Image source: CoStar Group.

CoStar Group (NASDAQ:CSGP) reported third-quarter results on Oct. 28, 2015. The commercial real estate services company is enjoying strong sales growth as it benefits from its commanding lead in the apartment listings space.

CoStar Group results: The raw numbers

 Metric

Q3 2015

Q3 2014

Growth (YOY)

Revenue

$189.1 million

$153.1 million

24%

EBITDA

$22.1 million

$43.7 million

-49%

Earnings per share

($0.17)

($0.47)

N/A

Data source: CoStar Group Q3 2015 earnings press release.

What happened with CoStar Group this quarter?

  • CoStar is dominating the multifamily real estate space, with Apartments.com having three times the number of page views as its next closest apartment site competitor, according to Alexa. In addition, CoStar's collection of properties -- consisting of Apartments.com, Apartment Finder, and Apartment Home Living -- was the No. 1 apartment listing network in unique monthly visitors, visits, page views, average minutes per visit, and total time on site. Even better, CoStar's lead appears to be widening, with Apartments.com experiencing a 74% year-over-year increase in unique visitors, according to comScore.
  • Net bookings surged 100% year over year to $30.8 million. "We had more net bookings in the last two quarters than in the entire year of 2014," said founder and CEO Andrew Florance. "This impressive performance has been driven by exceptional execution on the part of our sales team supported by the highly effective Apartments.com advertising campaign and is resulting in strong sales companywide."
  • To fuel this torrid growth, CoStar is investing heavily in marketing for Apartments.com. Along with the costs associated with the integration of its recent Apartment Finder acquisition, these investments are taking a toll on CoStar's profits. Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization -- which excludes stock-based compensation expense, acquisition-related costs, and restructuring charges -- declined 31% year over year to $35.5 million. Adjusted net income and adjusted EPS also declined 38% and 39%, respectively.

What management had to say
While CoStar's earnings declined sharply when compared with the third quarter of 2014, they did rise on a sequential basis. Florance touched on this point in CoStar's earnings release, saying: "We have also begun to achieve margin improvement, which I anticipate will continue in 2016 and beyond as we remain fully committed to reaching our goal of a 40% margin by the end of 2018. We are extremely focused on accelerating cost synergies within our apartment rentals listings services, as we continue to deliver new sales at high incremental margin across all of our services."

Looking forward
For the fourth quarter of 2015, CoStar expects revenue of $190 million to $193 million and adjusted EPS of $0.79 to $0.83. That would place adjusted EPS for the full year at $1.74 to $1.78, an increase of $0.10 at the mid-point compared with the company's prior forecast.

"We are raising full year earnings guidance based on great progress integrating Apartment Finder and the fact that we are reducing costs faster than expected," said Interim CFO Scott Yinger.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends CoStar Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.