CoStar Group, Inc. Earnings Surge 44%

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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.

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CoStar Group results: The raw numbers

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 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 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:

With its LoopNet, CoStar Suite, and 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.