CoStar Group(CSGP) - 2024 Q2 - Quarterly Results

Executive Summary & Q2 2024 Highlights This section provides an overview of CoStar Group's strong financial and operational performance in Q2 2024, including key financial metrics, record website traffic, and management's commentary on business segment growth Q2 2024 Financial & Operational Highlights CoStar Group achieved strong performance in Q2 2024, with revenue growing 12% year-over-year to $678 million, net new bookings reaching $67 million, and the company's network averaging a record 183 million unique monthly visitors Q2 2024 Key Financial Data | Metric | Q2 2024 | Q2 2023 | Year-over-Year Growth | | :--- | :--- | :--- | :--- | | Revenue | $678 million | $606 million | 12% | | Net Income | $19 million | $101 million | -81.2% | | Diluted Net Income Per Share | $0.05 | $0.25 | -80% | | EBITDA | $12 million | $105 million | -88.6% | | Adjusted EBITDA | $41 million | $127 million | -67.7% | | Non-GAAP Net Income | $61 million | $127 million | -51.9% | | Non-GAAP Diluted Net Income Per Share | $0.15 | $0.31 | -51.6% | - Net new bookings totaled $67 million[1] - CoStar Group's network averaged a record 183 million unique monthly visitors[1][47] - Homes.com's net new bookings exceeded $55 million by June, with the Homes.com network attracting 148 million average monthly unique visitors in Q2[14] - Homes.com's unaided brand awareness reached 27% in June 2024[14] Management Commentary CEO Andy Florance highlighted strong revenue, sales, and website traffic growth, with Apartments.com up 18% and CoStar up 10%, while CFO Chris Lown noted the strength of core commercial businesses and ongoing progress of the Homes.com strategy - CEO Andy Florance reported total revenue growth of 12% year-over-year, with Apartments.com growing 18% and CoStar 10%, and commercial information and marketplace businesses achieving a 41% profit margin in Q2 2024[2] - CFO Chris Lown stated that the quarter's results demonstrate the strength of the company's core commercial businesses and the continued progress of the Homes.com strategy[14] Financial Performance This section details CoStar Group's financial results, including condensed consolidated statements of operations, balance sheets, cash flows, and disaggregated revenues by segment for Q2 2024 and the first half of 2024 Condensed Consolidated Statements of Operations In Q2 2024, CoStar Group reported revenue of $677.8 million, gross profit of $542.0 million, and net income of $19.2 million, significantly lower than Q2 2023's $100.5 million, with diluted EPS at $0.05 Condensed Consolidated Statements of Operations Summary (Q2 2024 vs Q2 2023) | Metric (Millions of USD, except per share data) | Q2 2024 | Q2 2023 | | :-------------------------------------------- | :------------- | :------------- | | Revenue | $677.8 | $605.9 | | Cost of Revenues | $135.8 | $112.4 | | Gross Profit | $542.0 | $493.5 | | Operating Expenses | $558.1 | $414.4 | | Operating (Loss) Income | $(16.1) | $79.1 | | Net Income | $19.2 | $100.5 | | Diluted Net Income Per Share | $0.05 | $0.25 | Condensed Consolidated Statements of Operations Summary (Six Months Ended June 30, 2024 vs June 30, 2023) | Metric (Millions of USD, except per share data) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------- | :----------------------- | :----------------------- | | Revenue | $1,334.2 | $1,190.3 | | Cost of Revenues | $277.0 | $231.6 | | Gross Profit | $1,057.2 | $958.7 | | Operating Expenses | $1,116.1 | $807.3 | | Operating (Loss) Income | $(58.9) | $151.4 | | Net Income | $25.9 | $187.7 | | Diluted Net Income Per Share | $0.06 | $0.46 | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets increased to $9,067.3 million from $8,919.7 million on December 31, 2023, with cash and cash equivalents decreasing, but net property, plant, and equipment significantly increasing due to new campus acquisitions Condensed Consolidated Balance Sheets Summary (Millions of USD) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :------------ | :------------- | | Cash and Cash Equivalents | $4,919.5 | $5,215.9 | | Total Current Assets | $5,207.2 | $5,476.1 | | Property, Plant and Equipment, Net | $853.2 | $472.2 | | Goodwill | $2,383.6 | $2,386.2 | | Total Assets | $9,067.3 | $8,919.7 | | Total Current Liabilities | $561.7 | $455.8 | | Long-Term Debt, Net | $991.2 | $990.5 | | Total Liabilities | $1,671.6 | $1,581.1 | | Total Stockholders' Equity | $7,395.7 | $7,338.6 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities significantly decreased to $189.2 million from $298.4 million in the prior year, while net cash used in investing activities substantially increased to $472.5 million, primarily due to new campus acquisitions Condensed Consolidated Statements of Cash Flows Summary (Six Months Ended June 30, 2024 vs June 30, 2023, Millions of USD) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :----------------------- | :----------------------- | | Net Cash Provided by Operating Activities | $189.2 | $298.4 | | Net Cash Used in Investing Activities | $(472.5) | $(54.4) | | Net Cash Used in Financing Activities | $(11.9) | $(6.3) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(296.4) | $237.3 | | Cash and Cash Equivalents at End of Period | $4,919.5 | $5,205.3 | - Purchases of property, plant, and equipment and other assets for the new campus amounted to $449.5 million in the first half of 2024, compared to $45.6 million in the first half of 2023[22] Disaggregated Revenues & Segment Results Total revenue for Q2 2024 was $677.8 million, with North America contributing $643.8 million and International $34.0 million, primarily driven by Multifamily and CoStar businesses; total EBITDA for Q2 2024 significantly decreased to $12.1 million from $105.2 million in Q2 2023, mainly due to negative International EBITDA Q2 2024 Disaggregated Revenues (Millions of USD) | Segment | North America | International | Total | | :--- | :--- | :--- | :--- | | CoStar | $237.1 | $15.9 | $253.0 | | Information Services | $27.9 | $5.5 | $33.4 | | Multifamily | $264.2 | — | $264.2 | | LoopNet | $67.2 | $2.6 | $69.8 | | Residential | $16.2 | $10.0 | $26.2 | | Other Marketplaces | $31.2 | — | $31.2 | | Total Revenue | $643.8 | $34.0 | $677.8 | Q2 2024 Segment EBITDA (Millions of USD) | Segment | Q2 2024 | Q2 2023 | | :--- | :------------- | :------------- | | North America | $30.8 | $104.6 | | International | $(18.7) | $0.6 | | Total EBITDA | $12.1 | $105.2 | 2024 Outlook & Guidance This section outlines CoStar Group's financial projections for the third quarter and full year 2024, including updated guidance for adjusted EBITDA and revenue, along with forward-looking non-GAAP reconciliations Full Year and Q3 2024 Guidance CoStar Group raised its full-year 2024 adjusted EBITDA guidance to $195 million to $205 million, with the midpoint increasing by $5 million from previous guidance, and full-year revenue is projected to be $2,735 million to $2,745 million, representing approximately 12% year-over-year growth at the midpoint, while Q3 2024 adjusted EBITDA is expected to be $47 million to $52 million 2024 Outlook (Millions of USD, except per share data) | Metric | Q3 2024 Guidance (Low-High) | Full Year 2024 Guidance (Low-High) | | :--- | :----------------------- | :--------------------- | | Adjusted EBITDA | $47 - $52 | $195 - $205 | | Revenue | $692 - $697 | $2,735 - $2,745 | | Non-GAAP Diluted Net Income Per Share | $0.15 - $0.16 | $0.64 - $0.66 | - The midpoint of the full-year 2024 adjusted EBITDA guidance increased by $5 million from previous guidance[5] - Full-year 2024 revenue growth is projected to be approximately 12% at the midpoint[14] - Q3 2024 revenue growth is projected to be approximately 11% at the midpoint[14] Forward-Looking Guidance Reconciliation (Non-GAAP) The company provides forward-looking non-GAAP guidance reconciliations, including net income to non-GAAP net income and net income to adjusted EBITDA, covering Q3 2024 and the full year Q3 2024 Guidance Reconciliation (Millions of USD, except per share data) | Metric | Low | High | | :--- | :-- | :--- | | Net Income | $22 | $26 | | Non-GAAP Net Income | $63 | $67 | | Adjusted EBITDA | $47 | $52 | Full Year 2024 Guidance Reconciliation (Millions of USD, except per share data) | Metric | Low | High | | :--- | :-- | :--- | | Net Income | $107 | $114 | | Non-GAAP Net Income | $263 | $270 | | Adjusted EBITDA | $195 | $205 | Non-GAAP Financial Measures & Reconciliations This section defines CoStar Group's key non-GAAP financial measures and provides detailed reconciliations from GAAP to non-GAAP metrics for various periods, including net income to non-GAAP net income, EBITDA, and adjusted EBITDA Definitions of Non-GAAP Measures This section defines CoStar Group's key non-GAAP financial measures, including non-GAAP net income, net new bookings, adjusted EBITDA, EBITDA, and non-GAAP diluted net income per share, explaining their calculation methods and purposes - Non-GAAP net income is determined by adjusting GAAP net income to exclude stock-based compensation expense, acquisition and integration-related costs, restructuring costs, out-of-period settlement and impairment costs, loss on debt extinguishment, and amortization of acquired intangible assets and other related costs, then subtracting a hypothetical income tax provision[7] - Net new bookings are calculated based on the annualized change in sales bookings resulting from new subscription contracts, changes to existing subscription contracts, and cancellations of subscription contracts during the reporting period[8] - Adjusted EBITDA is a non-GAAP financial measure representing EBITDA less stock-based compensation expense, acquisition and integration-related costs, restructuring costs, and out-of-period settlement and impairment[16] - EBITDA is a non-GAAP financial measure representing GAAP net income less net interest income or expense, net other income or expense, loss on debt extinguishment, income taxes, and depreciation and amortization expense[31] - Non-GAAP diluted net income per share is non-GAAP net income divided by the diluted shares used to calculate GAAP diluted net income per share; during periods of GAAP net loss and non-GAAP net income, the weighted average shares outstanding used to calculate non-GAAP EPS include potentially dilutive securities excluded from GAAP EPS calculations due to their anti-dilutive effect[32] Reconciliation of Net Income to Non-GAAP Net Income This reconciliation table shows adjustments from GAAP net income to non-GAAP net income, primarily by adding back amortization of acquired intangible assets, stock-based compensation expense, and acquisition and integration-related costs, then applying a hypothetical tax rate Q2 2024 Reconciliation of Net Income to Non-GAAP Net Income (Millions of USD, except per share data) | Metric | Q2 2024 | Q2 2023 | | :--- | :------------- | :------------- | | Net Income | $19.2 | $100.5 | | Income Tax Expense | $16.7 | $31.1 | | Pre-Tax Income | $35.9 | $131.6 | | Amortization of Acquired Intangible Assets | $18.1 | $18.0 | | Stock-Based Compensation Expense | $22.7 | $21.8 | | Acquisition and Integration-Related Costs | $6.0 | $(0.2) | | Non-GAAP Pre-Tax Income | $82.7 | $171.1 | | Hypothetical Income Tax Provision (26.0%) | $(21.5) | $(44.5) | | Non-GAAP Net Income | $61.2 | $126.6 | | Diluted Net Income Per Share | $0.05 | $0.25 | | Non-GAAP Diluted Net Income Per Share | $0.15 | $0.31 | Reconciliation of Net Income to EBITDA and Adjusted EBITDA This reconciliation table details adjustments from GAAP net income to EBITDA and then to adjusted EBITDA, primarily by adding back non-cash expenses such as depreciation and amortization, interest, taxes, stock-based compensation expense, and acquisition-related costs Q2 2024 Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Millions of USD) | Metric | Q2 2024 | Q2 2023 | | :--- | :------------- | :------------- | | Net Income | $19.2 | $100.5 | | Amortization of Acquired Intangible Assets (Cost of Revenues) | $7.9 | $7.5 | | Amortization of Acquired Intangible Assets (Operating Expenses) | $10.2 | $10.5 | | Depreciation and Other Amortization | $10.1 | $8.1 | | Interest Income, Net | $(53.5) | $(51.9) | | Other (Expense) Income, Net | $1.5 | $(0.6) | | Income Tax Expense | $16.7 | $31.1 | | EBITDA | $12.1 | $105.2 | | Stock-Based Compensation Expense | $22.7 | $21.8 | | Acquisition and Integration-Related Costs | $6.0 | $(0.2) | | Adjusted EBITDA | $40.8 | $126.7 | Quarterly Non-GAAP Reconciliations This section provides detailed quarterly non-GAAP reconciliations from Q1 2023 to Q2 2024, including net income to non-GAAP net income and net income to EBITDA and adjusted EBITDA Quarterly Non-GAAP Net Income Reconciliation (Millions of USD, except per share data) | Metric | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | | :--- | :------------- | :------------- | :------------- | :------------- | :------------- | :------------- | | Net Income | $87.1 | $100.5 | $90.6 | $96.4 | $6.7 | $19.2 | | Non-GAAP Net Income | $117.7 | $126.7 | $120.2 | $133.4 | $41.7 | $61.2 | | Non-GAAP Diluted Net Income Per Share | $0.29 | $0.31 | $0.30 | $0.33 | $0.10 | $0.15 | Quarterly EBITDA and Adjusted EBITDA Reconciliation (Millions of USD) | Metric | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | | :--- | :------------- | :------------- | :------------- | :------------- | :------------- | :------------- | | EBITDA | $97.8 | $105.2 | $88.7 | $98.0 | $(12.7) | $12.1 | | Adjusted EBITDA | $122.9 | $126.8 | $111.9 | $130.1 | $12.4 | $40.8 | Corporate Information This section provides details on CoStar Group's upcoming earnings conference call and an overview of the company's business, including its market position, key brands, and a disclaimer regarding forward-looking statements Earnings Conference Call CoStar Group will host a conference call on Tuesday, July 23, 2024, at 5:00 PM ET to discuss Q2 2024 results and company outlook, with investors able to listen to a live webcast on the company's investor relations website - Management will host a conference call on Tuesday, July 23, 2024, at 5:00 PM ET to discuss Q2 2024 results and the company's outlook[18][33] - A live audio webcast of the conference call will be available in the investor section of CoStar Group's website: https://investors.costargroup.com[18](index=18&type=chunk) About CoStar Group & Forward-Looking Statements Founded in 1987, CoStar Group is a leading provider of online real estate marketplaces, information, and analytics for the property market, operating platforms like CoStar, Apartments.com, and Homes.com, with this section also including a detailed disclaimer regarding forward-looking statements and potential risks - CoStar Group (NASDAQ: CSGP), founded in 1987, is a leading provider of online real estate marketplaces, information, and analytics for the property market[47] - The company's primary brands include CoStar, Apartments.com, LoopNet, STR, Ten-X, Homes.com, and international portals OnTheMarket (UK), BureauxLocaux (France), Thomas Daily (Germany), and Belbex (Spain)[47] - CoStar Group's websites attracted over 183 million average monthly unique visitors in Q2 2024[47] - This press release contains "forward-looking statements" subject to various risks and uncertainties, where actual results may differ materially from expectations[29] - Potential risk factors include risks related to the proposed transaction with Matterport, Inc., the ability to integrate operations and employees, the ability to realize anticipated benefits and synergies, impacts on business relationships, legal proceedings, the ability to retain key personnel, and the effects of economic conditions on the real estate industry and customer base[29]