WASHINGTON–(BUSINESS WIRE)–CoStar Group, Inc. (NASDAQ: CSGP), a leading provider of online real estate marketplaces, information and analytics in the property markets, announced today that revenue for the quarter ended September 30, 2022 was $557 million, an increase of 12% over revenue of $499 million for the third quarter of 2021.
Net income for the third quarter of 2022 was $72 million, or $0.18 per diluted share. Non-GAAP net income for the third quarter of 2022 (which excludes amortization of acquired intangible assets, stock-based compensation, and other items as described below) was $118 million or $0.30 per diluted share, an increase of 19% compared to the third quarter of 2021. EBITDA for the third quarter of 2022 was $129 million.
“We delivered outstanding results across all of our business lines in the third quarter, with Apartments.com leading the way” said Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group. “Net new bookings totaled $76 million in the third quarter of 2022, up 62% over the third quarter of 2021. Year-to-date our sales results have already exceeded the net new bookings for the full year 2021, and we still have one quarter left to go. Both revenue and profit in the third quarter of 2022 were at or above the high end of our guidance range and we are raising our forecast for the year.”
“Apartments.com sales continue to accelerate,” continued Florance. “Our Apartments.com sales team delivered record sales in September, bringing our net new bookings to $90 million on a year-to-date basis in 2022, an increase of 192% compared to the same period of 2021. Revenue growth for Apartments.com accelerated to 11% in the third quarter, and we now expect revenue growth of 16% in the fourth quarter of 2022. Revenue growth for CoStar was even stronger with a 17% increase in the third quarter 2022 over third quarter 2021 on a constant currency basis.”
Year 2021-2022 Quarterly Results – Unaudited
(in millions, except per share data)
2021
2022
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Revenues
$458
$480
$499
$507
$516
$536
$557
Net income
74
61
64
93
89
83
72
Net income per share – diluted(1)
0.19
0.16
0.16
0.24
0.23
0.21
0.18
Weighted average outstanding shares – diluted(1)
394
394
394
395
394
394
396
EBITDA
136
133
123
173
158
140
129
Adjusted EBITDA
160
150
144
193
178
159
153
Non-GAAP net income
108
103
99
138
123
112
118
Non-GAAP net income per share – diluted(1)
0.27
0.26
0.25
0.35
0.31
0.28
0.30
__________________________
(1) Certain prior period amounts have been retroactively adjusted to reflect the ten-for-one stock split effected in the form of a stock dividend in June 2021.
2022 Outlook
The Company is raising its revenue guidance to a range of $2.175 billion to $2.180 billion for the full year of 2022, an increase of $5 million at the midpoint of the range compared to the prior outlook. The Company expects revenue for the fourth quarter of 2022 in the range of $565 million to $570 million, representing revenue growth of approximately 12% over the fourth quarter of 2021 at the midpoint of the range.
The Company is raising its adjusted EBITDA guidance to a range of $665 million to $670 million for the full year of 2022, an increase of $48 million at the midpoint of the range compared to the prior outlook. For the fourth quarter of 2022, the Company expects adjusted EBITDA in a range of $176 million to $181 million.
“Our financial results in the third quarter and improved 2022 revenue outlook demonstrate the strength of our products and resilience of our subscription-based business model,” said Scott Wheeler, Chief Financial Officer of CoStar Group. “We are making great progress with our Residential investment strategy while managing investment levels well below our initial estimates. This results in our improved profit outlook for 2022.”
The Company expects full year 2022 non-GAAP net income per diluted share in a range of $1.25 to $1.26 based on 397 million shares, an increase of $0.15 per diluted share compared to the prior outlook. For the fourth quarter of 2022, the Company expects non-GAAP net income per diluted share in a range of $0.35 to $0.36 based on 405 million shares. These ranges include an estimated non-GAAP tax rate of 26% for the full year and the fourth quarter of 2022.
The preceding forward-looking statements reflect CoStar Group’s expectations as of October 25, 2022, including forward-looking non-GAAP financial measures on a consolidated basis, based on current estimates, expectations, observations, and trends. Given the risk factors, rapidly evolving economic environment, and uncertainties and assumptions discussed in this release and in our quarterly reports on Form 10-Q and annual reports on Form 10-K, actual results may differ materially. Other than in publicly available statements, the Company does not intend to update its forward-looking statements until its next quarterly results announcement.
Reconciliation of EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share to their GAAP basis results are shown in detail below, along with definitions for those terms. A reconciliation of forward-looking non-GAAP guidance to the most directly comparable GAAP measure, net income, can be found within the tables included in this release.
Non-GAAP Financial Measures
For information regarding the purpose for which management uses the non-GAAP financial measures disclosed in this release and why management believes they provide useful information to investors regarding the Company’s financial condition and results of operations, please refer to the Company’s latest periodic report.
EBITDA is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group before interest (expense) income and other (expense) income, loss on debt extinguishment, income taxes, depreciation and amortization.
Adjusted EBITDA is a non-GAAP financial measure that represents EBITDA before stock-based compensation expense, acquisition- and integration-related costs, restructuring costs, and settlements and impairments incurred outside the Company’s normal course of business. Adjusted EBITDA margin represents adjusted EBITDA divided by revenues for the period.
Non-GAAP net income is a non-GAAP financial measure determined by adjusting GAAP net income attributable to CoStar Group for stock-based compensation expense, acquisition- and integration-related costs, restructuring costs, settlement and impairment costs incurred outside the Company’s normal course of business and loss on debt extinguishment, as well as amortization of acquired intangible assets and other related costs, and then subtracting an assumed provision for income taxes. In 2022, the Company is assuming a 26% tax rate in order to approximate its statutory corporate tax rate excluding the impact of discrete items.
Non-GAAP net income per diluted share is a non-GAAP financial measure that represents non-GAAP net income divided by the number of diluted shares outstanding for the period used in the calculation of GAAP net income per diluted share. For periods with GAAP net losses and non-GAAP net income, the weighted average outstanding shares used to calculate non-GAAP net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.
Operating Metrics
Net new bookings is calculated based on the annualized amount of change in the Company’s sales bookings resulting from new subscription-based contracts and changes to existing subscription-based contracts for the period reported. Information regarding net new bookings is not comparable to, nor should it be substituted for, an analysis of the Company’s revenues over time.
Earnings Conference Call
Management will conduct a conference call to discuss the third quarter 2022 results and the Company’s outlook at 5:00 PM EST on Tuesday, October 25, 2022. A live audio webcast of the conference will be available in listen-only mode through the Investors section of the CoStar Group website: https://investors.costargroup.com. A replay of the webcast audio will also be available in the Investors section of our website for a period of time following the call.
CoStar Group, Inc.
Condensed Consolidated Statements of Operations – Unaudited
(in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues
$
556,921
$
499,319
$
1,609,054
$
1,437,349
Cost of revenues
108,364
92,597
304,814
270,911
Gross profit
448,557
406,722
1,304,240
1,166,438
Operating expenses:
Selling and marketing (excluding customer base amortization)
185,395
180,055
510,736
483,354
Software development
56,912
53,143
162,520
148,500
General and administrative
91,270
64,671
246,576
186,747
Customer base amortization
29,651
19,121
60,621
55,885
363,228
316,990
980,453
874,486
Income from operations
85,329
89,732
323,787
291,952
Interest income (expense), net
10,656
(7,943
)
(461
)
(23,698
)
Other income, net
1,389
1,546
3,596
2,343
Income before income taxes
97,374
83,335
326,922
270,597
Income tax expense
25,084
19,031
81,841
70,933
Net income
$
72,290
$
64,304
$
245,081
$
199,664
Net income per share – basic
$
0.18
$
0.16
$
0.62
$
0.51
Net income per share – diluted
$
0.18
$
0.16
$
0.62
$
0.51
Weighted-average outstanding shares – basic
394,712
392,419
393,650
392,101
Weighted-average outstanding shares – diluted
396,209
394,295
394,973
394,036
CoStar Group, Inc.
Reconciliation of Non-GAAP Financial Measures – Unaudited
(in thousands, except per share data)
Reconciliation of Net Income to Non-GAAP Net Income
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income
$
72,290
$
64,304
$
245,081
$
199,664
Income tax expense
25,084
19,031
81,841
70,933
Income before income taxes
97,374
83,335
326,922
270,597
Amortization of acquired intangible assets
36,596
26,330
82,601
77,450
Stock-based compensation expense
18,138
16,299
54,097
46,988
Acquisition and integration related costs
1,095
5,012
3,238
15,475
Restructuring and related costs
191
—
191
—
Settlements and impairments
4,100
—
4,100
—
Other expense
2,063
934
6,162
2,791
Non-GAAP income before income taxes
159,557
131,910
477,311
413,301
Assumed rate for income tax expense(1)
26
%
25
%
26
%
25
%
Assumed provision for income tax expense
(41,485
)
(32,978
)
(124,101
)
(103,325
)
Non-GAAP net income
$
118,072
$
98,932
$
353,210
$
309,976
Net income per share – diluted
$
0.18
$
0.16
$
0.62
$
0.51
Non-GAAP net income per share – diluted
$
0.30
$
0.25
$
0.89
$
0.79
Weighted average outstanding shares – basic
394,712
392,419
393,650
392,101
Weighted average outstanding shares – diluted
396,209
394,295
394,973
394,036
__________________________
(1) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income
$
72,290
$
64,304
$
245,081
$
199,664
Amortization of acquired intangible assets in cost of revenues
6,945
7,209
21,980
21,565
Amortization of acquired intangible assets in operating expenses
29,651
19,121
60,621
55,885
Depreciation and other amortization
7,224
6,610
21,199
22,138
Interest (income) expense, net
(10,656
)
7,943
461
23,698
Other income, net
(1,389
)
(1,546
)
(3,596
)
(2,343
)
Income tax expense
25,084
19,031
81,841
70,933
EBITDA
$
129,149
$
122,672
$
427,587
$
391,540
Stock-based compensation expense
18,138
16,299
54,097
46,988
Acquisition and integration related costs
1,095
5,012
3,238
15,475
Restructuring and related costs
191
—
191
—
Settlements and impairments
4,100
—
4,100
—
Adjusted EBITDA
$
152,673
$
143,983
$
489,213
$
454,003
CoStar Group, Inc.
Condensed Consolidated Balance Sheets – Unaudited
(in thousands)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash, cash equivalents and restricted cash
$
4,774,465
$
3,827,126
Accounts receivable
157,104
138,191
Less: Allowance for credit losses
(9,334
)
(13,374
)
Accounts receivable, net
147,770
124,817
Income tax receivable
9,278
—
Prepaid expenses and other current assets
75,074
36,182
Total current assets
5,006,587
3,988,125
Deferred income taxes, net
5,032
5,034
Property and equipment, net
306,319
271,431
Lease right-of-use assets
94,262
100,680
Goodwill
2,301,739
2,321,015
Intangible assets, net
343,232
435,662
Deferred commission costs, net
129,815
101,879
Deposits and other assets
16,872
21,762
Income tax receivable
2,005
11,283
Total assets
$
8,205,863
$
7,256,871
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
31,435
$
22,244
Accrued wages and commissions
83,041
81,794
Accrued expenses
77,275
81,676
Income taxes payable
39
31,236
Lease liabilities
34,063
26,268
Deferred revenue
100,053
95,471
Total current liabilities
325,906
338,689
Long-term debt, net
988,890
987,944
Deferred income taxes, net
80,611
98,656
Income taxes payable
14,603
12,496
Lease and other long-term liabilities
88,941
107,414
Total liabilities
$
1,498,951
$
1,545,199
Total stockholders’ equity
6,706,912
5,711,672
Total liabilities and stockholders’ equity
$
8,205,863
$
7,256,871
CoStar Group, Inc.
Condensed Consolidated Statements of Cash Flows – Unaudited
(in thousands)
Nine Months Ended
September 30,
2022
2021
Operating activities:
Net income
$
245,081
$
199,664
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
109,983
102,390
Amortization of deferred commissions costs
55,373
46,728
Amortization of Senior Notes discount and issuance costs
1,771
1,742
Non-cash lease expense
23,108
21,118
Stock-based compensation expense
54,097
46,988
Deferred income taxes, net
(21,676
)
16,255
Credit loss expense
13,468
7,797
Other operating activities, net
(1,774
)
10
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
(36,177
)
(17,715
)
Prepaid expenses and other current assets
(17,235
)
(18,820
)
Deferred commissions
(83,875
)
(49,798
)
Accounts payable and other liabilities
2,131
(27,912
)
Lease liabilities
(27,615
)
(23,596
)
Income taxes payable
(29,051
)
(3,583
)
Deferred revenue
4,488
15,800
Other assets
1,492
2,150
Net cash provided by operating activities
293,589
319,218
Investing activities:
Proceeds from sale of property and equipment and other assets
5,034
245
Purchase of Richmond assets and other intangibles
(31,530
)
(123,623
)
Purchases of property and equipment and other assets
(43,659
)
(21,533
)
Cash paid for acquisitions, net of cash acquired
(6,331
)
(152,594
)
Net cash used in investing activities
(76,486
)
(297,505
)
Financing activities:
Repayments of long-term debt assumed in acquisition
(2,155
)
—
Repurchase of restricted stock to satisfy tax withholding obligations
(20,259
)
(29,306
)
Proceeds from equity offering, net of transaction costs
746,170
—
Proceeds from exercise of stock options and employee stock purchase plan
10,777
15,025
Other financing activities
—
(57
)
Net cash provided by (used in) financing activities
734,533
(14,338
)
Effect of foreign currency exchange rates on cash and cash equivalents
(4,297
)
(1,700
)
Net increase in cash, cash equivalents and restricted cash
947,339
5,675
Cash, cash equivalents and restricted cash at the beginning of period
3,827,126
3,755,912
Cash, cash equivalents and restricted cash at the end of period
$
4,774,465
$
3,761,587
CoStar Group, Inc.
Disaggregated Revenues – Unaudited
(in thousands)
Three Months Ended September 30,
2022
2021
North America
International
Total
North America
International
Total
CoStar
$
203,657
$
9,033
$
212,690
$
174,071
$
9,194
$
183,265
Information Services
32,524
8,489
41,013
29,177
6,749
35,926
Multifamily
189,536
—
189,536
171,125
—
171,125
LoopNet
57,126
1,775
58,901
52,103
424
52,527
Residential
19,351
—
19,351
24,747
—
24,747
Other Marketplaces
35,430
—
35,430
31,729
—
31,729
Total revenues
$
537,624
$
19,297
$
556,921
$
482,952
$
16,367
$
499,319
Nine Months Ended September 30,
2022
2021
North America
International
Total
North America
International
Total
CoStar
$
590,141
$
27,764
$
617,905
$
505,470
$
26,958
$
532,428
Information Services
93,306
23,424
116,730
84,959
20,820
105,779
Multifamily
547,372
—
547,372
508,629
—
508,629
LoopNet
164,417
5,228
169,645
151,770
1,082
152,852
Residential
57,565
—
57,565
53,939
—
53,939
Other Marketplaces
99,837
—
99,837
83,722
—
83,722
Total revenues
$
1,552,638
$
56,416
$
1,609,054
$
1,388,489
$
48,860
$
1,437,349
CoStar Group, Inc.
Results of Segments – Unaudited
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
EBITDA
North America
$
127,965
$
119,823
$
422,454
$
385,857
International
1,184
2,849
5,133
5,683
Total EBITDA
$
129,149
$
122,672
$
427,587
$
391,540
CoStar Group, Inc.
Reconciliation of Non-GAAP Financial Measures with Quarterly Results – Unaudited
(in millions, except per share data)
Reconciliation of Net Income to Non-GAAP Net Income
2021
2022
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Net income
$74.2
$61.1
$64.3
$92.9
$89.3
$83.5
$72.3
Income tax expense
19.1
32.8
19.0
40.5
32.1
24.7
25.1
Income before income taxes
93.3
93.9
83.3
133.4
121.4
108.1
97.4
Amortization of acquired intangible assets
25.8
25.3
26.3
26.2
23.2
22.8
36.6
Stock-based compensation expense
15.5
15.1
16.3
16.7
17.8
18.1
18.1
Acquisition and integration related costs
8.5
2.0
5.0
3.2
1.6
0.5
1.1
Restructuring and related costs
—
—
—
—
—
—
0.2
Settlements and impairments
—
—
—
—
—
—
4.1
Other expense
1.1
0.8
0.9
4.1
2.0
2.1
2.1
Non-GAAP income before income taxes(1)
144.2
137.1
131.8
183.6
166.1
151.6
159.6
Assumed rate for income tax expense (2)
25%
25%
25%
25%
26%
26%
26%
Assumed provision for income tax expense
(36.0)
(34.3)
(33.0)
(45.9)
(43.2)
(39.4)
(41.5)
Non-GAAP net income(1)
$108.2
$102.8
$98.8
$137.7
$122.9
$112.2
$118.1
Non-GAAP net income per share – diluted(3)
$0.27
$0.26
$0.25
$0.35
$0.31
$0.28
$0.30
Weighted average outstanding shares – basic(3)
391.6
392.3
392.4
392.5
392.9
393.3
394.7
Weighted average outstanding shares – diluted(3)
393.7
394.1
394.3
394.5
394.2
394.5
396.2
__________________________
(1) Totals may not foot due to rounding.
(2) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.
(3) Certain prior period amounts have been retroactively adjusted to reflect the ten-for-one stock split effected in the form of a stock dividend in June 2021.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
2021
2022
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Net income
$74.2
$61.1
$64.3
$92.9
$89.3
$83.5
$72.3
Amortization of acquired intangible assets
25.8
25.3
26.3
26.2
23.2
22.8
36.6
Depreciation and other amortization
8.5
7.0
6.6
6.9
7.0
7.0
7.2
Interest (income) expense, net
7.9
7.9
7.9
7.9
7.7
3.4
(10.7)
Other (income) expense, net
0.1
(0.8)
(1.5)
(0.9)
(0.9)
(1.3)
(1.4)
Income tax expense
19.1
32.8
19.0
40.5
32.1
24.7
25.1
EBITDA(1)
$135.6
$133.3
$122.6
$173.4
$158.4
$140.0
$129.1
Stock-based compensation expense
15.5
15.1
16.3
16.7
17.8
18.1
18.1
Acquisition and integration related costs
8.5
2.0
5.0
3.2
1.6
0.5
1.1
Restructuring and related costs
—
—
—
—
—
—
0.2
Settlements and impairments
—
—
—
—
—
—
4.1
Adjusted EBITDA(1)
$159.6
$150.4
$143.9
$193.4
$177.9
$158.6
$152.7
__________________________
(1) Totals may not foot due to rounding.
CoStar Group, Inc.
Reconciliation of Forward-Looking Guidance – Unaudited
(in thousands, except per share data)
Reconciliation of Forward-Looking Guidance, Net Income to Non-GAAP Net Income
Guidance Range
Guidance Range
For the Three Months
For the Year Ending
Ending December 31, 2022
December 31, 2022
Low
High
Low
High
Net income
$
113,000
$
117,000
$
359,000
$
363,000
Income tax expense
40,000
41,000
122,000
123,000
Income before income taxes
153,000
158,000
481,000
486,000
Amortization of acquired intangible assets
20,000
20,000
102,000
102,000
Stock-based compensation expense
19,000
19,000
73,000
73,000
Acquisition and integration related costs
—
—
3,000
3,000
Settlements and impairments
—
—
4,000
4,000
Other expense
—
—
6,000
6,000
Non-GAAP income before income taxes
192,000
197,000
669,000
674,000
Assumed rate for income tax expense(1)
26
%
26
%
26
%
26
%
Assumed provision for income tax expense
(49,900
)
(51,200
)
(173,900
)
(175,200
)
Non-GAAP net income
$
142,100
$
145,800
$
495,100
$
498,800
Net income per share – diluted
$
0.28
$
0.29
$
0.90
$
0.91
Non-GAAP net income per share – diluted
$
0.35
$
0.36
$
1.25
$
1.26
Weighted average outstanding shares – diluted
405,300
405,300
397,300
397,300
__________________________
(1) The assumed tax rate approximates our statutory federal and state corporate tax rate for the applicable period.
Reconciliation of Forward-Looking Guidance, Net Income to Adjusted EBITDA
Guidance Range
Guidance Range
For the Three Months
For the Year Ending
Ending December 31, 2022
December 31, 2022
Low
High
Low
High
Net income
$
113,000
$
117,000
$
359,000
$
363,000
Amortization of acquired intangible assets
20,000
20,000
102,000
102,000
Depreciation and other amortization
9,000
9,000
30,000
30,000
Interest income, net
(25,000
)
(25,000
)
(24,000
)
(24,000
)
Other (income) expense, net
—
—
(4,000
)
(4,000
)
Income tax expense
40,000
41,000
122,000
123,000
Stock-based compensation expense
19,000
19,000
73,000
73,000
Acquisition and integration related costs
—
—
3,000
3,000
Settlements and impairments
—
—
4,000
4,000
Adjusted EBITDA
$
176,000
$
181,000
$
665,000
$
670,000
Contacts
Investor Relations:
Cyndi Eakin
Senior Vice President
CoStar Group Investor Relations
(202) 346-6784
ceakin@costar.com
News Media:
Matthew Blocher
Vice President
CoStar Group Corporate Marketing & Communications
(202) 346-6775
mblocher@costar.com