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CoStar Group Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 27, 2012 11:45AM
CoStar Group Inc. (CSGP) filed Quarterly Report for the period ended 2012-03-31. Costar Grp Inc has a market cap of $1.81 billion; its shares were traded at around $72.81 with a P/E ratio of 76.3 and P/S ratio of 7.2. Costar Grp Inc had an annual average earning growth of 2.7% over the past 5 years.
Highlight of Business Operations:We had no Level 3 liabilities as of March 31, 2012 and December 31, 2011. As of March 31, 2011, we held Level 3 liabilities for deferred consideration related to the October 19, 2009 acquisition of Resolve Technology. The deferred consideration totaled $3.3 million as of March 31, 2011 and included (i) a potential deferred cash payment two years after closing based on the incremental growth of Resolve Technology's revenue, and (ii) other potential deferred cash payments for successful completion of operational and sales milestones during the period from closing through October 31, 2013, which period was subject to extension by the parties to a date no later than December 31, 2014. On June 24, 2011, we made a payment to the seller of Resolve Technology of $500,000 as a result of the successful completion of one of the operational milestones. On September 8, 2011, we entered into an agreement to settle all remaining potential deferred cash payments due under the acquisition agreement. Under the terms of the settlement agreement, we made a payment of $1.6 million on September 14, 2011 to settle the entire obligation. We reversed the remaining $1.2 million of deferred consideration as a reduction to general and administrative expense during the three months ended September 30, 2011.
Software Development Expenses. Software development expenses slightly decreased to $5.0 million in the first quarter of 2012 from $5.3 million in the first quarter of 2011, and decreased as a percentage of revenues to 7.3% in the first quarter of 2012 compared to 8.8% in the first quarter of 2011. The decrease in the amount and percentage of software development expenses was primarily due to decreased personnel expense due to the capitalization of internal-use software development costs recorded to property and equipment in the first quarter of 2012 which did not occur in the first quarter of 2011.
General and Administrative Expenses. General and administrative expenses increased to $14.5 million in the first quarter of 2012 from $10.9 million in the first quarter of 2011, and increased as a percentage of revenues to 21.1% in the first quarter of 2012 compared to 18.3% in the first quarter of 2011. The increase in the amount and percentage of general and administrative expenses was primarily due to an approximate $1.3 million increase in legal costs, primarily due to acquisition-related costs, an approximate $800,000 increase in personnel costs and an increase of approximately $500,000 as a result of our October 2011 acquisition of Virtual Premise.
Segment Revenues. CoStar Property Professional, CoStar Tenant, and CoStar COMPS Professional are generally sold as a suite of similar services and comprise our primary service offering in our U.S. operating segment. U.S. revenues increased to $64.0 million in the first quarter of 2012 from $55.0 million in the first quarter of 2011. This increase in U.S. revenue was primarily due to further penetration of our subscription-based information services, and successful cross-selling of our services to our customers in existing markets, combined with continued high renewal rates. FOCUS is our primary service offering in our International operating segment. International revenues remained relatively constant at $4.6 million in the first quarter of 2012 and 2011. Intersegment revenue slightly increased to approximately $343,000 in the first quarter of 2012, compared to approximately $254,000 in the first quarter of 2011. Intersegment revenue is attributable to services performed for our wholly owned subsidiary, PPR, by Property and Portfolio Research Ltd., a wholly owned subsidiary of PPR. Intersegment revenue is recorded at an amount we believe approximates fair value. Intersegment revenue is eliminated from total revenues.
Segment EBITDA. U.S. EBITDA increased to $13.2 million in the first quarter of 2012 from $11.4 million in the first quarter of 2011. The increase in U.S. EBITDA was due primarily to an increase in revenues in the first quarter of 2012 from the first quarter of 2011. International EBITDA decreased to a higher loss of approximately $1.3 million in the first quarter of 2012 from a loss of approximately $833,000 in the first quarter of 2011. This higher loss was primarily due to increased personnel costs for the first quarter of 2012 compared to the first quarter of 2011. International EBITDA includes a corporate allocation of approximately $800,000 and $40,000 for each of the three months ended March 31, 2012 and 2011, respectively. The corporate allocation represents costs incurred for U.S. employees involved in international management and expansion activities.
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