CoStar Group Earnings Surge 88%

CEO Andrew Florance sees a path to $3 billion in revenue for the real estate information company.

Joe Tenebruso
Joe Tenebruso
Feb 27, 2019 at 6:06PM
Technology and Telecom

CoStar Group (NASDAQ:CSGP) reported fourth-quarter results on Feb. 26. The leading provider of commercial real estate information, analytics, and online marketplaces delivered sharply higher sales and profits, and management issued aggressive new growth targets for the years ahead.

CoStar Group results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Revenue

$316 million

$254 million

24%

Net income

$84 million

$44 million

89%

Earnings per share

$2.29

$1.22

88%

Data source: CoStar Group Q4 2018 earnings release. 

What happened with CoStar Group this quarter?

Companywide net new bookings jumped 15% to $50 million, fueled by the strong growth of Apartments.com, which continues to widen its lead over its competitors.

"We averaged 17 million unique visitors per month over the course of the year, according to ComScore, which is an increase of 35% compared to 2017," CEO Andrew Florance said during a conference call with analysts. "This is by far the most in the industry, as we continue to pull away from RentPath, which ... averaged less than 8.8 million unique visitors per month.

Results were also strong across CoStar Group's other business segments. CoStar Suite revenue rose 16% to $142 million, while revenue in the company's commercial property and land segment, which includes LoopNet, increased 17% to $46 million.

Florance said that he sees a "huge opportunity" to further monetize LoopNet in the coming years:

LoopNet has become a vital utility for tens of thousands of commercial real estate professionals seeking to market their properties to the millions of tenants and investors looking for commercial real estate online. LoopNet is the most heavily trafficked commercial real estate marketplace, with approximately 5 million unique visitors in a month. LoopNet generates $127 million of annual revenue on a very high margin. While we've more than tripled LoopNet's marketing revenues since CoStar acquired the company in 2012, we believe that we can further innovate and evolve the LoopNet solution -- and more than triple the revenue again -- with a focused effort, and site relaunch. 

A compass pointing toward the word growth

CoStar Group is ramping up its expansion initiatives. Image source: Getty Images.

Moreover, CoStar Group's margins are expanding as it scales its operations. Adjusted EBITDA -- which excludes stock-based compensation, acquisition-related charges, and restructuring costs -- surged 78% to $139 million, as adjusted EBITDA margin improved to 44% from 31% in the prior-year period. Adjusted (non-GAAP) net income, meanwhile, soared 126% to $102 million, or $2.81 per share.

Check out the latest CoStar Group earnings call transcript.

Looking forward

CoStar also issued guidance for 2019. Management expects:

  • Revenue of $1.37 billion to $1.38 billion, signifying year-over-year growth of approximately 15%
  • Adjusted EBITDA of $495 million to $505 million, up 20% at the midpoint
  • Non-GAAP earnings per share of $9.80 to $10.00, up from $8.28 in 2018

The company also issued new long-term financial targets.

"We achieved $1.2 billion in revenue for the full year and 44% adjusted EBITDA margin in the fourth quarter which significantly exceeded the long-term goals we set way back in 2014 of $1 billion in annual revenue in 2018 and 40% adjusted EBITDA margin in the fourth quarter," Florance said in a press release. "With these important milestones behind us, we are setting a new goal to exit 2023 with a $3 billion revenue run rate with adjusted EBITDA margin at or above 40% for the full year."