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CoStar Group, Inc. Boosts Full-Year Outlook as Profits Soar

By Joe Tenebruso – Apr 25, 2018 at 7:51AM

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Accelerating revenue growth is a beautiful thing.

CoStar Group (CSGP -2.13%) reported first-quarter results on April 23. The provider of commercial real estate information, analytics, and online marketplaces is enjoying a powerful combination of accelerating sales growth and margin expansion, prompting it to raise its guidance for the year ahead.

CoStar Group results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$274 million

$227 million

21%

Net income

$52 million

$22 million

136%

Earnings per share

$1.44

$0.68

112%

Data source: CoStar Group Q1 2018 earnings press release.

What happened with CoStar Group this quarter?

Multifamily revenue jumped 37% to $88 million, and 23% on an organic basis. CoStar Group continues to fortify its best-in-class apartment-listing network, with recent acquisition ForRent adding 3.7 million unique visitors to its monthly traffic. Combined with Apartments.com and its other rental sites, CoStar's network averaged 15.6 million unique monthly visitors in the first quarter -- representing a year-over-year an increase of 38% -- according to comScore.

"We are moving quickly to integrate the operations of the ForRent business with Apartments.com," founder and CEO Andrew Florance said in a press release. "With ForRent, we have expanded our industry-leading multifamily sales team to over 300 highly seasoned and trained sales professionals, which we believe will result in higher sales and revenue as the year progresses."

Additionally, CoStar Suite revenue rose 19% to $130 million, as the commercial real estate information service's U.S. customer base increased by over 20,000 to approximately 126,000 subscribers.

Moreover, CoStar Group is growing more profitable as it expands. Adjusted EBITDA -- which excludes stock-based compensation, acquisition-related charges, and certain other items -- leapt 32% to $84 million, as adjusted EBITDA margin improved by nearly 300 basis points, to 31%.

All told, adjusted (non-GAAP) net income soared 75% to $60 million, and non-GAAP earnings per share surged 57% to $1.65.

Hand turning a dial labeled Profit to high

Image source: Getty Images.

Looking forward

These strong results prompted CoStar Group to boost its full-year financial outlook, which now includes:

  • Revenue of $1.174 billion to $1.19 billion, representing growth of 22% at the midpoint, and up from a prior estimate of $1.17 billion to $1.19 billion.
  • Adjusted EBITDA of $380 million to $390 million, up from $365 million to $375 million.
  • Non-GAAP EPS of $7.44 to $7.64, up from $7.01 to $7.21.

For the second quarter, CoStar Group expects revenue of $292 million to $295 million, adjusted EBITDA of $66 million to $70 million, and non-GAAP EPS of $1.25 to $1.34.

"With our continued strong sales and revenue performance and focus on margin improvement, we are raising our guidance for the full year of 2018," CFO Scott Wheeler said. "Our first quarter performance increases our confidence in achieving our goal of 40% adjusted EBITDA margin for the fourth quarter of 2018."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends CoStar Group. The Motley Fool has a disclosure policy.

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