Apartments.com Dominance Fuels CoStar Group, Inc. Earnings

Image source: Apartments.com.

CoStar Group (CSGP 6.48%) reported second-quarter results on July 27. The provider of commercial real estate information, analytics, and online marketplaces enjoyed strong increases in sales and profits driven by share gains in its key Apartments.com brand.

CoStar Group results: The raw numbers

Source: CoStar Group Q2 2016 earnings press release.

What happened with CoStar Group this quarter?

Revenue jumped 21% year over year to $207 million, surpassing CoStar's guidance for second-quarter sales of approximately $204 million to $206 million.

"In the second quarter of 2016, we achieved the second highest sales quarter in our history in both CoStar Suite and Multifamily," said CEO Andrew Florance in a press release. "For the fifth consecutive quarter, we generated over $25 million in net bookings with $26 million in net bookings in the second quarter of 2016.

Helping to drive CoStar's growth is the increasing dominance of Apartments.com.

"In the first half of 2016, Apartments.com continued to break away from the pack as the most trafficked apartment internet listing site," said Florance. "According to comScore, in June 2016 Apartments.com generated nearly 23 million visits, which is more than all other apartment internet listing sites. In the same month compared to last year, Apartments.com unique visitors grew 40%, while our two primary competitors saw decreases of 9% and 14%, respectively."

CoStar's strong sales performance, combined with a 6% reduction in the company's cost of revenue and operating expenses, led to a surge in profitability.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to $46 million -- up from a loss of $1 million in Q2 2015. Adjusted EBITDA, which excludes stock-based compensation, restructuring charges, acquisition-related costs, and other special items, likewise soared 394% to $56 million.

All told, adjusted (non-GAAP) net income jumped to $29 million from only $2 million in the year-ago quarter. And adjusted earnings per share increased to $0.91 from $0.08 in the second quarter of 2015.

Looking forward

CoStar Group expects third-quarter revenue of approximately $211 million to $213 million, and non-GAAP EPS of $1.00 to $1.04.

The company also reiterated its guidance for full-year revenue of between $834 million and $840 million and raised its 2016 adjusted earnings forecast to a range between $4.05 and $4.13 -- an increase of $0.04 at the midpoint from its previous estimate.

"The company continued to deliver strong revenue growth and better than expected earnings in the second quarter of 2016," added CFO Scott Wheeler. "With our continued focus on cost management, we are increasing our full-year earnings outlook and expect further margin expansion in the second half of the year."