CoStar (CSGP) 8-K Results of Operations and Financial Condition

Exhibit 99.1

	NEWS
	Contacts:
	Investors/Analysts: Brian J. Radecki - Chief Financial Officer (301) 664-9132 bradecki@costar.com Media: Timothy J. Trainor - Communications Director (301) 280-7695 ttrainor@costar.com

CoStar Group, Inc. Announces First Quarter 2009 Results

Net Income Increases 21% and EBITDA Increases 25% Year Over Year

BETHESDA, MD – April 22, 2009 – CoStar Group, Inc. (NASDAQ: CSGP), the number one provider of information/marketing services to the commercial real estate industry, today announced that net income for the quarter ended March 31, 2009 increased 21.1% to $6.1 million, or $0.31 per diluted share, compared to $5.0 million, or $0.26 per diluted share for the quarter ended March 31, 2008.  EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter ended March 31, 2009 was $14.4 million, an increase of 25.2% compared to EBITDA of $11.5 million for the quarter ended March 31, 2008.

Revenues for the quarter ended March 31, 2009 were $51.4 million, compared to revenues of $52.3 million for the quarter ended March 31, 2008. Revenues in the first quarter of 2009 were impacted by unfavorable foreign exchange rate fluctuations in our International operations.

As of March 31, 2009, the company had $233.5 million in cash, cash equivalents, short-term and long-term investments, an increase of $8.9 million since December 31, 2008, and no long-term debt.

Year 2008-2009 Quarterly Results - Unaudited
(in millions, except per share data)
	2008								2009
	Q1		Q2		Q3		Q4		Q1
Total Revenues	$	52.3	$	53.5	$	53.8	$	52.9	$	51.4
EBITDA		11.5		12.8		15.5		16.7		14.4
Net income		5.0		5.4		6.6		7.5		6.1
Net income per share - diluted		0.26		0.28		0.34		0.38		0.31
Weighted average outstanding shares - diluted		19.4		19.5		19.6		19.5		19.6

“In the first quarter of 2009, CoStar Group continued to deliver strong earnings through a down cycle in commercial real estate,” said CoStar Group CEO Andrew C. Florance. “While economic conditions remain difficult for our client base, our information services provide significant value to subscribers by helping them reduce costs and drive revenue. We remain confident in our ability to manage through the current environment and to capitalize on our industry-leading research and subscription-based business model to achieve our earnings goals.  As economic conditions improve, we expect that we will see a return to sequential quarterly growth and higher earnings.”

U.S. revenues in the first quarter of 2009 totaled $47.1 million, which is a 1.6% increase compared to $46.4 million in the first quarter of 2008, and International revenues totaled £2.9 million in the first quarter of 2009, as compared to £3.0 million in the first quarter of 2008.  Subscription-based revenue accounts for more than 95% of the company’s total revenue. The 12-month trailing customer renewal rate for CoStar’s subscription-based services was approximately 87%.

“We plan to take advantage of our market-leading position to capitalize on growth opportunities we see in these challenging times and pursue a number of initiatives to further expand our market share and enhance our services,” said Florance. “We recently released an individual-subscription option for our extremely successful CoStar Showcase® service that enables individual brokers to take advantage of the greater Internet exposure available on Showcase and market an unlimited number of listings at a low, flat monthly rate.  By making this service available at a much lower cost than a primary competitor, we believe we can significantly grow Showcase revenue this year and continue to capture market share in the Internet lead-generation market.”

Second Quarter 2009 Outlook

“For the second quarter of 2009, we expect approximately $49.5 to $51.0 million in revenues and fully diluted net income per share of approximately $0.22 to $0.25, which includes seasonally high selling and marketing expenses associated with the ICSC trade show and CoStar Showcase,” stated CoStar Group Chief Financial Officer Brian J. Radecki.  In addition, during the second quarter, the company expects approximately $1.0 million of higher legal costs compared to the prior quarter. The company follows U.S. GAAP basis accounting and reports all legal expenses in the income statement, EBITDA and in our earnings outlook.

“For the full year of 2009, we continue to expect approximately $198.0 to $203.0 million in revenues and fully diluted net income per share of approximately $1.00 to $1.05, which includes approximately $6.0 million in pre-tax, non-cash equity compensation charges related to the vesting of restricted stock and stock option grants,” said Radecki.  For 2009, the company expects an overall effective tax rate of approximately 45%, and an interest rate of approximately 0.5% for interest income.

Management will conduct a conference call to discuss earnings results for the first quarter ended March 31, 2009, and the financial outlook for the second quarter of 2009 at 11:00 a.m. ET on Thursday, April 23, 2009. The audio portion of the conference call will be broadcast live over the Internet at http://www.costar.com/corporate/investor/. To join the conference call by telephone, please call (800) 288-8974 from within the United States and Canada, or (612) 332-1213 from outside the United States and Canada. Refer to Conference reservation number 995479. A replay of the conference call will be available approximately one hour after the live call concludes and remain available through midnight on May 7, 2009. The replay telephone number is (800) 475-6701 within the United States and Canada, or (320) 365-3844 outside the United States and Canada.  Refer to Conference reservation number 995479. The replay will also be available over the Internet at http://www.costar.com/corporate/investor/ for a period of time following the call.

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CoStar Group, Inc.
Condensed Consolidated Statements of Operations-Unaudited
(in thousands, except per share data)
	For the Three Months
	Ended March 31,
	2009			2008
Revenues	$	51,370		$	52,264
Cost of revenues		16,894			19,721
Gross margin		34,476			32,543
Operating expenses:
Selling and marketing		9,161			10,873
Software development		3,178			3,414
General and administrative		10,450			9,805
Purchase amortization		946			1,221
		23,735			25,313
Income from operations		10,741			7,230
Interest and other income, net		442			1,938
Income before income taxes		11,183			9,168
Income tax expense, net		5,077			4,126
Net income	$	6,106		$	5,042
Net income per share - basic	$	0.31		$	0.26
Net income per share - diluted	$	0.31		$	0.26
Weighted average outstanding shares - basic		19,468			19,217
Weighted average outstanding shares - diluted		19,562			19,369
Reconciliation of Non-GAAP Financial Measures with Net Income
Net income	$	6,106		$	5,042
Purchase amortization in cost of revenues		479			583
Purchase amortization in operating expenses		946			1,221
Depreciation and other amortization		2,251			2,478
Interest income, net		(442	)		(1,938	)
Income tax expense, net		5,077			4,126
EBITDA	$	14,417		$	11,512

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CoStar Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
	March 31,		December 31,
	2009		2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	170,624	$	159,982
Short-term investments		33,508		35,268
Accounts receivable, net		14,236		12,294
Deferred income taxes		2,164		2,036
Prepaid and other current assets		3,013		2,903
Total current assets		223,545		212,483
Long-term investments		29,340		29,340
Deferred income taxes		3,269		3,392
Property and equipment, net		15,801		16,876
Intangible and other assets, net		68,557		70,749
Deposits and other assets		1,470		1,544
Total assets	$	341,982	$	334,384
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	19,209	$	19,694
Deferred revenue		9,760		9,442
Total current liabilities		28,969		29,136
Deferred income taxes		103		132
Income taxes payable		1,745		1,695
Stockholders' equity		311,165		303,421
Total liabilities and stockholders' equity	$	341,982	$	334,384

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CoStar Group, Inc.
Results of Segments-Unaudited
(in thousands)
	For the Three Months
	Ended March 31,
	2009			2008
Revenues
United States	$	47,132		$	46,403
International		4,238			5,861
Total Revenues	$	51,370		$	52,264
EBITDA
United States	$	14,586		$	12,570
International*		(169	)		(1,058	)
Total EBITDA	$	14,417		$	11,512
* International EBITDA includes a corporate allocation of approximately $100,000 and $325,000 for the three months ended March 31, 2009 and 2008, respectively.

Reconciliation of Non-GAAP Financial Measures with 2008-2009 Quarterly Results
(in millions)
	2008												2009
	Q1			Q2			Q3			Q4			Q1
Net income	$	5.0		$	5.4		$	6.6		$	7.5		$	6.1
Purchase amortization		1.8			1.9			1.8			1.7			1.4
Depreciation and other amortization		2.5			2.5			2.4			2.3			2.2
Interest income, net		(1.9	)		(1.3	)		(0.9	)		(0.8	)		(0.4	)
Income tax expense, net		4.1			4.3			5.6			6.0			5.1
EBITDA	$	11.5		$	12.8		$	15.5		$	16.7		$	14.4

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About CoStar Group, Inc.

CoStar Group, Inc. (Nasdaq:CSGP) is the number one provider of information/marketing services to commercial real estate professionals in the United States as well as the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information throughout the U.S. as well as in the United Kingdom and France. Headquartered in Bethesda, MD, CoStar has approximately 1,300 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com.

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including CoStar's Form 10-K for the year ended December 31, 2008 under the heading "Risk Factors.” In addition to these statements, there can be no assurance as  to what effect the current economic environment and continued financial instability, including foreign exchange rate fluctuations, will have on the company’s revenue and earnings growth; that the company will be able to manage through the current environment and to successfully capitalize on its industry-leading research and subscription-based business model to achieve its earnings goals; that economic conditions will improve; that, as economic conditions improve, the company will see a return to sequential quarterly growth and higher earnings; that the company will be able to successfully take advantage of its market-leading position to capitalize on growth opportunities and pursue initiatives to further expand its market share and enhance its services; that the company will be able to significantly grow CoStar Showcase revenue this year and continue to capture market share in the Internet lead-generation market; that quarterly revenue for the second quarter 2009 and revenue for the full year 2009 will be as stated in this press release; that fully diluted net income for the second quarter of 2009 and full year 2009 will be as stated in this press release; that legal costs for the second quarter of 2009 will be as stated in this press release; that the equity compensation charges for the full year 2009 will be as stated in this press release; and that the overall effective tax rate and the interest rate for our interest income for 2009 will be as stated in this press release.  All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.

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