SEC Filing | CoStar Group, Inc.

View:

Download DOC

Download PDF

Download XLS

form_8-k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 18, 2009

COSTAR GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-24531	52-2091509
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2 Bethesda Metro Center, Bethesda, Maryland	20814
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (301) 215-8300

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On February 18, 2009, CoStar Group, Inc. announced its financial results for the quarter and year ended December 31, 2008. The full text of the press release (the “Press Release”) issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information contained in the Press Release shall be considered “furnished” pursuant to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, nor shall it be deemed incorporated by reference into any of the Registrant’s reports or filings with the Securities and Exchange Commission, whether made before or after the date hereof, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

Exhibit No. Description

Exhibit 99.1 CoStar Group, Inc. Press Release Dated February 18, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	COSTAR GROUP, INC.

	By:
Date: February 18, 2009	/s/ Brian J. Radecki

	Name: Brian J. Radecki
	Title: Chief Financial Officer

Exhibit Index

Exhibit 99.1

CoStar Group, Inc. Press Release Dated February 18, 2009.

press_release.htm

		NEWS
		Contacts:

		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

CoStar Group, Inc. Announces Fourth Quarter and Year-End 2008 Results

Net Income Increases 145% Year Over Year Excluding One-Time Gain; Revenues Grow 10%

BETHESDA, MD – February 18, 2009 – CoStar Group, Inc. (NASDAQ: CSGP), the number one provider of information/marketing services to the commercial real estate industry, today announced that net income for the year ended December 31, 2008 increased 144.9% to $24.6 million, or $1.26 per diluted share, compared to $10.1 million, or $0.52 per diluted share for 2007, excluding 2007’s one-time gain on a lease settlement. EBITDA (earnings before interest, taxes, depreciation and amortization) for the year ended December 31, 2008 was $56.6 million, an increase of 114.5% compared to EBITDA of $26.4 million for the year ended December 31, 2007, excluding 2007’s one-time lease settlement gain.

Revenues for the year ended December 31, 2008 were $212.4 million, an increase of 10.2% over revenues of $192.8 million for the year ended December 31, 2007. Revenues in the fourth quarter 2008 increased approximately $125,000 from the third quarter of 2008, excluding the unfavorable impact of foreign exchange rate fluctuations on International revenue.

As of December 31, 2008, the company had $224.6 million in cash, cash equivalents, short-term and long-term investments, an increase of $37.2 million since December 31, 2007, and no long-term debt.

Year 2007-2008 Quarterly Results-Unaudited
(in millions, except per share data)
	2007								2008
	Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4

U.S. Revenues	$	40.2	$	41.9	$	43.5	$	44.7	$	46.4	$	47.5	$	48.0	$	48.2
International Revenues (in British pounds)	£	2.4	£	3.0	£	2.9	£	3.0	£	3.0	£	3.1	£	3.0	£	3.0
Total Revenues	$	44.8	$	47.8	$	49.3	$	50.8	$	52.3	$	53.5	$	53.8	$	52.9
EBITDA		5.0		4.2		8.0		16.8		11.5		12.8		15.5		16.7
Net income		1.8		1.2		3.3		9.7		5.0		5.4		6.6		7.5
Net income per share - diluted		0.09		0.06		0.17		0.50		0.26		0.28		0.34		0.38
Weighted average outstanding shares - diluted		19.2		19.3		19.5		19.5		19.4		19.5		19.6		19.5

“CoStar Group completed another very successful year in 2008, delivering the earnings growth we projected by focusing on cost containment and earnings leverage,” said CoStar Group CEO Andrew C. Florance. “I was especially pleased that in the fourth quarter of 2008 we attained our longstanding goal of a company-wide EBITDA margin of 30%. Moreover, we doubled earnings year over year excluding 2007’s one-time lease settlement gain, and we added more than $37 million to cash and investments to maintain our company’s strong financial position despite challenging economic conditions.”

Revenues for the fourth quarter of 2008 were $52.9 million, a 4.1% increase compared to the same period a year ago. Fourth quarter 2008 revenue reflected the impact of unfavorable foreign currency exchange rates, declining non-subscription-based revenue combined with slower revenue growth for subscription-based services during the quarter. Subscription-based revenue accounts for more than 95% of the company’s total revenue.

Excluding the unfavorable impact from year-over-year changes in exchange rates throughout the quarter, revenues for the fourth quarter of 2008 would have grown 6.9% compared with the fourth quarter of 2007. In the fourth quarter of 2008 alone, the unfavorable impact from quarter-over-quarter changes in exchange rates totaled approximately $1 million. On a functional currency basis, U.S. revenues in the fourth quarter of 2008 totaled $48.2 million, as compared to $48.0 million in the third quarter of 2008, and international revenues totaled £3.0 million in the fourth quarter of 2008 consistent with the third quarter of 2008.

Net income increased to $7.5 million, or $0.38 per diluted share, for the fourth quarter of 2008 compared to net income of $3.8 million, or $0.20 per diluted share, for the fourth quarter of 2007, excluding the one-time lease settlement gain in the fourth quarter of 2007. EBITDA was $16.7 million for the fourth quarter of 2008 compared to $9.2 million for the fourth quarter 2007, excluding the one-time lease settlement gain in the fourth quarter of 2007.

“As we reported last quarter, the current economic environment and continued financial instability have had an adverse effect on our near-term revenue growth,” said Florance. “Certainly, we expect 2009 will present difficult challenges for many businesses. However, with our strong balance sheet and industry-leading market position, we fully expect to manage through the current environment and to capitalize on our subscription-based business model.”

“In addition, CoStar Showcase, the innovative new Internet marketing service we launched last May, has proven to be a major hit with our clients and we believe has the potential to be a significant contributor to revenue,” added Florance.

At the end of the fourth quarter 2008, CoStar had 89,712 paying subscribers to the company’s subscription-based information services, an increase of 961 compared to the end of the fourth quarter 2007. The 12-month trailing customer renewal rate for CoStar’s subscription-based services was approximately 89%.

2009 Outlook

“For the first quarter of 2009, we expect fully diluted net income per share of approximately $0.28 to $0.30,” stated CoStar Group Chief Financial Officer Brian J. Radecki. “For the full year of 2009, we expect fully diluted net income per share of approximately $1.00 to $1.05, which includes approximately $5.5 million in pre-tax, non-cash equity compensation charges related to the vesting of restricted stock and stock option grants. For 2009, we also anticipate our overall effective tax rate to be approximately 45%, and the interest rate for interest income to be approximately 0.5% to 0.8%.”

“Given the uncertainties surrounding foreign exchange rate fluctuations, we are providing revenue guidance separately for our U.S. and International operations. In the U.S., we expect first quarter of 2009 quarterly revenue in the range of $47.0 to $48.0 million, and International revenue in the range of £2.7 to £2.9 million. For the full year 2009, we expect U.S. revenue in the range of $185.0 to $190.0 million and International revenue in the range of £11.5 to £12.0 million,” said Radecki.

In this press release, we include disclosure of net income, excluding 2007’s one-time lease settlement gain, and EBITDA, excluding 2007’s one-time lease settlement gain, which are non-GAAP financial measures. We believe these numbers provide useful information to investors as they provide a means for a more accurate comparison of our results of operations over historical periods. We also believe these measures provide more meaningful insight into the company’s performance, as they exclude a non-recurring item that is not considered by management to be directly related to on-going business operations.

Management will conduct a conference call to discuss earnings results for the fourth quarter and full year ended December 31, 2008, and the financial outlook for the first quarter of 2009 at 11:00 a.m. EST on Thursday, February 19, 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) 398-9386 from within the United States and Canada, or (612) 288-0340 from outside the United States and Canada. Refer to Conference reservation number 984704. A replay of the conference call will be available approximately one hour after the live call concludes and remain available through midnight on March 5, 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 984704. 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 Year
	Ended December 31,						Ended December 31,
	2008			2007			2008			2007


Revenues	$	52,929		$	50,840		$	212,428		$	192,805
Cost of revenues		17,733			20,009			73,408			76,704
Gross margin		35,196			30,831			139,020			116,101

Operating expenses:
Selling and marketing		8,375			12,025			41,705			51,777
Software development		3,082			3,087			12,759			12,453
General and administrative		9,814			9,743			39,888			36,569
Gain on lease settlement, net		-			(7,613	)		-			(7,613	)
Purchase amortization		1,157			1,256			4,880			5,063
		22,428			18,498			99,232			98,249

Income from operations		12,768			12,333			39,788			17,852
Interest and other income, net		782			2,220			4,914			8,045
Income before income taxes		13,550			14,553			44,702			25,897
Income tax expense, net		6,049			4,841			20,079			9,946
Net income	$	7,501		$	9,712		$	24,623		$	15,951

Net income per share - basic	$	0.39		$	0.51		$	1.27		$	0.84
Net income per share - diluted	$	0.38		$	0.50		$	1.26		$	0.82

Weighted average outstanding shares - basic		19,451			19,148			19,372			19,044
Weighted average outstanding shares - diluted		19,544			19,498			19,550			19,404

Reconciliation of Non-GAAP Financial Measures with Net Income

Net income	$	7,501		$	9,712		$	24,623		$	15,951
Purchase amortization in cost of revenues		512			783			2,284			2,170
Purchase amortization in operating expenses		1,157			1,256			4,880			5,063
Depreciation and other amortization		2,263			2,401			9,637			8,914
Interest income, net		(782	)		(2,220	)		(4,914	)		(8,045	)
Income tax expense, net		6,049			4,841			20,079			9,946
EBITDA	$	16,700		$	16,773		$	56,589		$	33,999

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

	December 31,		December 31,
	2008		2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	159,982	$	57,785
Short-term investments		35,268		129,641
Accounts receivable, net		12,294		10,875
Deferred income taxes		2,036		2,716
Prepaid and other current assets		2,903		4,661
Total current assets		212,483		205,678

Long-term investments		29,340		-
Deferred income taxes		3,392		2,233
Property and equipment, net		16,876		24,045
Intangible and other assets, net		70,749		87,565
Deposits and other assets		1,544		2,322
Total assets	$	334,384	$	321,843

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	19,694	$	27,863
Deferred revenue		9,442		10,374
Total current liabilities		29,136		38,237

Deferred income taxes		132		1,801
Income taxes payable		1,695		-

Stockholders' equity		303,421		281,805
Total liabilities and stockholders' equity	$	334,384	$	321,843

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

	For the Three Months				For the Year
	Ended December 31,				Ended December 31,
	2008		2007		2008			2007
Revenues
United States	$	48,187	$	44,733	$	190,075		$	170,298
International		4,742		6,107		22,353			22,507
Total Revenues	$	52,929	$	50,840	$	212,428		$	192,805

EBITDA
United States	$	16,629	$	11,861	$	58,813		$	32,872
International*		71		4,912		(2,224	)		1,127
Total EBITDA	$	16,700	$	16,773	$	56,589		$	33,999

International Revenue in British pounds	£	3,004	£	2,985	£	12,042		£	11,231

* International EBITDA includes a corporate allocation of approximately $222,000 and $390,000 for the three months ended December 31, 2008 and 2007, respectively, and $1,110,000 and $2,590,000 for the year ended December, 2008 and 2007, respectively.

Reconciliation of Non-GAAP Financial Measures with 2007-2008 Quarterly Results
(in millions)
	2007												2008
	Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4

Net income	$	1.8		$	1.2		$	3.3		$	9.7		$	5.0		$	5.4		$	6.6		$	7.5
Purchase amortization		1.6			1.8			1.8			2.0			1.8			1.9			1.8			1.7
Depreciation and other amortization		2.0			2.1			2.3			2.5			2.5			2.5			2.4			2.3
Interest income, net		(1.9	)		(1.9	)		(2.1	)		(2.2	)		(1.9	)		(1.3	)		(0.9	)		(0.8	)
Income tax expense, net		1.5			1.0			2.7			4.8			4.1			4.3			5.6			6.0
EBITDA	$	5.0		$	4.2		$	8.0		$	16.8		$	11.5		$	12.8		$	15.5		$	16.7

Reconciliation of Fourth Quarter and Full-year 2007 Results, excluding Gain on lease settlement
(in thousands)

	For the Three Months			For the Year
	Ended December 31,			Ended December 31,
	2007			2007

EBITDA	$	16,773		$	33,999
Gain on lease settlement, net		(7,613	)		(7,613	)
EBITDA, excluding gain	$	9,160		$	26,386

Net Income	$	9,712		$	15,951
Gain on lease settlement, net		(7,613	)		(7,613	)
Income tax expense, net		1,718			1,718
Net Income, excluding gain	$	3,817		$	10,056

Net income, excluding gain, per share - diluted	$	0.20		$	0.52

About CoStar Group, Inc.

CoStar Group, Inc. (Nasdaq:CSGP) 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 1,300 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, 2007 and CoStar's Form 10-Q for the quarter ended September 30, 2008, under the heading "Risk Factors.” In addition to these statements, there can be no assurance as to what effect the current economic environment and continued financial instability will have on CoStar’s revenue and earnings growth; that 2009 will present difficult challenges for the company and many other businesses; that CoStar Showcase will be a significant contributor to CoStar’s revenue; that CoStar will be able to manage through the current environment and to capitalize on its subscription-based business model; that fully diluted net income for the first quarter of 2009 and full year 2009 will be as stated in this press release; that the equity compensation charges for full year 2009 will be as stated in this press release; that the overall effective tax rate and the interest rate for our interest income for 2009 will be as stated in this press release; and that quarterly revenue for the first quarter 2009 and revenue for the full year 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.