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As filed with the Securities and Exchange Commission on April 23, 2003

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): April 23, 2003

COSTAR GROUP, INC.
(Exact name of registrant as specified in its charter)

Commission File Number: 0-24531

     
DELAWARE   52-2091509
(State or other jurisdiction of incorporation)   (I.R.S. employer identification number)

2 Bethesda Metro Center
Bethesda, MD
(Address of principal executive offices)

20814
(Zip Code)

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

 

 

INFORMATION INCLUDED IN THIS REPORT

Item 9. REGULATION FD DISCLOSURE (INFORMATION FURNISHED PURSUANT TO ITEM 12, “DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION”)

On April 23, 2003, CoStar Group, Inc. announced its financial results for the quarter ended March 31, 2003. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

In accordance with the procedural guidance in SEC Release No. 33-8216, the information in this Form 8-K and the Exhibit attached hereto is being furnished under “Item 9. Regulation FD Disclosure” rather than under “Item 12. Disclosure of Results of Operations and Financial Condition.” The information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

 

SIGNATURE

     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.

     
Date: April 23, 2003   COSTAR GROUP, INC.
     
     
    By:    /s/ Frank A. Carchedi   
    Name: Frank A. Carchedi
    Title: Chief Financial Officer

 

 

EXHIBIT INDEX

     
Exhibit No.   Description
     
99.1   Press Release dated April 23, 2003

 

exv99w1
 

EXHIBIT 99.1

COSTAR GROUP LOGO

 

FOR IMMEDIATE RELEASE

Contact:
Mark A. Klionsky,
Senior Vice President
CoStar Group, Inc.
(301) 280-3898
mklionsky@costar.com

CoStar Group, Inc. Announces First Quarter 2003 Results

U.K. Operations and Core Business Contribute to 18.3% Revenue Growth
Over First Quarter of 2002

BETHESDA, MD April 23, 2003 – The addition of a strong U.K. operation and continued organic growth of the core business contributed to revenue growth of 18.3% for the first quarter of 2003 over the first quarter of 2002, CoStar Group, Inc. (Nasdaq: CSGP) announced today.

CoStar Group, the leading provider of information services to the commercial real estate industry in the United States, entered the U.K. market in January 2003 with the acquisition of London-based Property Intelligence plc, a leading provider of commercial real estate information in the United Kingdom.

Year 2002-2003 Quarterly Results
($’s in millions, except per share data)
                                         
    2002   2003
   
 
    Q1   Q2   Q3   Q4   Q1
   
 
Revenues
   $ 19.1     $ 19.5     $ 20.1     $ 20.7     $ 22.6  
EBITDA
     1.3       1.4       1.6       2.0       2.4  
Pro forma net income
     0.2       0.3       0.4       0.8       1.0  
Pro forma net income per share
     0.01       0.02       0.03       0.05       0.06  
Net income (loss)
     (1.6 )     (1.3 )     (1.1 )     (0.8 )     (0.8 )
Net income (loss) per share
     (0.10 )     (0.08 )     (0.07 )     (0.05 )     (0.05 )
Weighted average common shares
     15.7       15.7       15.8       15.8       15.8  

Revenues for the first quarter of 2003 were $22.6 million, compared to $19.1 million in the first quarter of 2002. In addition, revenues increased sequentially by 9% for the first quarter of 2003 over the fourth quarter of 2002. The U.K. operation contributed approximately 7% of the revenue for the first quarter of

 

 

2003, with income from operations equal to approximately 10% of U.K. revenue, before corporate charges.

“We believe several factors contributed to the steady progress we have achieved,” said CoStar President & CEO Andrew C. Florance. “We continue to post sequential increases in revenue and earnings as a result of steady organic growth in our U.S. operations, while our new U.K. operation provides additional opportunities for growth. We believe the commercial real estate industry will soon begin to stabilize, which may also help us to achieve higher growth rates later in the year.”

For the quarter ended March 31, 2003, pro forma net income, which excludes purchase amortization, improved to $972,000 versus pro forma net income of $225,000 for the same quarter in 2002. On a per share basis, pro forma net income improved to $0.06 per share for the first quarter of 2003 versus pro forma net income of $0.01 per share for the first quarter of 2002. EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $2.4 million for the first quarter of 2003 compared to EBITDA of $1.3 million in the first quarter of 2002. The Company’s GAAP-basis net loss for the first quarter of 2003 narrowed to ($843,000) or $(0.05) per share, compared to a net loss of $(1.6) million or $(0.10) per share for the first quarter of 2002.

As of March 31, 2003, the Company had $26.3 million in cash, cash equivalents, and short-term investments, and no long-term debt.

“For the second quarter of 2003, we expect overall sequential quarterly revenue growth of approximately 2% over the first quarter of 2003, and pro forma net income of approximately $0.08 per share” said Frank Carchedi, CoStar’s Chief Financial Officer. “In addition, we continue to expect to reach our stated goal of approximately $0.40 of pro forma net income per share for 2003. Adjusting these pro forma amounts for purchase amortization, which we anticipate to be consistent with the charges for the first quarter of 2003, we expect a GAAP-basis net loss of approximately $(0.03) per share for the second quarter of 2003 and a GAAP-basis total net loss of approximately $(0.05) per share for the year 2003. We continue to expect to reach GAAP-basis net income during 2003.

 

 

CoStar Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)

                   
      For the Three Months
      Ended March 31,
      2003   2002
     
 
      (unaudited)
                   
Revenues
   $ 22,553     $ 19,061  
                   
Cost of revenues
     7,603       7,096  
 
    
     
 
Gross margin
     14,950       11,965  
                   
Operating expenses:
                
 
Selling and marketing
     6,569       5,669  
 
Software development
     1,700       1,397  
 
General and administrative
     6,489       5,867  
 
Purchase amortization
     1,112       893  
 
    
     
 
 
     15,870       13,826  
 
    
     
 
Loss from operations
     (920 )     (1,861 )
                   
Other income, net
     77       239  
 
    
     
 
Net loss before income taxes
     (843 )     (1,622 )
                   
Income tax benefit
     0       0  
 
    
     
 
Net loss
   $ (843 )   $ (1,622 )
 
    
     
 
Net loss per share
   $ (0.05 )   $ (0.10 )
 
    
     
 
Pro forma net income
   $ 972     $ 225  
 
    
     
 
Pro forma net income per share
   $ 0.06     $ 0.01  
 
    
     
 
Weighted average common shares
     15,814       15,720  
 
    
     
 
Reconciliation of Non-GAAP Financial Measures with Net Loss
        
                   
Net loss
   $ (843 )   $ (1,622 )
Purchase amortization in cost of revenues
     703       954  
Purchase amortization in operating expenses
     1,112       893  
 
    
     
 
Pro forma net income
   $ 972     $ 225  
 
    
     
 
Pro forma net income
   $ 972     $ 225  
Depreciation and other amortization
     1,456       1,351  
Interest income, net
     (78 )     (239 )
 
    
     
 
EBITDA
   $ 2,350     $ 1,337  
 
    
     
 

 

 

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

                   
      March 31,   December 31,
      2003   2002
     
 
      (unaudited)        
ASSETS
                
Current assets:
                
 
Cash and cash equivalents
   $ 24,910     $ 25,546  
 
Cash held for acquisition
     0       16,386  
 
Short-term investments
     1,405       1,598  
 
Accounts receivable, net
     7,123       6,786  
 
Prepaid and other current assets
     1,723       1,567  
 
    
     
 
Total current assets
     35,161       51,883  
                   
Property and equipment, net
     10,689       11,048  
Intangible and other assets, net
     72,755       55,704  
Deposits
     280       272  
 
    
     
 
Total assets
   $ 118,885     $ 118,907  
 
    
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
 
Accounts payable and accrued expenses
   $ 9,050     $ 10,124  
 
Deferred revenue
     6,505       4,766  
 
    
     
 
Total current liabilities
     15,555       14,890  
                   
Stockholders’ equity
     103,330       104,017  
 
    
     
 
Total liabilities and stockholders’ equity
   $ 118,885     $ 118,907  
 
    
     
 

Reconciliation of Non-GAAP Financial Measures for Year 2002-2003 Quarterly Results
($’s in millions)

                                         
    2002   2003
   
 
    Q1   Q2   Q3   Q4   Q1
   
 
Net Loss
   $ (1.6 )   $ (1.3 )   $ (1.1 )   $ (0.8 )   $ (0.8 )
Purchase amortization
     1.8       1.6       1.5       1.6       1.8  
   
 
Pro forma net income
     0.2       0.3       0.4       0.8       1.0  
Depreciation and other amortization
     1.3       1.3       1.3       1.3       1.5  
Interest income, net
     (0.2 )     (0.2 )     (0.1 )     (0.1 )     (0.1 )
   
 
EBITDA
   $ 1.3     $ 1.4     $ 1.6     $ 2.0     $ 2.4  
   
 

 

 

Management will conduct a conference call to discuss earnings results for the quarter ended March 31, 2003 and financial outlook for 2003, at 11:00 am ET, Thursday, April 24, 2003. This conference call will be broadcast live over the Internet at www.costar.com/corporate/investor. If you would like to join by telephone, please call (800) 329-4405 within the United States or (706) 634-0964 outside the United States. A telephonic replay of the conference call will be available two hours after the live call concludes through midnight on May 1, 2003. The replay telephone number is (800) 642-1687 within the United States or (706) 645-9291 outside the United States. Refer to Conference ID 9586040. The replay will also be available over the Internet at www.costar.com/corporate/investor for a period of time following the call.

About CoStar Group, Inc.

CoStar Group, Inc., (NASDAQ: CSGP) is the leading provider of information services to commercial real estate professionals in the United States and the United Kingdom. CoStar’s suite of products offers customers access via the Internet to the most comprehensive, verified database of commercial real estate information on 50 U.S. markets, London and the United Kingdom. Based in Bethesda, MD, the company has approximately 850 employees in 34 offices throughout the United States and the United Kingdom, including the largest professional research organization in the industry.

This news release includes “forward-looking statements,” which involve 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 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, 2002 under the heading “Risk Factors”. In addition to these statements, there can be no assurance that CoStar’s revenues will grow at the rates specified herein, that CoStar’s pro forma net income for the second quarter of 2003 or for the year ended December 31, 2003 will be as stated in this press release, that CoStar’s GAAP-basis net loss for the second quarter of 2003 or for the year ended December 31, 2003 will be as stated in this press release, that CoStar’s estimated purchase amortization will be as stated in this press release, that CoStar’s sequential quarterly growth rate or earnings will continue to improve, or that CoStar will reach GAAP-basis net income during 2003. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.