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CoStar Group First Quarter 2023 Revenue Increased 13% Year-over-Year and Net New Bookings Grew 17% to $80 Million

Business Wire - Tue Apr 25, 2023

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 March 31, 2023 was $584 million, an increase of 13% over revenue of $516 million for the quarter ended March 31, 2022. Net income was $87 million and net income per diluted share was $0.21 for the first quarter of 2023.

“CoStar Group delivered exceptional revenue, sales and marketplace traffic results in the first quarter against a backdrop of rising interest rates and continued disruption in the commercial and residential property markets,” said Andy Florance, Founder and Chief Executive Officer of CoStar Group. “Company-wide revenue grew 13% year-over-year, with Apartments.com delivering 20% revenue growth and LoopNet achieving 16% revenue growth in the first quarter.”

“Our expanded sales team delivered the second highest quarterly net new bookings in our history of $80 million, an increase of 17% over the first quarter of 2022. Apartments.com reached its highest sales quarter ever with a 110% increase in net new bookings over the prior year, and LoopNet increased net new bookings by 100% on a year-over-year basis,” continued Florance.

“We are very pleased with the progress we are making building the new Homes.com. When we acquired Homes.com in May of 2021, the site had six million unique visitors according to Google Analytics,” said Florance. “Traffic in March of 2023 to the Homes.com network surpassed 27 million unique monthly visitors. Sequentially, Homes.com’s unique visitors grew 41% in March over February of this year, and month to date in April Homes.com’s traffic has grown 53% sequentially over the same period in March.”

“Last year we communicated an initial traffic goal of 25 million unique visitors and an intermediate traffic goal of 50 million unique visitors,” continued Florance. “We are pleased to be crossing our initial goal and making great progress towards that intermediate goal. In March, we reached a new high of 94 million monthly unique visitors in total across Homes.com, Apartments.com, LoopNet, and the rest of our marketplaces. We believe that by focusing on building a great user experience, combined with the lower friction of our “your listing, your lead” business model, many home buyers are coming to prefer Homes.com.”

Year 2022-2023 Quarterly Results - Unaudited

(in millions, except per share data)

 

2022

 

2023

 

Q1

Q2

Q3

Q4

 

Q1

 

 

 

 

 

 

 

Revenues

$516

$536

$557

$573

 

$584

Net income

89

83

72

124

 

87

Net income per share - diluted

0.23

0.21

0.18

0.31

 

0.21

Weighted average outstanding shares - diluted

394

394

396

406

 

406

 

 

 

 

 

 

 

EBITDA

158

140

129

155

 

98

Adjusted EBITDA

178

159

153

182

 

123

Non-GAAP net income

123

112

118

153

 

118

Non-GAAP net income per share - diluted

0.31

0.28

0.30

0.38

 

0.29

2023 Outlook

The Company now expects revenue in the range of $2.465 billion to $2.48 billion for the full year of 2023, representing growth of approximately 13% to 14% for the year. The Company expects revenue for the second quarter of 2023 in the range of $603 million to $608 million, representing revenue growth of approximately 13% year-over-year at the midpoint of the range.

The Company expects adjusted EBITDA in the range of $505 million to $520 million for the full year of 2023. For the second quarter of 2023, the Company expects adjusted EBITDA in the range of $118 million to $123 million.

The Company is raising its full year 2023 non-GAAP net income per diluted share outlook to reflect higher expected rates of return on investments. The new outlook range for non-GAAP net income per diluted share is $1.21 to $1.24 based on 407 million shares, an increase of $0.15 per diluted share compared to the prior outlook. For the second 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 second quarter of 2023.

The preceding forward-looking statements reflect CoStar Group’s expectations as of April 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 first quarter 2023 results and the Company’s outlook at 5:00 PM ET on Tuesday, April 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

March 31,

 

 

 

2023

 

 

2022

 

Revenues

 

$

584,366

 

$

515,825

 

Cost of revenues

 

 

119,196

 

 

95,479

 

Gross profit

 

 

465,170

 

 

420,346

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling and marketing (excluding customer base amortization)

 

 

226,234

 

 

143,997

 

Software development

 

 

66,590

 

 

54,021

 

General and administrative

 

 

89,508

 

 

77,961

 

Customer base amortization

 

 

10,617

 

 

16,092

 

 

 

 

392,949

 

 

292,071

 

Income from operations

 

 

72,221

 

 

128,275

 

Interest income (expense), net

 

 

43,548

 

 

(7,718

)

Other income, net

 

 

581

 

 

864

 

Income before income taxes

 

 

116,350

 

 

121,421

 

Income tax expense

 

 

29,219

 

 

32,103

 

Net income

 

$

87,131

 

$

89,318

 

 

 

 

 

 

Net income per share - basic

 

$

0.22

 

$

0.23

 

Net income per share - diluted

 

$

0.21

 

$

0.23

 

 

 

 

 

 

Weighted-average outstanding shares - basic

 

 

404,490

 

 

392,895

 

Weighted-average outstanding shares - diluted

 

 

406,157

 

 

394,234

 

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,

 

 

 

2023

 

 

 

2022

 

Net income

 

$

87,131

 

 

$

89,318

 

Income tax expense

 

 

29,219

 

 

 

32,103

 

Income before income taxes

 

 

116,350

 

 

 

121,421

 

Amortization of acquired intangible assets

 

 

17,681

 

 

 

23,190

 

Stock-based compensation expense

 

 

20,045

 

 

 

17,847

 

Acquisition and integration related costs

 

 

1,655

 

 

 

1,639

 

Restructuring and related costs

 

 

3,422

 

 

 

 

Settlements and impairments

 

 

(77

)

 

 

 

Other expense, net

 

 

 

 

 

2,036

 

Non-GAAP income before income taxes

 

 

159,076

 

 

 

166,133

 

Assumed rate for income tax expense(1)

 

 

26

%

 

 

26

%

Assumed provision for income tax expense

 

 

(41,360

)

 

 

(43,195

)

Non-GAAP net income

 

$

117,716

 

 

$

122,938

 

 

 

 

 

 

Net income per share - diluted

 

$

0.21

 

 

$

0.23

 

Non-GAAP net income per share - diluted

 

$

0.29

 

 

$

0.31

 

 

 

 

 

 

Weighted average outstanding shares - basic

 

 

404,490

 

 

 

392,895

 

Weighted average outstanding shares - diluted

 

 

406,157

 

 

 

394,234

 

__________________________

 

 

 

 

(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

March 31,

 

 

 

2023

 

 

 

2022

 

Net income

 

$

87,131

 

 

$

89,318

 

Amortization of acquired intangible assets in cost of revenues

 

 

7,064

 

 

 

7,098

 

Amortization of acquired intangible assets in operating expenses

 

 

10,617

 

 

 

16,092

 

Depreciation and other amortization

 

 

7,946

 

 

 

6,965

 

Interest (income) expense, net

 

 

(43,548

)

 

 

7,718

 

Other income, net

 

 

(581

)

 

 

(864

)

Income tax expense

 

 

29,219

 

 

 

32,103

 

EBITDA

 

$

97,848

 

 

$

158,430

 

Stock-based compensation expense

 

 

20,045

 

 

 

17,847

 

Acquisition and integration related costs

 

 

1,655

 

 

 

1,639

 

Restructuring and related costs

 

 

3,422

 

 

 

 

Settlements and impairments

 

 

(77

)

 

 

 

Adjusted EBITDA

 

$

122,893

 

 

$

177,916

 

CoStar Group, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands)

 

 

 

 

 

 

 

March 31,

2023

 

December 31,

2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

5,055,646

 

 

$

4,967,970

 

Accounts receivable

 

 

196,655

 

 

 

166,140

 

Less: Allowance for credit losses

 

 

(14,897

)

 

 

(12,195

)

Accounts receivable, net

 

 

181,758

 

 

 

153,945

 

Prepaid expenses and other current assets

 

 

60,232

 

 

 

63,952

 

Total current assets

 

 

5,297,636

 

 

 

5,185,867

 

 

 

 

 

 

Deferred income taxes, net

 

 

9,722

 

 

 

9,722

 

Property and equipment, net

 

 

330,836

 

 

 

321,250

 

Lease right-of-use assets

 

 

76,174

 

 

 

80,392

 

Goodwill

 

 

2,318,133

 

 

 

2,314,759

 

Intangible assets, net

 

 

312,420

 

 

 

329,306

 

Deferred commission costs, net

 

 

152,929

 

 

 

142,482

 

Deposits and other assets

 

 

17,057

 

 

 

16,687

 

Income tax receivable

 

 

2,005

 

 

 

2,005

 

Total assets

 

$

8,516,912

 

 

$

8,402,470

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

31,664

 

 

$

28,460

 

Accrued wages and commissions

 

 

89,352

 

 

 

104,988

 

Accrued expenses

 

 

86,669

 

 

 

89,113

 

Income taxes payable

 

 

39,481

 

 

 

10,438

 

Lease liabilities

 

 

36,050

 

 

 

36,049

 

Deferred revenue

 

 

117,805

 

 

 

103,567

 

Total current liabilities

 

 

401,021

 

 

 

372,615

 

 

 

 

 

 

Long-term debt, net

 

 

989,533

 

 

 

989,210

 

Deferred income taxes, net

 

 

73,359

 

 

 

76,202

 

Income taxes payable

 

 

15,295

 

 

 

14,001

 

Lease and other long-term liabilities

 

 

72,095

 

 

 

80,321

 

Total liabilities

 

$

1,551,303

 

 

$

1,532,349

 

 

 

 

 

 

Total stockholders' equity

 

 

6,965,609

 

 

 

6,870,121

 

Total liabilities and stockholders' equity

 

$

8,516,912

 

 

$

8,402,470

 

CoStar Group, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

 

 

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Operating activities:

 

 

 

Net income

$

87,131

 

 

$

89,318

 

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

 

 

 

Depreciation and amortization

 

25,627

 

 

 

32,190

 

Amortization of deferred commissions costs

 

21,889

 

 

 

17,583

 

Amortization of Senior Notes discount and issuance costs

 

597

 

 

 

588

 

Non-cash lease expense

 

6,769

 

 

 

7,537

 

Stock-based compensation expense

 

20,045

 

 

 

17,847

 

Deferred income taxes, net

 

(2,907

)

 

 

(10,211

)

Credit loss expense

 

4,683

 

 

 

3,321

 

Other operating activities, net

 

277

 

 

 

(30

)

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(32,157

)

 

 

(13,724

)

Prepaid expenses and other current assets

 

(5,735

)

 

 

(385

)

Deferred commissions

 

(32,281

)

 

 

(25,829

)

Accounts payable and other liabilities

 

(13,731

)

 

 

(32,581

)

Lease liabilities

 

(10,006

)

 

 

(7,822

)

Income taxes payable, net

 

39,609

 

 

 

41,154

 

Deferred revenue

 

13,797

 

 

 

12,417

 

Other assets

 

(391

)

 

 

(666

)

Net cash provided by operating activities

 

123,216

 

 

 

130,707

 

 

 

 

 

Investing activities:

 

 

 

Purchase of Richmond assets

 

(15,713

)

 

 

 

Purchases of property and equipment and other assets

 

(3,917

)

 

 

(12,401

)

Net cash used in investing activities