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CoStar Group (CSGP)
Q3 2013 Earnings Call
October 24, 2013 11:00 am ET
Richard Simonelli - Director of Strategic Communications and Investor Relations
Andrew C. Florance - Co-Founder, Chief Executive Officer, President and Director
Brian J. Radecki - Chief Financial Officer, Principal Accounting Officer and Treasurer
Jonathan Coleman - General Counsel and Secretary
Brandon Burke Dobell - William Blair & Company L.L.C., Research Division
Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division
Michael Huang - Needham & Company, LLC, Research Division
Ian Corydon - B. Riley Caris, Research Division
Todd Lukasik - Morningstar Inc., Research Division
Steve Weinstein - Pacific Crest Securities, Inc., Research Division
Previous Statements by CSGP
» CoStar Group Inc (CSGP) Management Discusses Q2 2013 Results - Earnings Call Transcript
» CoStar Group Management Discusses Q1 2013 Results - Earnings Call Transcript
» CoStar Group Management Discusses Q4 2012 Results - Earnings Call Transcript
I would now like to turn the conference over to our host, Rich Simonelli. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to CoStar Group's Third Quarter 2013 conference call coming from our headquarters in Washington, D.C. We are delighted you have joined us.
Before I turn the call over to Andy and Brian, I have some important facts for you. Certain portions of this discussion contain forward-looking statements, which involve many risks and uncertainties that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's October 23, 2013, press release on third quarter results and in CoStar's filings with the SEC, including our Form 10-K for the period ended December 31, 2012, as well as our Form 10-Q for the period ended June 30, 2013, in each case under the heading Risk Factors. All forward statements are based on information available to CoStar on the date of this call, and then CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise.
As a reminder, today's conference call is also being broadcast live and in color over the Internet on www.costar.com. A replay will be available approximately an hour after the call and available until November 28 of this year. To listen to the replay, call 1 (800) 475-6701 within the U.S. or Canada or (320) 365-3844 outside the U.S. and Canada. The access code is 304716. A replay will be available on our website soon after the call concludes.
I will now turn the call over to Andy.
Andrew C. Florance
Good morning and thank you, everyone, for joining us today. Our third quarter 2013 financial results were very strong. Revenue grew to $112 million for the third quarter, a 17% year-over-year increase. Our annualized net new sales of subscription services in the third quarter were $13.7 million, an increase of 47% year-over-year. We added nearly 1,200 new CoStar information subscription customers during the quarter, bringing the total number of new clients to 4,900 over the last 12 months. This represents a 58% increase in the acceleration of new customers compared to the previous trailing 12-month period. EBITDA increased 52% year-over-year to nearly $30 million for the quarter. I think this margin expansion is all the more impressive when you consider that we are investing so aggressively right now into important initiatives that we believe will enable us to sustain these impressive revenue growth rates for many years to come.
In prior calls and meetings, we've briefed you on the years of planning our product design development and engineering teams have invested into building next-generation of our flagship product, CoStar Suite and CoStarGo. At times, we refer to this next generation of CoStar as Fusion. We call this next product platform Fusion because it blends our valuable in-depth data, our historical data sets, the power of our subsidiary companies' software and their solutions together with our clients own data. We believe that this next-generation platform moves CoStar into the realm of workflow solutions, decision-support, creates communication channels and yields predictive analytics. We, in turn, believe that this increases the utility of our services, gives us additional competitive advantage and will fuel our long-term growth. The scope of our plans for Fusion is very ambitious, so we intend to build a platform in a series of segmented lower risk product releases over the course of several years.
Last week, we launched the first of these planned software releases, with 5 major product enhancements to the CoStar platform. The 5 enhancements include a new map-based interactive search tool based on the popular search tool that we had in our mobile platform, CoStarGo. We've had in-depth coverage of the U.S. multifamily marketplace. We've expanded the property and market analytics capability of the product, and we integrated in a lease valuation and comparison tool. And finally, we released an upgrade to our very popular CoStarGo products, giving it mobile analytics capabilities.
The release was first made available in Maryland, Virginia and the District. The release went very smoothly in those areas, so we launched it in the United Kingdom and a few days later, in the Northeastern United States. The release is still progressing very smoothly, and we plan to roll it out to the rest of the country over the course of the next 2 weeks. Initial reaction is positive across the board, and clients' activity in the first phase of our release has been fantastic. In just 10 days, as of about 2 minutes before the call, we solved 1.13 million searches in the platform, and there were almost -- actually not almost, there were 1,030 lease analysis financial models created in basically the first week. So we're very pleased with the level of activity from this limited rollout in the Mid-Atlantic, Northeast and the U.K.
We've met with over 100 firms in the first 10 days in order to understand how clients are reacting to the new product. The following anecdotal feedback gives you a flavor of the sort of feedback we're receiving overall. Tom Edgar of GBR Phoenix Beard in the United Kingdom told us to quote, "The upgraded CoStar Suite has massively improved the user's experience. It now offers an easy to navigate user-friendly interface, which mirrors the fantastic CoStarGo app for iPad and offers great functionality. The extra time spent on further development of the product is clear to see."