxes, net

(6,989

)

(14,946

)

Credit loss expense

13,938

6,890

Other operating activities, net

540

(1,149

)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(40,601

)

(33,318

)

Prepaid expenses and other current assets

(4,220

)

3,152

Deferred commissions

(65,028

)

(54,155

)

Accounts payable and other liabilities

54,422

14,098

Lease liabilities

(16,559

)

(15,932

)

Income taxes payable, net

12,916

(27,770

)

Deferred revenue

8,873

8,520

Other assets

(735

)

1,578

Net cash provided by operating activities

298,380

212,099

Investing activities:

Proceeds from sale of property and equipment and other assets

5,034

Purchase of Richmond assets

(45,621

)

(25,664

)

Purchases of property and equipment and other assets

(8,801

)

(30,746

)

Cash paid for acquisitions, net of cash acquired

(6,331

)

Net cash used in investing activities

(54,422

)

(57,707

)

Financing activities:

Repayments of long-term debt assumed in acquisition

(2,155

)

Repurchase of restricted stock to satisfy tax withholding obligations

(22,445

)

(19,755

)

Proceeds from exercise of stock options and employee stock purchase plan

16,175

7,340

Net cash used in financing activities

(6,270

)

(14,570

)

Effect of foreign currency exchange rates on cash and cash equivalents

(363

)

(2,832

)

Net increase in cash and cash equivalents

237,325

136,990

Cash and cash equivalents at the beginning of period

4,967,970

3,827,126

Cash and cash equivalents at the end of period

$

5,205,295

$

3,964,116

CoStar Group, Inc.

Disaggregated Revenues - Unaudited

(in thousands)

Three Months Ended June 30,

2023

2022

North America

International

Total

North America

International

Total

CoStar

$

219,573

$

9,596

$

229,169

$

197,380

$

9,186

$

206,566

Information Services

32,213

9,708

41,921

30,511

7,991

38,502

Multifamily

224,291

224,291

182,359

182,359

LoopNet

63,268

2,295

65,563

54,603

1,694

56,297

Residential

12,708

12,708

20,154

20,154

Other Marketplaces

32,254

32,254

32,430

32,430

Total revenues

$

584,307

$

21,599

$

605,906

$

517,437

$

18,871

$

536,308

Six Months Ended June 30,

2023

2022

North America

International

Total

North America

International

Total

CoStar

$

435,386

$

18,796

$

454,182

$

386,484

$

18,731

$

405,215

Information Services

64,313

19,237

83,550

60,782

14,935

75,717

Multifamily

434,988

434,988

357,836

357,836

LoopNet

124,447

4,353

128,800

107,291

3,453

110,744

Residential

25,861

25,861

38,214

38,214

Other Marketplaces

62,891

62,891

64,407

64,407

Total revenues

$

1,147,886

$

42,386

$

1,190,272

$

1,015,014

$

37,119

$

1,052,133

CoStar Group, Inc.

Results of Segments - Unaudited

(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2023

2022

2023

2022

EBITDA

North America

$

104,614

$

138,527

$

201,270

$

294,489

International

595

1,481

1,787

3,949

Total EBITDA

$

105,209

$

140,008

$

203,057

$

298,438

CoStar Group, Inc.

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

(in millions, except per share data)

Reconciliation of Net Income to Non-GAAP Net Income

2022

2023

Q1

Q2

Q3

Q4

Q1

Q2

Net income

$89.3

$83.5

$72.3

$124.4

$87.1

$100.5

Income tax expense

32.1

24.7

25.1

35.2

29.2

31.1

Income before income taxes

121.4

108.1

97.4

159.5

116.4

131.7

Amortization of acquired intangible assets

23.2

22.8

36.6

20.0

17.7

18.0

Stock-based compensation expense

17.8

18.1

18.1

21.1

20.0

21.8

Acquisition and integration related costs

1.6

0.5

1.1

2.2

1.7

(0.2)

Restructuring and related costs

0.2

2.0

3.4

(0.1)

Settlements and impairments

4.1

2.0

(0.1)

Other expense, net

2.0

2.1

2.1

Non-GAAP income before income taxes(1)

166.1

151.6

159.6

206.7

159.1

171.2

Assumed rate for income tax expense (2)

26%

26%

26%

26%

26%

26%

Assumed provision for income tax expense

(43.2)

(39.4)

(41.5)

(53.8)

(41.4)

(44.5)

Non-GAAP net income(1)

$122.9

$112.2

$118.1

$153.0

$117.7

$126.7

Non-GAAP net income per share - diluted

$0.31

$0.28

$0.30

$0.38

$0.21

$0.25

Weighted average outstanding shares - basic

392.9

393.3

394.7

404.2

404.5

405.4

Weighted average outstanding shares - diluted

394.2

394.5

396.2

406.1

406.2

406.8

__________________________

(1) Totals may not foot due to rounding.

(2) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

2022

2023

Q1

Q2

Q3

Q4

Q1

Q2

Net income

$89.3

$83.5

$72.3

$124.4

$87.1

$100.5

Amortization of acquired intangible assets

23.2

22.8

36.6

20.0

17.7

18.0

Depreciation and other amortization

7.0

7.0

7.2

7.9

7.9

8.1

Interest expense (income), net

7.7

3.4

(10.7)

(32.6)

(43.5)

(51.9)

Other (income) expense, net

(0.9)

(1.3)

(1.4)

0.2

(0.6)

(0.6)

Income tax expense

32.1

24.7

25.1

35.2

29.2

31.1

EBITDA(1)

$158.4

$140.0

$129.1

$155.1

$97.8

$105.2

Stock-based compensation expense

17.8

18.1

18.1

21.1

20.0

21.8

Acquisition and integration related costs

1.6

0.5

1.1

2.2

1.7

(0.2)

Restructuring and related costs

0.2

2.0

3.4

(0.1)

Settlements and impairments

4.1

2.0

(0.1)

Adjusted EBITDA(1)

$177.9

$158.6

$152.7

$182.3

$122.9

$126.8

__________________________

(1) Totals may not foot due to rounding.

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 Year Ending

Ending September 30, 2023

December 31, 2023

Low

High

Low

High

Net income

$

86,000

$

90,000

$

376,000

$

383,000

Income tax expense

32,000

33,000

138,000

141,000

Income before income taxes

118,000

123,000

514,000

524,000

Amortization of acquired intangible assets

19,000

19,000

73,000

73,000

Stock-based compensation expense

23,000

23,000

89,000

89,000

Acquisition and integration related costs

1,000

1,000

Restructuring and related costs

3,000

3,000

Non-GAAP income before income taxes

160,000

165,000

680,000

690,000

Assumed rate for income tax expense(1)

26

%

26

%

26

%

26

%

Assumed provision for income tax expense

(41,600

)

(42,900

)

(176,800

)

(179,400

)

Non-GAAP net income

$

118,400

$

122,100

$

503,200

$

510,600

Net income per share - diluted

$

0.21

$

0.22

$

0.92

$

0.94

Non-GAAP net income per share - diluted

$

0.29

$

0.30

$

1.24

$

1.26

Weighted average outstanding shares - diluted

407,000

407,000

406,800

406,800

__________________________

(1) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.

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

Guidance Range

Guidance Range

For the Three Months

For the Year Ending

Ending September 30, 2023

December 31, 2023

Low

High

Low

High

Net income

$

86,000

$

90,000

$

376,000

$

383,000

Amortization of acquired intangible assets

19,000

19,000

73,000

73,000

Depreciation and other amortization

9,000

9,000

34,000

34,000

Interest income, net

(54,000

)

(54,000

)

(203,000

)

(203,000

)

Other income, net

(1,000

)

(1,000

)

Income tax expense

32,000

33,000

138,000

141,000

Stock-based compensation expense

23,000

23,000

89,000

89,000

Acquisition and integration related costs

1,000

1,000

Restructuring and related costs

3,000

3,000

Adjusted EBITDA

$

115,000

$

120,000

$

510,000

$

520,000

About CoStar Group

CoStar Group (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar Group conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of real estate information. CoStar is the global leader in commercial real estate information, analytics, and news, enabling clients to analyze, interpret and gain unmatched insight on property values, market conditions and availabilities. Apartments.com is the leading online marketplace for renters seeking great apartment homes, providing property managers and owners a proven platform for marketing their properties. LoopNet is the most heavily trafficked online commercial real estate marketplace with over twelve million monthly global unique visitors.


Contacts

Investor Relations:
Cyndi Eakin
Senior Vice President
CoStar Group Investor Relations
(202) 346-6784
ceakin@costar.com

News Media:
Matthew Blocher
Vice President
CoStar Group Corporate Marketing & Communications
(202) 346-6775
mblocher@costar.com


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First published on Wed, Jul 26, 2023

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