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CoStar Group's Apartments.com Sales Growing at 50% Annualized Rate

WASHINGTON, June 8, 2015 (GLOBE NEWSWIRE) -- CoStar Group, Inc. (Nasdaq:CSGP), the leading provider of commercial real estate information, analytics and online marketplaces, today announced that based on the last three months, Apartments.com sales are growing at a 50% annualized rate. Following the re-launch of Apartments.com in February, the Company had excellent sales results in March, April and May, the three highest months in the history of Apartments.com. The Company also announced that it completed its acquisition of Apartment Finder on June 1, 2015, pursuant to an agreement and plan of merger with Network Communications, Inc., which was previously announced on April 29, 2015.

"We are seeing immediate returns on our investments in technology, research, sales and marketing," said Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group. "The launch of the new Apartments.com website coupled with our consumer marketing campaign has been a huge success. Revenue growth for Apartments.com in the year leading up to the acquisition was only 4%. In the past three months, we have increased the annualized sales growth rate for Apartments.com to 50% based upon the three months ended May 31, 2015. Property managers and owners are rapidly shifting their advertising spend to Apartments.com with approximately 2,800 new apartment communities added to the site in the past 90 days. We are also achieving increased sales in the CoStar information business as many of the multifamily sales we are making are a combination of marketing and information."

Florance continued, "It is obvious that our consumer marketing campaign is highly successful. The marketing is driving traffic to the site and consumers like what they see. We have more than doubled unique visitor traffic year-over-year on Apartments.com and according to leading internet traffic monitoring companies comScore, Compete, Experian Hitwise and Alexa, Apartments.com is the most heavily trafficked multifamily website. In April, 43 million renters saw our television commercials, 13 million saw our outdoor and transit ads and 9 million heard our radio commercials. 27 million renters saw our digital ads in prime placements and takeovers on top websites and social media."

"Our search engine marketing spend on Apartments.com has also been very effective," said Florance. "Renters saw our keyword ads 89 million times in April 2015." Last week, the Company increased the investment in search engine marketing for newly acquired Apartment Finder. This resulted in an immediate 81% increase in unique visitors and 73% increase in leads. Florance added, "In just one week, we are already driving more leads to our customers on Apartment Finder than its existing print business."

Strong traffic trends continued into the beginning of June. According to Alexa, Apartments.com has the most traffic in the multifamily internet listing service industry and the most heavily trafficked network of multifamily websites, which includes Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com.

"Apartments.com is attracting more renters and they are more deeply engaged," said Florance. "Consumer engagement on Apartments.com is the highest in the space and has increased significantly since the middle of February 2015 when we launched the new Apartments.com website. Since then, according to Alexa, consumers are spending more time on Apartments.com than on any of the competitors' sites and in March and April, Apartments.com had three times the number of page views of the nearest competitor. This is a testament to our superior content and user interface."

"We have tremendous sales momentum that I believe will continue," said Florance. "Based on the outstanding results we have seen, we are modestly extending our national advertising campaign by approximately $5 million in the third quarter through the 2015 rental season. We also plan to make $3 million in additional B2B investments, including a bigger presence at the upcoming National Apartment Association conference to make our brands more visible with over 8,000 property managers and owners from around the United States attending the conference."

CoStar Group plans to expand its software development team to accelerate the integration of Apartment Finder and to further expand its service offering for the CoStar core business. "Our larger debt/equity sales team is demonstrating early success selling our newly launched CoStar Market Analytics service at the institutional level, and the response from prospects is extremely positive," said Florance. "In order to support this sales effort, we plan to increase the size of our development team."

"We have transformed the online apartment search industry and we believe that with Apartments.com we have created the best online destination for apartment owners, property managers and consumers to interact in a far more efficient manner, a win-win for all," Florance stated, "We believe the addition of Apartment Finder strengthens our service offering creating an even stronger multifamily platform and even better total solution."

Company Outlook

The Company expects the Apartment Finder acquisition to be accretive in 2016 and beyond. The Company's goal is to aggressively integrate the back ends of Apartments.com and Apartment Finder by the end of the year, effectively leveraging the same research, systems, support, and sales platform to power both websites. The Company expects this to drive tremendous cost synergies and greater operating efficiencies in 2016. As previously indicated, Apartment Finder will remain a distinct, complementary brand to Apartments.com with a unique user interface, but will also eventually be powered by CoStar's information. The Company believes that by offering multiple online marketing solutions, property managers and owners will get more exposure for their listings and more effective and precise targeting of leads.

"We have built tremendous momentum in the three months since the launch of the new Apartments.com," stated CoStar Group Chief Financial Officer Brian J. Radecki. "Based on strong sales in March, April and May and our closing of the Apartment Finder acquisition ahead of schedule, we are raising our revenue guidance for the full year 2015 and now expect consolidated revenue of approximately $700 million to $710 million."

The consolidated outlook includes revenue from Apartment Finder for seven months in a range of $40 million to $43 million. The Company is also increasing its revenue outlook by approximately $4 million compared to prior guidance, primarily related to higher than anticipated sales at Apartments.com.

Based on strong sales in the past three months and our early closing of the Apartment Finder acquisition, as indicated above, the Company is expanding its previously disclosed $75 million incremental investment in Apartments.com advertising by $5 million or $0.10 per diluted share in the third quarter to continue to take advantage of increased sales momentum. Also, higher sales commissions associated with higher than anticipated sales trends are expected to impact the 2015 outlook for non-GAAP net income per diluted share by approximately $0.10.

Additionally, in 2015 the Company is investing approximately $8 million or $0.15 per diluted share into its software development team to accelerate the integration of Apartment Finder and to further expand its service offering for the CoStar core business to support sales efforts of our larger sales team. The Company is also adding to its investment in search engine marketing at Apartment Finder for the remaining seven months of the year, which it believes will drive more traffic and accelerate the transition from print to digital distribution, impacting the 2015 non-GAAP net income share per diluted share by approximately $.10 for the full year 2015.

For the consolidated business, the Company now expects non-GAAP net income per diluted share of approximately $1.58 to $1.68 for 2015.

For the second quarter of 2015, the Company expects consolidated revenue in the range of $168 million to $170 million, which includes approximately $6 million related to Apartment Finder.

Radecki added, "The early closing of the Apartment Finder transaction allows us to further leverage our presence at the National Apartments Association event and begin to aggressively integrate the acquisition sooner." As stated above, the Company plans to increase its investment at the event by $3 million or approximately $0.06 per diluted share in the second quarter. Taking into account the increased investment, higher commissions and development costs, the Company now expects approximately $0.02 to $0.05 non-GAAP net income per diluted share for the second quarter of 2015.

The preceding forward-looking statements reflect CoStar Group's expectations as of June 8, 2015, including forward-looking non-GAAP financial measures on a consolidated basis. Reconciliation of non-GAAP net income, adjusted EBITDA and all of the disclosed non-GAAP financial measures to their GAAP basis results are shown in detail below, along with definitions for those terms.

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 (i) interest income (expense), (ii) provision for income taxes, and (iii) depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that represents EBITDA before (i) stock-based compensation expense, (ii) acquisition and integration related costs, (iii) restructuring charges and related costs, and (iv) settlements and impairments incurred outside the Company's normal business operations.

Non-GAAP net income is a non-GAAP financial measure that represents GAAP net income attributable to CoStar Group before (i) purchase amortization and other related costs, (ii) stock-based compensation expense, (iii) acquisition and integration related costs, (iv) purchase accounting adjustments, (v) restructuring charges and related costs, and (vi) settlements and impairments. From this figure, we then subtract an assumed provision for income taxes to arrive at non-GAAP net income. We assume a 38% tax rate in order to approximate our long-term effective corporate tax rate.

Non-GAAP net income per diluted share (also referred to as non-GAAP EPS) 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.

CoStar Group, Inc.
Reconciliation of Forward-Looking Guidance-Unaudited
(in thousands, except per share data)
Reconciliation of Forward-Looking Guidance, Net Income (Loss) to Non-GAAP Net Income
Guidance Range Guidance Range
For the Three Months For the Twelve Months
Ended June 30, 2015 Ended December 31, 2015
Low High Low High
Net income (loss) $ (16,800) $ (14,300) $ (23,400) $ (14,200)
Income tax expense (benefit), net (8,600) (7,300) (8,300) (3,300)
Income before income taxes (25,400) (21,600) (31,700) (17,500)
Purchase amortization and other related costs 13,500 13,500 58,600 58,600
Stock-based compensation expense 9,500 8,500 39,000 34,000
Acquisition and integration related costs 3,000 2,000 7,000 5,000
Restructuring and related costs 500 300 8,000 6,000
Settlements and Impairments -- -- 1,400 1,400
Non-GAAP income before income taxes 1,100 2,700 82,300 87,500
Assumed rate for income tax expense, net * 38% 38% 38% 38%
Assumed provision for income tax expense, net (418) (1,026) (31,274) (33,250)
Non-GAAP net income $ 682 $ 1,674 $ 51,026 $ 54,250
Net income (loss) per share - diluted $ (0.53) $ (0.45) $ (0.73) $ (0.44)
Non-GAAP net income per share - diluted $ 0.02 $ 0.05 $ 1.58 $ 1.68
Weighted average outstanding shares - diluted 32,200 32,200 32,300 32,300
Weighted average outstanding shares - basic 31,900 31,900 32,000 32,000
* A 38% tax rate is assumed for 2015 in order to approximate the Company's long-term effective corporate tax rate.
** For periods with GAAP net losses, the basic weighted-average outstanding shares are used to calculate the GAAP net loss per share as including the effect of the potentially dilutive securities would have an anti-dilutive effect. For periods with Non-GAAP net income, the diluted weighted-average outstanding shares are used to calculate Non-GAAP net income per share in order to reflect the impact of potentially dilutive securities.
Reconciliation of Forward-Looking Guidance, Net Income (Loss) to Adjusted EBITDA
Guidance Range Guidance Range
For the Three Months For the Twelve Months
Ended June 30, 2015 Ended December 31, 2015
Low High Low High
Net income (loss) $ (16,800) $ (14,300) $ (23,400) $ (14,200)
Purchase amortization and other related costs 13,500 13,500 58,600 58,600
Depreciation and other amortization 5,000 5,000 20,700 20,700
Interest and other expense (income), net 2,300 2,300 9,000 9,000
Income tax expense (benefit), net (8,600) (7,300) (8,300) (3,300)
Stock-based compensation expense 9,500 8,500 39,000 34,000
Acquisition and integration related costs 3,000 2,000 7,000 5,000
Restructuring and related costs 500 300 8,000 6,000
Settlements and impairments 0 0 1,400 1,400
Adjusted EBITDA $ 8,400 $ 10,000 $ 112,000 $ 117,200

About CoStar Group, Inc.

CoStar Group (Nasdaq:CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. Through LoopNet, the Company operates the most heavily trafficked commercial real estate marketplace online with more than 9.6 million registered members. Apartments.com is a premier online apartment resource for renters that matches apartment seekers with great apartment homes and provides property managers and owners a proven platform for marketing their properties. CoStar Group operates websites with over 22 million unique monthly visitors in aggregate during March 2015. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S., Canada and Europe with a staff of approximately 3,000 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about CoStar Group's financial expectations, the Company's plans, objectives, expectations and intentions and other statements including words such as "hope," "anticipate," "may," "believe," "expect," "intend," "will," "should," "plan," "estimate," "predict," "continue" and "potential" or the negative of these terms or other comparable terminology. Such statements are based upon the current beliefs and expectations of management of CoStar Group and are subject to significant risks and uncertainties. Actual results may differ materially from the results anticipated in the forward-looking statements. The following factors, among others, could cause or contribute to such differences: the risk that the Company is unable to sustain current growth rates or increase them; the risk that the trends stated or implied by this release cannot or will not be sustained at the current pace, including trends related to sales, earnings, revenue, and investments; the risk that property managers and owners do not continue to shift their advertising spend to Apartments.com; the risk that the Company does not continue to achieve increased sales in the CoStar information business as a result of sales of a combination of marketing and information; the risk that the Company's investment and marketing plans and expected amounts, or the timing of any such investment including the investment at the upcoming National Apartment Association conference, may change and that such investments do not produce the expected results; the possibility that the Company's plans to expand the size of its software development team change; the risk that the Company is unable to accelerate the integration of Apartment Finder, to further expand its service offering for the CoStar core business, or to accelerate Apartment Finder's transition from print to digital distribution, when or as expected; the risk that the businesses of Apartments.com, Apartment Finder and CoStar may not be combined successfully or in a timely and cost-efficient manner; the risk that the back ends of Apartments.com and Apartment Finder will not be integrated when expected or that the integration of the back ends does not produce the cost synergies and operating efficiencies expected; the risk that business disruption relating to the Apartment Finder acquisition may be greater than expected; the risk that the Apartment Finder acquisition is not accretive when and as expected; the risk that revenues for the second quarter and full year 2015 for Apartment Finder and the Company on a consolidated basis will not be as stated in this press release; the risk that net income for the second quarter and full year 2015 will not be as stated in this press release; the risk that non-GAAP net income and non-GAAP net income per diluted share for the second quarter and full year 2015 will not be as stated in this press release; the risk that Adjusted EBITDA for the second quarter and full year 2015 will not be as stated in this press release; the risk that the impact of investments and sales commissions on earnings will differ from current expectations; the risk that synergies from the acquisitions of Apartments and Apartment Finder may not be as expected, may not be fully realized, may take longer to realize than expected or may not drive revenue and earnings growth as expected; and the risk that expected investments in the Apartment Finder website and increased search engine marketing, or the timing of any such investments, may change. Additional factors that could cause results to differ materially from those anticipated in the forward-looking statements can be found in CoStar Group's Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC, including in the "Risk Factors" section of those filings, and the Company's other filings with the SEC available at the SEC's website (www.sec.gov). CoStar Group assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: All Contacts Brian J. Radecki Chief Financial Officer (202) 336-6920 bradecki@costargroup.com Richard Simonelli Vice President, Investor Relations (202) 346-6394 rsimonelli@costargroup.com

Source:CoStar Group, Inc.