CoStar Integration of LoopNet Leads to 227% Year-Over-Year EBITDA Increase

CoStar Integration of LoopNet Leads to 227% Year-Over-Year EBITDA Increase

Revenue Increases 50% Year-Over-Year and Company Raises Guidance for 2012

WASHINGTON, Oct. 24, 2012 (GLOBE NEWSWIRE) -- CoStar Group, Inc.
(Nasdaq:CSGP), commercial real estate's leading provider of information,
analytics and marketing services, announced today that revenue for the third
quarter of 2012 was $96.0 million versus $63.8 million in the third quarter of
2011, which represents an increase of 50% year-over-year.

Non-GAAP net income (defined below) in the third quarter of 2012 was $13.1
million or $0.47 per diluted share which represents an increase of $5.9
million or 82% year-over-year. Net income in the third quarter of 2012
increased to $6.8 million or an increase of 196% year-over-year. 

Adjusted EBITDA (defined below) was $25.6 million for the third quarter of
2012, which is an increase of 83% year-over-year. Adjusted EBITDA margins for
the third quarter of 2012 increased to 26.7% from 21.9% in the third quarter
of 2011. EBITDA (defined below) in the third quarter of 2012 was $19.6
million versus $6.0 million in the third quarter of 2011, an increase of 227%
year-over-year. 

"I am very pleased with the progress we are making on the integration of
LoopNet," said Andrew C. Florance, Founder and Chief Executive Officer of
CoStar."All areas of our business are coming together to realize the
synergies associated with the LoopNet acquisition and provide the best
products and services to the participants in commercial real estate. In
particular, our combined sales force is successfully cross-selling CoStar's
information services and LoopNet's marketing solutions to our respective
customer bases. As a result, we have added an all-time high number of new
customers in the third quarter, and we are seeing the positive effects on our
revenue and earnings."

Year 2011-2012 Quarterly Results - Unaudited
(in millions, except per share data)
                                                                  
                                 2011                      2012
                                 Q1    Q2    Q3    Q4      Q1    Q2     Q3
                                                                  
Revenues                          $59.6 $62.1 $63.8 $ 66.2 $68.6 $85.2  $96.0
EBITDA                           10.5  7.1   6.0   11.0    11.9  8.2    19.6
Net income (loss)                 4.5   2.6   2.3   5.2    5.1   (6.7)  6.8
Net income (loss) per share -     0.22  0.12  0.09  0.20    0.20  (0.25) 0.24
diluted
Weighted average outstanding      21.0  22.4  25.3  25.4    25.5  26.5   27.7
shares - diluted
                                                                  
Adjusted EBITDA                   12.6  14.3  14.0  16.0   15.3  20.4   25.6
Non-GAAP Net Income               6.2   7.3   7.2   8.4     8.2   10.5   13.1
Non-GAAP Net Income per share -   0.29  0.33  0.28  0.33    0.32  0.39   0.47
diluted

In the third quarter of 2012, the Company's 12-month trailing renewal rate for
annual subscription-based services was 94% and the renewal rate for CoStar's
over 5,000 customer firms of five years or longer was 99%. Both remain at
all-time highs.

As of September 30, 2012, the Company had approximately $151.8 million in
cash, cash equivalents, short-term and long-term investments.This represents
an increase of $22.7 million from the second quarter of 2012.Short and
long-term debt associated with the LoopNet acquisition totaled approximately
$170.6 million as of September 30, 2012.

The third quarter of 2012 was the first full quarter including LoopNet. The
transaction closed on April 30, 2012.

2012 Outlook

"Based on the strong earnings results in the third quarter of 2012, we are
raising our annual guidance for non-GAAP net income per diluted share (defined
below) to a range of approximately $1.59 to $1.64 for the year, an increase of
$0.16 at the midpoint," stated Brian J. Radecki, Chief Financial Officer of
CoStar. For the fourth quarter of 2012, the Company expects non-GAAP net
income per diluted share of $0.40 to $0.45.

"I am excited that the progress we are making integrating the companies is
translating to cost synergies as reflected in our third quarter results and
increased earnings guidance," continued Radecki.As disclosed last quarter,
the Company plans to invest in marketing initiatives totaling $0.10 to $0.12
of non-GAAP net income per diluted share in order to drive revenue synergies
through cross-selling. These programs will be aligned with selling activities
throughout Q4 of 2012 and into Q1 of 2013.

For the full year of 2012, the Company is also raising the lower end of
estimates for revenue to a range of approximately $347 million to $349
million. For the fourth quarter of 2012, the Company expects revenue in the
range of $97 million to $99 million.

For the combined company, forward-looking non-GAAP net income per diluted
share includes the non-GAAP net income of CoStar's existing business, the
pro-rata non-GAAP net income of LoopNet for approximately eight months, as
well as the impact of the reduction in LoopNet deferred revenue and higher
interest expense related to the debt incurred to finance the acquisition. The
Company issued approximately 1.9 million shares for the stock component of the
merger consideration, which we estimate will result in fully diluted weighted
shares of approximately 27.7 million for the fourth quarter and 26.8 million
for the full year 2012.

The preceding forward-looking statements reflect CoStar's expectations as of
October 24, 2012, including forward-looking non-GAAP financial measures on a
consolidated basis – including LoopNet and related costs. We are not able to
forecast with certainty whether or when certain events, such as
acquisition-related costs, restructuring, settlements or impairments will
occur in any given quarter. Given the risk factors, uncertainties and
assumptions discussed above, actual results may differ materially. Other than
in publicly available statements, the Company does not intend to update its
forward-looking statements until its next quarterly results announcement.

Reconciliation of non-GAAP net income, EBITDA, adjusted EBITDA and all of the
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, Inc. 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, (iv) costs related to
the acquisition and transition of the Company's corporate headquarters, and
(v) 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, Inc. 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, (vi) costs related to the acquisition
and transition of the Company's corporate headquarters, and (vii) settlements
and impairments. From this figure, we then subtract an assumed provision for
income taxes to arrive at non-GAAP net income. In 2011, we assumed a 40% tax
rate, and in 2012 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.

Earnings Conference Call

Management will conduct a conference call to discuss earnings results for the
third quarter of 2012 and the Company's outlook for the fourth quarter of 2012
at 11:00 a.m. EDT on Thursday, October 25, 2012. The audio portion of the
conference call will be broadcast live over the Internet at
http://www.costar.com/investors.aspx. To join the conference call by
telephone, please dial (800) 230-1096 (from the United States and Canada) or
(612) 332-0107 (from all other countries) and refer to conference code 266046.
An audio recording of the conference call will be available approximately one
hour after the live call concludes and remain available for a period of time
following the call. To access the recorded call, please dial (800) 475-6701
(from the U.S. and Canada) or (320) 365-3844 (from all other countries) using
access code 266046. The webcast replay will also be available in the Investors
section of CoStar's web site for a period of time following the call.

CoStar Group, Inc.
Condensed Consolidated Statements of Operations-Unaudited
(in thousands, except per share data)
                                                                
                                   For the Three Months For the Nine Months
                                    Ended September 30,  Ended September 30,
                                   2012       2011      2012       2011
                                                                
                                                                
Revenues                            $96,001  $63,829 $249,853 $ 185,574
Cost of revenues                    30,882     21,175    83,388     66,153
Gross margin                        65,119     42,654    166,465    119,421
                                                                
Operating expenses:                                              
Selling and marketing               22,010     17,467    57,576     44,993
Software development                9,722      5,017     22,714     15,420
General and administrative          19,617     16,631    59,602     43,375
Purchase amortization               4,824      535       9,038      1,624
                                   56,173     39,650    148,930    105,412
                                                                
Income from operations              8,946      3,004     17,535     14,009
Interest and other income           (1,763)    194       (2,582)    574
(expense), net
Income before income taxes          7,183      3,198     14,953     14,583
Income tax expense, net             404        887       9,752      5,103
Net income                          $6,779   $2,311  $5,201   $9,480
                                                                
Net income per share - basic        $0.25    $0.09   $0.20    $0.42
Net income per share - diluted      $0.24    $0.09   $0.19    $0.41
                                                                
Weighted average outstanding shares 27,243     24,973    26,279     22,505
- basic
Weighted average outstanding shares 27,673     25,317    26,691     22,903
- diluted



CoStar Group, Inc.
Reconciliation of Non-GAAP Financial Measures-Unaudited
(in thousands, except per share data)
                                                                
                                                                
Reconciliation of Net Income to Non-GAAP Net Income
                                                                
                              For the Three Months     For the Nine Months
                               Ended September 30,      Ended September 30,
                              2012         2011        2012        2011
                                                                
Net income                     $6,779     $2,311    $5,201    $9,480
Income tax expense, net       404          887         9,752       5,103
Income before income taxes     7,183       3,198      14,953     14,583
Purchase amortization and      7,851       874        14,645     2,578
other related costs
Stock-based compensation       3,739       1,845      8,667      6,110
expense
Acquisition and integration    2,275       5,798      12,917     11,128
related costs
Restructuring and related      --          1,509      --         1,509
costs
Settlements and Impairments    --          (1,207)    --         (1,479)
Non-GAAP Income before income  21,048      12,017     51,182     34,429
taxes
Assumed rate for income tax    38%          40%         38%         40%
expense, net *
Assumed provision for income   (7,998)     (4,807)    (19,449)   (13,772)
tax expense, net
Non-GAAP Net Income            $13,050    $7,210    $31,733   $20,657
                                                                
Net Income per share - diluted $0.24      $0.09     $0.19     $0.41
Non-GAAP Net Income per share  $0.47      $0.28     $1.19     $0.90
- diluted
                                                                
Weighted average               27,673      25,317     26,691     22,903
outstandingshares - diluted
                                                                
* A 38% tax rate is assumed in 2012 in order to approximate the Company's
long-term effective corporate tax rate.A 40% tax rate was assumed in 2011.
                                                                
                                                                
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
                                                                
                              For the Three Months     For the Nine Months
                               Ended September 30,      Ended September 30,
                              2012         2011        2012        2011
                                                                
Net income                     $6,779     $2,311    $5,201    $9,480
Purchase amortization in cost  3,027        339         5,607       954
of revenues
Purchase amortization in       4,824        535         9,038       1,624
operating expenses
Depreciation and other         2,844        2,129       7,554       7,065
amortization
Interest income (expense), net 1,763        (194)       2,582       (574)
Income tax expense, net        404          887         9,752       5,103
EBITDA                         $19,641    $6,007    $39,734   $23,652
Stock-based compensation       3,739        1,845       8,667       6,110
expense
Acquisition and integration    2,275       5,798      12,917     11,128
related costs
Restructuring and related      --          1,509      --         1,509
costs
Settlements and Impairments    --          (1,207)    --         (1,479)
Adjusted EBITDA                $25,655    $13,952   $61,318   $40,920



CoStar Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
                                                       
                                          September 30, December 31,
                                           2012          2011
                                          (Unaudited)   
ASSETS                                                  
Current assets:                                         
Cash and cash equivalents                  $129,462    $545,280
Short-term investments                     817           3,515
Accounts receivable, net                   21,397        16,589
Deferred income taxes, net                 15,145        11,227
Income tax receivable                      6,560         850
Prepaid and other current assets           7,999         5,722
Debt issuance costs                        2,953         --
Total current assets                       184,333       583,183
                                                       
Long-term investments                      21,561        24,584
Deferred income taxes, net                 --          10,224
Property and equipment, net                42,962        37,571
Goodwill                                   718,080       91,784
Intangible and other assets, net           178,205       20,530
Deposits and other assets                  2,160         2,241
Debt issuance costs                        7,358         918
Total assets                               $1,154,659  $771,035
                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Current liabilities:                                    
Accounts payable and accrued expenses      $47,242     $38,533
Current portion of long-term debt          13,125       --
Income taxes payable                       --          978
Deferred revenue                           32,661        22,271
Total current liabilities                  93,028        61,782
                                                       
Long-term debt, less current portion       157,500       --
Deferred gain on sale of building          29,440       31,333
Deferred rent                              16,895       16,592
Deferred income taxes, net                 38,142       --
Income taxes payable                       2,826         2,151
Other long-term liabilities                977          --
                                                       
Stockholders' equity                       815,851       659,177
Total liabilities and stockholders' equity $1,154,659  $771,035



CoStar Group, Inc.
Results of Segments-Unaudited
(in thousands)
                                                              
                       For the Three Months        For the Nine Months
                        Ended September 30,         Ended September 30,
                       2012          2011          2012          2011
Revenues                                                       
United States           $91,153     $59,192     $235,606     $171,768
International                                                  
External customers      4,848        4,637        14,247       13,806
Intersegment revenue *  388          327          1,154        805
Total international     5,236        4,964        15,401       14,611
revenue
Intersegment            (388)        (327)        (1,154)      (805)
eliminations
Total revenues          $96,001     $63,829     $249,853     $185,574
                                                              
EBITDA                                                         
United States           $22,688     $6,828      $46,302     $26,451
International **        (3,047)      (821)        (6,568)      (2,799)
Total EBITDA            $19,641     $6,007      $39,734     $23,652
                                                              
* Intersegment revenue is attributable to services performed by Property and
Portfolio Research Ltd., awhollyowned subsidiary of Property and Portfolio
Research, Inc. (PPR), for PPR.Intersegment revenue is recorded at what the
Company believes approximates fair value.U.S. EBITDA includes a corresponding
cost for the services performed by Property and Portfolio Research Ltd. for
PPR.
                                                              
** International EBITDA includes a corporate allocation of approximately
$2,300,000 and $100,000 for the three months ended September 30, 2012 and
2011, and approximately $4,500,000 and $200,000 for the nine months ended
September 30, 2012 and 2011, respectively.



Reconciliation of Non-GAAP Financial Measures with 2011-2012 Quarterly Results
- Unaudited
(in millions, except per share data)
                                                                
Reconciliation of Net Income (Loss) to Non-GAAP Net Income
                                                                
                    2011                              2012
                    Q1       Q2       Q3      Q4      Q1     Q2       Q3
                                                                
Net income (loss)    $4.5   $2.6   $2.3  $5.2  $5.1 $(6.7) $6.8
Income tax expense,  2.8     1.5     0.9    2.8    3.7   5.6     0.4
net
Income (loss) before 7.3     4.1     3.2    8.0    8.8   (1.1)   7.2
income taxes
Purchase
amortization and     0.8     0.8     0.9    1.1    1.0   5.8     7.9
other related costs
Stock-based          2.1     2.2     1.9    1.9    2.2   2.7     3.7
compensation expense
Acquisition and
integration related  0.3     5.0     5.8    3.1    1.2   9.5     2.3
costs
Restructuring and    --     --     1.5    --    --   --     --
related costs
Settlements and      (0.3)   --     (1.2)  --    --   --     --
Impairments
Non-GAAP Income      10.2    12.1    12.1   14.1   13.2  16.9    21.1
before income taxes
Assumed rate for
income tax expense,  40%      40%      40%     40%     38%    38%      38%
net *
Assumed provision
for income tax       (4.0)   (4.8)   (4.9)  (5.7)  (5.0) (6.4)   (8.0)
expense, net
Non-GAAP Net Income  $6.2   $7.3   $7.2  $8.4  $8.2 $10.5  $13.1
                                                                
Non-GAAP Net Income  $0.29  $0.33  $0.28 $0.33 $0.32 $0.39  $0.47
per share - diluted
                                                                
Weighted average
outstandingshares - 21.0    22.4    25.3   25.4   25.5  26.9    27.7
diluted
                                                                
* A 38% tax rate is assumed in 2012 in order to approximate the Company's
long-term effective corporate tax rate.A 40% tax rate was assumed in 2011.
                                                                
                                                                
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
                                                                
                    2011                              2012
                    Q1       Q2       Q3      Q4      Q1     Q2       Q3
                                                                
Net income (loss)    $4.5   $2.6   $2.3  $5.2  $5.1 $(6.7) $6.8
Purchase             0.8     0.8     0.9    1.0    1.0   5.8     7.9
amortization
Depreciation and     2.6     2.4     2.1    2.2    2.3   2.4     2.8
other amortization
Interest expense     (0.2)   (0.2)   (0.2)  (0.2)  (0.2) 1.1     1.7
(income), net
Income tax expense,  2.8     1.5     0.9    2.8    3.7   5.6     0.4
net
EBITDA               $10.5  $7.1   $6.0  $11.0 $11.9 $8.2   $19.6
Stock-based          2.1     2.2     1.9    1.9    2.2   2.7     3.7
compensation expense
Acquisition and
integration related  0.3     5.0     5.8    3.1    1.2   9.5     2.3
costs
Restructuring and    --     --     1.5    --    --   --     --
related costs
Settlements and      (0.3)   --     (1.2)  --    --   --     --
Impairments
Adjusted EBITDA      $12.6  $14.3  $14.0 $16.0 $15.3 $20.4  $25.6



Reconciliation of Forward-Looking Guidance, Net Income to Non-GAAP Net Income
(in thousands, except per share data)
                            Guidance Range            Guidance Range
                           For the Three Months      For the Twelve Months
                            Ended December 31, 2012   Ended December 31, 2012
                           Low          High         Low          High
                                                               
Net income                  $2,800     $4,800     $8,000     $10,000
Income tax expense, net    2,500        3,900        12,200       13,600
Income before income taxes  5,300       8,700       20,200      23,600
Purchase amortization and   7,600       7,600       22,200      22,200
other related costs
Stock-based compensation    3,500       3,000       12,200      11,700
expense
Acquisition and integration 1,300       600         14,200      13,500
related costs
Non-GAAP Income before      17,700      19,900      68,800      71,000
income taxes
Assumed rate for income tax 38%          38%          38%          38%
expense, net *
Assumed provision for       (6,726)     (7,562)     (26,144)    (26,980)
income tax expense, net
Non-GAAP Net Income         $10,974    $12,338    $42,656    $44,020
                                                               
Net Income per share -      $0.10      $0.17      $0.30      $0.37
diluted
Non-GAAP Net Income per     $0.40      $0.45      $1.59      $1.64
share - diluted
                                                               
Weighted average
outstandingshares -        27,700      27,700      26,800      26,800
diluted
                                                               
* A 38% tax rate is assumed for 2012 in order to approximate the Company's
long-term effective corporate tax rate.

About CoStar Group, Inc.

CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of
information, analytics and marketing services. 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 6.4
million registered members and 3.5 million unique monthly visitors.
Headquartered in Washington, DC, CoStar maintains offices throughout the U.S.
and in Europe including the industry's largest professional research
organization. For more information, visit www.costar.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'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 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 trends stated or implied
by this release cannot be sustained at the current pace, including trends
related to sales, earnings, and revenue growth and renewal rates; the risk
that the combination of CoStar and LoopNet does not result in or create the
anticipated benefits for CoStar; the risk that the sales and marketing
programs directed at cross-selling of services will not drive the anticipated
revenue synergies through cross-selling or position the company for high
margin revenue growth in 2013 and beyond or that such synergies may take
longer to realize than expected; the risk that CoStar will not achieve
continued strong revenue and earnings growth throughout 2012 and in 2013; the
risk that revenues for the fourth quarter of 2012 and full year 2012 will not
be as stated in this press release; the risk that non-GAAP net income per
diluted share for the fourth quarter of 2012 and full year 2012 will not be as
stated in this press release; the risk that the integration of LoopNet will
not continue to result in anticipated cost savings or synergies; the risk that
the additional marketing initiatives will not be executed as stated in this
press release; and the risk that the businesses of LoopNet and CoStar may not
be combined successfully or in a timely and cost-efficient manner.Additional
factors that could cause results to differ materially from those anticipated
in the forward-looking statements can be found in CoStar's Annual Report on
Form 10-K for the year ended December31, 2011, and CoStar's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2012, each filed with the SEC,
including in the "Risk Factors" section of each of these filings, and the
company's other filings with the SEC available at the SEC's website
(www.sec.gov).CoStar assumes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

CONTACT: Brian J. Radecki
         Chief Financial Officer
         (202) 336-6920
         bradecki@costar.com
        
         Richard Simonelli
         Director Investor Relations
         (202) 346-6394
         rsimonelli@costar.com