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[PREMIUM] CoStar Group, Inc. Earnings Surge 44%

CoStar Group (NASDAQ: CSGP) reported third-quarter results on Oct. 25.

The new business model for the provider of commercial real estate information is exceeding expectations for sales and profits, and management now expects CoStar to exceed its goal of $1 billion in run-rate revenue exiting 2017.

Image source: Getty Images.

CoStar Group results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$248 million

$213 million

16%

Net income

$34 million

$23 million

48%

Earnings per share

$1.04

$0.72

44%

Data source: CoStar Group Q3 2017 earnings press release.

What happened with CoStar Group this quarter?

Companywide net new bookings leapt 31% year over year to $34 million, driven by a 43% jump in multifamily bookings.

"We believe we've built the best user experience in the market, helping millions of people find new homes in our Apartments.com network," founder and CEO Andrew Florance said during a conference call with analysts. "Better user experience, deeper content, effective SEO [search-engine optimization] strategies, and great marketing [are] consistently driving huge traffic growth, an advantage to the Apartments.com network, and it's positively impacting these sales results."

Moreover, CoStar's profitability improved significantly in the third quarter; adjusted EBITDA margin rose to 34%, up from 23% in the second quarter. In turn, adjusted EBITDA -- which excludes stock-based compensation, acquisition-related charges, and certain other items -- jumped 25% year over year, to $84 million.

All told, adjusted (non-GAAP) net income increased 29% to $46 million, or $1.41 per share.

Looking forward

For the fourth quarter, CoStar Group expects:

  • Revenue in a range of $251 million to $254 million
  • Adjusted EBITDA of $85 million to $89 million
  • Non-GAAP earnings per share of $1.31 to $1.38

The company's full-year 2017 guidance now includes:

  • Revenue of $962 million to $965 million, up from a prior forecast of $954 million to $960 million
  • Adjusted EBITDA of $287 million to $291 million, an increase of $17 million at the midpoint from CoStar's previous outlook
  • Non-GAAP EPS of $4.65 to $4.73, up from $4.42 to $4.52

Additionally, Florance praised the company's successful integration of its CoStar and LoopNet databases and revamped business model, both of which should continue to fuel CoStar Group's results in the quarters ahead:

We converted LoopNet.com to a pure pay-to-list marketing site, eliminating free listings and creating more value for our paid listers. Beginning in early October, our sales force hit the ground running with our focused cross-selling campaign to convert LoopNet information users to CoStar Suite, and sell more paid advertising on LoopNet. In the first twelve days of the campaign, we closed over 500 deals. The response from our sales teams, clients, and prospects has been overwhelmingly positive. We believe this will ultimately result in significant revenue opportunities for the next several years.

With its LoopNet, CoStar Suite, and Apartments.com divisions all performing well, CoStar Group is a business firing on all cylinders.

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