falsedesktopCSGP2020-09-30000105735220000126{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "PART I\tFINANCIAL INFORMATION\t\nItem 1.\tFinancial Statements\t4\n\tCondensed Consolidated Statements of Operations\t4\n\tCondensed Consolidated Statements of Comprehensive Income\t5\n\tCondensed Consolidated Balance Sheets\t6\n\tCondensed Consolidated Statements of Changes in Stockholders' Equity\t7\n\tCondensed Consolidated Statements of Cash Flows\t9\n\tNotes to Condensed Consolidated Financial Statements\t10\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t31\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t49\nItem 4.\tControls and Procedures\t50\nPART II\tOTHER INFORMATION\t\nItem 1.\tLegal Proceedings\t51\nItem 1A.\tRisk Factors\t51\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t52\nItem 3.\tDefaults Upon Senior Securities\t52\nItem 4.\tMine Safety Disclosures\t52\nItem 5.\tOther Information\t52\nItem 6.\tExhibits\t53\nSignatures\t\t54\n", "q10k_tbl_1": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t425620\t352808\t1214626\t1024993\nCost of revenues\t77865\t71172\t230814\t214243\nGross profit\t347755\t281636\t983812\t810750\nOperating expenses:\t\t\t\t\nSelling and marketing (excluding customer base amortization)\t146634\t101582\t402202\t308751\nSoftware development\t40732\t32639\t121343\t89022\nGeneral and administrative\t65322\t45530\t181598\t127943\nCustomer base amortization\t18258\t7616\t44677\t22473\n\t270946\t187367\t749820\t548189\nIncome from operations\t76809\t94269\t233992\t262561\nInterest (expense) income\t(7537)\t4414\t(9482)\t13304\nOther (expense) income\t(338)\t240\t29\t779\nIncome before income taxes\t68934\t98923\t224539\t276644\nIncome tax expense\t10748\t20304\t33200\t49608\nNet income\t58186\t78619\t191339\t227036\nNet income per share - basic\t1.49\t2.16\t5.07\t6.26\nNet income per share - diluted\t1.48\t2.15\t5.04\t6.20\nWeighted-average outstanding shares - basic\t39159\t36333\t37718\t36293\nWeighted-average outstanding shares - diluted\t39401\t36652\t37970\t36615\n", "q10k_tbl_2": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t58186\t78619\t191339\t227036\nOther comprehensive income (loss) net of tax\t\t\t\t\nForeign currency translation adjustment\t7535\t(2161)\t(4551)\t(2548)\nUnrealized gain on investments\t0\t0\t189\t0\nReclassification adjustment for realized loss on investments included in net income\t0\t0\t541\t0\nTotal other comprehensive income (loss)\t7535\t(2161)\t(3821)\t(2548)\nTotal comprehensive income\t65721\t76458\t187518\t224488\n", "q10k_tbl_3": "\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCurrent assets:\t\t\nCash cash equivalents and restricted cash\t3867805\t1070731\nAccounts receivable\t119219\t96788\nLess: Allowance for credit losses\t(14205)\t(4548)\nAccounts receivable net\t105014\t92240\nPrepaid expenses and other current assets\t34414\t36194\nTotal current assets\t4007233\t1199165\nLong-term investments\t0\t10070\nDeferred income taxes net\t3891\t5408\nProperty and equipment net\t127280\t107529\nLease right-of-use assets\t106320\t115084\nGoodwill\t2015079\t1882020\nIntangible assets net\t414608\t421196\nDeferred commission costs net\t93006\t89374\nDeposits and other assets\t15102\t9232\nIncome tax receivable\t14806\t14908\nTotal assets\t6797325\t3853986\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nAccounts payable\t20266\t7640\nAccrued wages and commissions\t63341\t53087\nAccrued expenses\t54753\t38680\nIncome taxes payable\t256\t10705\nLease liabilities\t31494\t29670\nDeferred revenue\t75001\t67274\nTotal current liabilities\t245111\t207056\nLong-term debt net\t986413\t0\nDeferred income taxes net\t97022\t87096\nIncome taxes payable\t21114\t20521\nLease and other long-term liabilities\t129607\t133720\nTotal liabilities\t1479267\t448393\nTotal stockholders' equity\t5318058\t3405593\nTotal liabilities and stockholders' equity\t6797325\t3853986\n", "q10k_tbl_4": "\tCommon Stock\t\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Loss\tRetained Earnings\tTotal Stockholders' Equity\n\tShares\tAmount\t\t\t\nBalance at December 31 2019\t36668\t366\t2473338\t(8585)\t940474\t3405593\nNet income\t0\t0\t0\t0\t72793\t72793\nOther comprehensive loss\t0\t0\t0\t(12219)\t0\t(12219)\nExercise of stock options\t41\t1\t9232\t0\t0\t9233\nRestricted stock grants\t83\t1\t(1)\t0\t0\t0\nRestricted stock grants surrendered\t(56)\t(1)\t(30144)\t0\t0\t(30145)\nStock-based compensation expense\t0\t0\t15006\t0\t0\t15006\nEmployee stock purchase plan\t4\t0\t2550\t0\t0\t2550\nBalance at March 31 2020\t36740\t367\t2469981\t(20804)\t1013267\t3462811\nNet income\t0\t0\t0\t0\t60360\t60360\nOther comprehensive income\t0\t0\t0\t863\t0\t863\nExercise of stock options\t11\t0\t2924\t0\t0\t2924\nRestricted stock grants\t11\t0\t0\t0\t0\t0\nRestricted stock grants surrendered\t(17)\t0\t(3509)\t0\t0\t(3509)\nStock-based compensation expense\t0\t0\t8609\t0\t0\t8609\nEmployee stock purchase plan\t4\t0\t2292\t0\t0\t2292\nStock issued for equity offerings net of transaction costs\t2634\t26\t1689945\t0\t0\t1689971\nBalance at June 30 2020\t39383\t393\t4170242\t(19941)\t1073627\t5224321\nNet income\t0\t0\t0\t0\t58186\t58186\nOther comprehensive income\t0\t0\t0\t7535\t0\t7535\nExercise of stock options\t44\t0\t9714\t0\t0\t9714\nRestricted stock grants\t3\t0\t0\t0\t0\t0\nRestricted stock grants surrendered\t(3)\t0\t(398)\t0\t0\t(398)\nStock-based compensation expense\t0\t0\t16542\t0\t0\t16542\nEmployee stock purchase plan\t3\t0\t2158\t0\t0\t2158\nBalance at September 30 2020\t39430\t393\t4198258\t(12406)\t1131813\t5318058\n", "q10k_tbl_5": "\tCommon Stock\t\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Loss\tRetained Earnings\tTotal Stockholders' Equity\n\tShares\tAmount\t\t\t\nBalance at December 31 2018\t36446\t364\t2419812\t(11688)\t613454\t3021942\nCumulative effect of adoption of new accounting standard net of tax\t0\t0\t0\t0\t12057\t12057\nBalance at January 1 2019\t36446\t364\t2419812\t(11688)\t625511\t3033999\nNet income\t0\t0\t0\t0\t85169\t85169\nOther comprehensive income\t0\t0\t0\t380\t0\t380\nExercise of stock options\t79\t1\t10637\t0\t0\t10638\nRestricted stock grants\t132\t1\t(1)\t0\t0\t0\nRestricted stock grants surrendered\t(43)\t0\t(18679)\t0\t0\t(18679)\nStock-based compensation expense\t0\t0\t12034\t0\t0\t12034\nManagement stock purchase plan\t0\t0\t3491\t0\t0\t3491\nEmployee stock purchase plan\t4\t0\t1582\t0\t0\t1582\nBalance at March 31 2019\t36618\t366\t2428876\t(11308)\t710680\t3128614\nNet income\t0\t0\t0\t0\t63248\t63248\nOther comprehensive loss\t0\t0\t0\t(767)\t0\t(767)\nExercise of stock options\t15\t0\t3001\t0\t0\t3001\nRestricted stock grants\t4\t0\t0\t0\t0\t0\nRestricted stock grants surrendered\t(17)\t0\t(5546)\t0\t0\t(5546)\nStock-based compensation expense\t0\t0\t13706\t0\t0\t13706\nEmployee stock purchase plan\t4\t0\t1815\t0\t0\t1815\nBalance at June 30 2019\t36624\t366\t2441852\t(12075)\t773928\t3204071\nNet income\t0\t0\t0\t0\t78619\t78619\nOther comprehensive loss\t0\t0\t0\t(2161)\t0\t(2161)\nExercise of stock options\t20\t0\t4697\t0\t0\t4697\nRestricted stock grants\t8\t0\t0\t0\t0\t0\nRestricted stock grants surrendered\t(5)\t0\t(815)\t0\t0\t(815)\nStock-based compensation expense\t0\t0\t13002\t0\t0\t13002\nEmployee stock purchase plan\t3\t0\t1753\t0\t0\t1753\nBalance at September 30 2019\t36650\t366\t2460489\t(14236)\t852547\t3299166\n", "q10k_tbl_6": "\tNine Months Ended September 30\t\n\t2020\t2019\nOperating activities:\t\t\nNet income\t191339\t227036\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation and amortization\t83911\t57235\nAmortization of deferred commissions costs\t45017\t39189\nAmortization of senior notes discount and issuance costs\t1082\t657\nNon-cash lease expense\t18801\t16369\nStock-based compensation expense\t40783\t38984\nDeferred income taxes net\t6812\t13288\nCredit loss expense\t21395\t7458\nOther operating activities net\t(12)\t0\nChanges in operating assets and liabilities net of acquisitions:\t\t\nAccounts receivable\t(34131)\t(8797)\nIncome taxes payable\t(9838)\t7784\nPrepaid expenses and other current assets\t4145\t(754)\nDeferred commissions\t(48704)\t(48791)\nOther assets\t1521\t(43)\nAccounts payable and other liabilities\t47341\t7664\nLease liabilities\t(21247)\t(19787)\nDeferred revenue\t7123\t12525\nNet cash provided by operating activities\t355338\t350017\nInvesting activities:\t\t\nProceeds from sale and settlement of investments\t10259\t0\nPurchases of property and equipment and other assets\t(42137)\t(44162)\nCash paid for acquisitions net of cash acquired\t(192002)\t(13721)\nNet cash used in investing activities\t(223880)\t(57883)\nFinancing activities:\t\t\nProceeds from long-term debt\t1744210\t0\nPayments of debt issuance costs\t(15747)\t0\nPayments of long-term debt\t(745000)\t0\nRepurchase of restricted stock to satisfy tax withholding obligations\t(34051)\t(25040)\nProceeds from equity offering net of transaction costs\t1689971\t0\nProceeds from exercise of stock options and employee stock purchase plan\t28169\t22970\nOther financing activities\t(1650)\t(123)\nNet cash provided by (used in) financing activities\t2665902\t(2193)\nEffect of foreign currency exchange rates on cash and cash equivalents\t(286)\t(738)\nNet increase in cash cash equivalents and restricted cash\t2797074\t289203\nCash cash equivalents and restricted cash at the beginning of period\t1070731\t1100416\nCash cash equivalents and restricted cash at the end of period\t3867805\t1389619\nSupplemental cash flow disclosures:\t\t\nInterest paid\t5948\t1500\nIncome taxes paid\t36475\t41699\nSupplemental non-cash investing and financing activities:\t\t\nConsideration owed for acquisitions\t0\t1650\n", "q10k_tbl_7": "\tSeptember 30 2020\tDecember 31 2019\nForeign currency translation adjustment\t(12406)\t(7855)\nNet unrealized loss on investments net of tax\t0\t(730)\nTotal accumulated other comprehensive loss\t(12406)\t(8585)\n", "q10k_tbl_8": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\nNumerator:\t2020\t2019\t2020\t2019\nNet income\t58186\t78619\t191339\t227036\nDenominator:\t\t\t\t\nDenominator for basic net income per share - weighted-average outstanding shares\t39159\t36333\t37718\t36293\nEffect of dilutive securities:\t\t\t\t\nStock options restricted stock awards and restricted stock units\t242\t319\t252\t322\nDenominator for diluted net income per share - weighted-average outstanding shares\t39401\t36652\t37970\t36615\nNet income per share - basic\t1.49\t2.16\t5.07\t6.26\nNet income per share - diluted\t1.48\t2.15\t5.04\t6.20\n", "q10k_tbl_9": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nPerformance-based restricted stock awards\t79\t60\t79\t90\nAnti-dilutive securities\t37\t7\t71\t82\n", "q10k_tbl_10": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCost of revenues\t3007\t2281\t8009\t6899\nSelling and marketing (excluding customer base amortization)\t2091\t1646\t5886\t5049\nSoftware development\t2821\t2243\t7635\t6638\nGeneral and administrative\t8811\t6969\t19907\t20398\nTotal stock-based compensation expense (1)\t16730\t13139\t41437\t38984\n__________________________\t\t\t\t\n(1) Stock-based compensation expense for the nine months ended September 30 2020 includes $0.7 million of expense related to the cash settlement of stock options in connection with the acquisition of Ten-X recorded during the three months ended June 30 2020. See Note 5 for details of the acquisition.\t\t\t\t\n", "q10k_tbl_11": "\tThree Months Ended September 30\t\t\t\t\t\n\t2020\t\t\t2019\t\t\n\tNorth America\tInternational\tTotal\tNorth America\tInternational\tTotal\nInformation and analytics\t\t\t\t\t\t\nCoStar Suite\t158235\t7753\t165988\t149187\t6826\t156013\nInformation services\t26357\t6817\t33174\t17382\t2089\t19471\nOnline marketplaces\t\t\t\t\t\t\nMultifamily\t155184\t0\t155184\t125707\t0\t125707\nCommercial property and land\t71128\t146\t71274\t51508\t109\t51617\nTotal revenues\t410904\t14716\t425620\t343784\t9024\t352808\n", "q10k_tbl_12": "\tNine Months Ended September 30\t\t\t\t\t\n\t2020\t\t\t2019\t\t\n\tNorth America\tInternational\tTotal\tNorth America\tInternational\tTotal\nInformation and analytics\t\t\t\t\t\t\nCoStar Suite\t473363\t22634\t495997\t436070\t20469\t456539\nInformation services\t77069\t19023\t96092\t52632\t6466\t59098\nOnline marketplaces\t\t\t\t\t\t\nMultifamily\t438185\t0\t438185\t360463\t0\t360463\nCommercial property and land\t184096\t256\t184352\t148418\t475\t148893\nTotal revenues\t1172713\t41913\t1214626\t997583\t27410\t1024993\n", "q10k_tbl_13": "Balance at December 31 2019\t70620\nRevenue recognized in the current period from the amounts in the beginning balance\t(62687)\nNew deferrals net of amounts recognized in the current period\t69810\nEffects of foreign currency\t(178)\nBalance at September 30 2020(1)\t77565\n__________________________\t\n", "q10k_tbl_14": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCommissions incurred\t25436\t20371\t69047\t62766\nCommissions capitalized in the current period\t(16582)\t(15394)\t(48704)\t(48791)\nAmortization of deferred commissions costs\t15355\t13639\t45017\t39189\nTotal commissions expense\t24209\t18616\t65360\t53164\n", "q10k_tbl_15": "\tNine Months Ended September 30 2020\t\t\t\n\tCoStar Suite\tInformation services\tMultifamily\tCommercial property and land\t\t\t\tTotal\t\t\nBeginning balance at December 31 2019\t1264\t624\t1195\t1465\t\t\t\t4548\t\t\nCurrent-period provision for expected credit losses(1) (2)\t9616\t2634\t6579\t2566\t\t\t\t21395\t\t\nWrite-offs charged against the allowance net of recoveries and other\t(5457)\t(350)\t(4135)\t(1796)\t\t\t\t(11738)\t\t\nEnding balance at September 30 2020\t5423\t2908\t3639\t2235\t\t\t\t14205\t\t\n__________________________\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_16": "\tPreliminary: June 24 2020\nCash and cash equivalents\t3290\nAccounts receivable\t131\nLease right-of-use assets\t4945\nGoodwill\t135446\nIntangible assets\t58000\nLease liabilities\t(4945)\nDeferred tax liabilities\t(4810)\nOther assets and liabilities\t(4697)\nFair value of identifiable net assets acquired\t187360\n", "q10k_tbl_17": "\tEstimated Fair Value\tEstimated Useful Life\tAmortization Method\nCustomer base\t46000\t6\tAccelerated\nTechnology\t11000\t5\tStraight-line\nOther intangible assets\t1000\t2\tStraight-line\nTotal intangible assets\t58000\t\t\n", "q10k_tbl_18": "\tFinal: October 22 2019\nCash and cash equivalents\t11620\nAccounts receivable\t8067\nLease right-of-use assets\t7306\nGoodwill\t261868\nIntangible assets\t178000\nLease liabilities\t(7306)\nDeferred revenue\t(10966)\nDeferred tax liabilities\t(7980)\nOther assets and liabilities\t(4815)\nFair value of identifiable net assets acquired\t435794\n", "q10k_tbl_19": "\tNorth America\t\tInternational\t\t\n\tEstimated Fair Value\tEstimated Useful Life\tEstimated Fair Value\tEstimated Useful Life\tAmortization Method\nCustomer base\t97000\t13\t42000\t10\tAccelerated\nTrade name\t24000\t15\t0\t\tStraight-line\nOther intangible assets\t10000\t5\t5000\t5\tStraight-line\nTotal intangible assets\t131000\t\t47000\t\t\n", "q10k_tbl_20": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenue\t425620\t385221\t1237544\t1110912\nNet income\t60897\t68809\t178591\t195854\nNet income per share - basic\t1.56\t1.89\t4.73\t5.40\nNet income per share - diluted\t1.55\t1.88\t4.70\t5.35\n", "q10k_tbl_21": "\tDecember 31 2019\t\t\t\t\t\t\n\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tFair Value\tLevel 1\tLevel 2\tLevel 3\nCash equivalents\t576761\t0\t0\t576761\t576761\t0\t0\nAuction rate securities\t10800\t0\t(730)\t10070\t0\t0\t10070\nTotal cash equivalents and long-term investments\t587561\t0\t(730)\t586831\t576761\t0\t10070\n", "q10k_tbl_22": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\nOperating lease costs:\t2020\t2019\t2020\t2019\nCost of revenues\t2992\t2690\t8732\t9080\nSoftware development\t1628\t1091\t4412\t3070\nSelling and marketing (excluding customer base amortization)\t2636\t2198\t7725\t6568\nGeneral and administrative\t1259\t995\t3609\t2237\nTotal operating lease costs\t8515\t6974\t24478\t20955\n", "q10k_tbl_23": "Balance\tBalance Sheet Location\tSeptember 30 2020\tDecember 31 2019\nOperating lease liabilities\t\t148503\t165542\nLess: imputed interest\t\t(11978)\t(15719)\nPresent value of lease liabilities\t\t136525\t149823\nLess: current portion of lease liabilities\tLease liabilities\t31494\t29670\nLong-term lease liabilities\tLease and other long-term liabilities\t105031\t120153\nWeighted-average remaining lease term in years\t\t4.3\t5.0\nWeighted-average discount rate\t\t3.8%\t4.0%\n", "q10k_tbl_24": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash paid for amounts included in the measurement of lease liabilities:\t\t\nOperating cash flows used in operating leases\t26924\t24114\nROU assets obtained in exchange for lease obligations:\t\t\nOperating leases\t11124\t7048\n", "q10k_tbl_25": "\tNorth America\tInternational\tTotal\nGoodwill December 31 2018\t1573088\t38447\t1611535\nAcquisitions including measurement period adjustments(1)\t165272\t102532\t267804\nEffect of foreign currency translation\t0\t2681\t2681\nGoodwill December 31 2019\t1738360\t143660\t1882020\nAcquisitions including measurement period adjustments(2)\t135765\t113\t135878\nEffect of foreign currency translation\t0\t(2819)\t(2819)\nGoodwill September 30 2020\t1874125\t140954\t2015079\n__________________________\t\t\t\n", "q10k_tbl_26": "\tSeptember 30 2020\tDecember 31 2019\tWeighted- Average Amortization Period (in years)\nAcquired technology and data\t116235\t105168\t5\nAccumulated amortization\t(95607)\t(90542)\t\nAcquired technology and data net\t20628\t14626\t\nAcquired customer base\t532315\t487532\t11\nAccumulated amortization\t(277716)\t(233202)\t\nAcquired customer base net\t254599\t254330\t\nAcquired trade names and other intangible assets\t239325\t236358\t12\nAccumulated amortization\t(99944)\t(84118)\t\nAcquired trade names and other intangible assets net\t139381\t152240\t\nIntangible assets net\t414608\t421196\t\n", "q10k_tbl_27": "\tSeptember 30 2020\tDecember 31 2019\n2.800% Senior Notes due July 15 2030\t1000000\t0\n2020 Credit Agreement due July 2025\t0\t0\nTotal face amount of long-term debt\t1000000\t0\nSenior notes unamortized discount and issuance costs\t(13587)\t\nLong-term debt net\t986413\t0\n", "q10k_tbl_28": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nInterest on outstanding borrowings\t7000\t0\t11509\t0\nAmortization of senior notes discount and issuance costs\t574\t218\t1082\t657\nCommitment fees and other\t492\t479\t1133\t1422\nTotal interest expense\t8066\t697\t13724\t2079\n", "q10k_tbl_29": "Year Ending December 31\tOperating lease obligations\tLong-term debt principal payments\tLong-term debt principal interest payments\nRemainder of 2020\t9792\t0\t0\n2021\t34982\t0\t29089\n2022\t33073\t0\t28000\n2023\t31575\t0\t28000\n2024\t25887\t0\t28000\nThereafter\t13194\t1000000\t168000\nTotal\t148503\t1000000\t281089\n", "q10k_tbl_30": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNorth America\t107906\t115973\t322611\t326648\nInternational\t579\t(2882)\t(4708)\t(6852)\nTotal EBITDA\t108485\t113091\t317903\t319796\n", "q10k_tbl_31": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t58186\t78619\t191339\t227036\nAmortization of acquired intangible assets in cost of revenues\t6612\t4957\t18671\t15503\nAmortization of acquired intangible assets in operating expenses\t18258\t7586\t44677\t22443\nDepreciation and other amortization\t6806\t6279\t20563\t19289\nInterest expense (income)\t7537\t(4414)\t9482\t(13304)\nOther expense (income)\t338\t(240)\t(29)\t(779)\nIncome tax expense\t10748\t20304\t33200\t49608\nEBITDA\t108485\t113091\t317903\t319796\n", "q10k_tbl_32": "\tSeptember 30 2020\tDecember 31 2019\nProperty and equipment net:\t\t\nNorth America\t124320\t103383\nInternational\t2960\t4146\nTotal property and equipment net\t127280\t107529\nGoodwill:\t\t\nNorth America\t1874125\t1738360\nInternational\t140954\t143660\nTotal goodwill\t2015079\t1882020\nAssets:\t\t\nNorth America\t6561083\t3615258\nInternational\t236242\t238728\nTotal assets\t6797325\t3853986\nLiabilities:\t\t\nNorth America\t1433164\t402759\nInternational\t46103\t45634\nTotal liabilities\t1479267\t448393\n", "q10k_tbl_33": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t58186\t78619\t191339\t227036\nAmortization of acquired intangible assets in cost of revenues\t6612\t4957\t18671\t15503\nAmortization of acquired intangible assets in operating expenses\t18258\t7586\t44677\t22443\nDepreciation and other amortization\t6806\t6279\t20563\t19289\nInterest expense (income)\t7537\t(4414)\t9482\t(13304)\nOther expense (income)\t338\t(240)\t(29)\t(779)\nIncome tax expense\t10748\t20304\t33200\t49608\nEBITDA\t108485\t113091\t317903\t319796\nNet cash flows provided by (used in)\t\t\t\t\nOperating activities\t106692\t116451\t355338\t350017\nInvesting activities\t(36855)\t(29775)\t(223880)\t(57883)\nFinancing activities\t249544\t5460\t2665902\t(2193)\n", "q10k_tbl_34": "\tThree Months Ended September 30\t\t\t\n\t2020\t2019\tIncrease (Decrease) ($)\tIncrease (Decrease) (%)\t\t\t\t\t\t\nRevenues:\t\t\t\t\t\t\t\t\t\t\nCoStar Suite\t165988\t156013\t9975\t6%\t\t\t\t\t\t\nInformation services\t33174\t19471\t13703\t70\t\t\t\t\t\t\nMultifamily\t155184\t125707\t29477\t23\t\t\t\t\t\t\nCommercial property and land\t71274\t51617\t19657\t38\t\t\t\t\t\t\nTotal revenues\t425620\t352808\t72812\t21\t\t\t\t\t\t\nCost of revenues\t77865\t71172\t6693\t9\t\t\t\t\t\t\nGross profit\t347755\t281636\t66119\t23\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\t\t\nSelling and marketing (excluding customer base amortization)\t146634\t101582\t45052\t44\t\t\t\t\t\t\nSoftware development\t40732\t32639\t8093\t25\t\t\t\t\t\t\nGeneral and administrative\t65322\t45530\t19792\t43\t\t\t\t\t\t\nCustomer base amortization\t18258\t7616\t10642\tNM\t\t\t\t\t\t\nTotal operating expenses\t270946\t187367\t83579\t45\t\t\t\t\t\t\nIncome from operations\t76809\t94269\t(17460)\t(19)\t\t\t\t\t\t\nInterest (expense) income\t(7537)\t4414\t(11951)\tNM\t\t\t\t\t\t\nOther (expense) income\t(338)\t240\t(578)\tNM\t\t\t\t\t\t\nIncome before income taxes\t68934\t98923\t(29989)\t(30)\t\t\t\t\t\t\nIncome tax expense\t10748\t20304\t(9556)\t(47)\t\t\t\t\t\t\nNet income\t58186\t78619\t(20433)\t(26)%\t\t\t\t\t\t\n__________________________\t\t\t\t\t\t\t\t\t\t\nNM - Not meaningful\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_35": "\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tIncrease (Decrease) ($)\tIncrease (Decrease) (%)\t\t\t\t\t\t\nRevenues:\t\t\t\t\t\t\t\t\t\t\nCoStar Suite\t495997\t456539\t39458\t9%\t\t\t\t\t\t\nInformation services\t96092\t59098\t36994\t63\t\t\t\t\t\t\nMultifamily\t438185\t360463\t77722\t22\t\t\t\t\t\t\nCommercial property and land\t184352\t148893\t35459\t24\t\t\t\t\t\t\nTotal revenues\t1214626\t1024993\t189633\t19\t\t\t\t\t\t\nCost of revenues\t230814\t214243\t16571\t8\t\t\t\t\t\t\nGross profit\t983812\t810750\t173062\t21\t\t\t\t\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\t\t\nSelling and marketing (excluding customer base amortization)\t402202\t308751\t93451\t30\t\t\t\t\t\t\nSoftware development\t121343\t89022\t32321\t36\t\t\t\t\t\t\nGeneral and administrative\t181598\t127943\t53655\t42\t\t\t\t\t\t\nCustomer base amortization\t44677\t22473\t22204\t99\t\t\t\t\t\t\nTotal operating expenses\t749820\t548189\t201631\t37\t\t\t\t\t\t\nIncome from operations\t233992\t262561\t(28569)\t(11)\t\t\t\t\t\t\nInterest (expense) income\t(9482)\t13304\t(22786)\tNM\t\t\t\t\t\t\nOther income\t29\t779\t(750)\t(96)\t\t\t\t\t\t\nIncome before income taxes\t224539\t276644\t(52105)\t(19)\t\t\t\t\t\t\nIncome tax expense\t33200\t49608\t(16408)\t(33)\t\t\t\t\t\t\nNet income\t191339\t227036\t(35697)\t(16)%\t\t\t\t\t\t\n__________________________\t\t\t\t\t\t\t\t\t\t\nNM - Not meaningful\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_36": "Month 2020\tTotal Number of Shares Purchased\t\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs\tMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs\nJuly 1 through July 31\t102\t\t691.63\t0\t0\nAugust 1 through August 31\t0\t\t0\t0\t0\nSeptember 1 through September 30\t370\t\t856.85\t0\t0\nTotal\t472\t(1)\t849.67\t0\t0\n__________________________\t\t\t\t\t\n", "q10k_tbl_37": "Exhibit No.\tDescription\n3.1\tThird Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 6 2013).\n3.2\tThird Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on September 24 2013).\n4.1\tIndenture dated as of July 1 2020 by and among CoStar Group Inc. as issuer the guarantors named therein and Wilmington Trust National Association as trustee relating to the 2.800% Senior Notes due 2030 including the form of 2.800% Senior Notes due 2030 (Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Commission on July 1 2020).\n10.1\tSecond Amended and Restated Credit Agreement dated as of July 1 2020 by and among CoStar Group Inc. as borrower CoStar Realty Information Inc. as co-borrower the lenders party thereto and Bank of America N.A. as administrative agent (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on July 1 2020).\n31.1\tCertification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).\n31.2\tCertification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).\n32.1\tCertification of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).\n32.2\tCertification of Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\n101.SCH\tXBRL Taxonomy Extension Schema Document.\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document.\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document.\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document.\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document.\n104\tThe cover page from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30 2020 formatted in Inline XBRL (included as Exhibit 101).\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_35", "cf": "q10k_tbl_6"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-24531
CoStar Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
52-2091509
(State or other jurisdiction ofincorporation or organization)
(I.R.S. EmployerIdentification No.)
1331 L Street, NW
Washington,
DC
20005
(Address of principal executive offices) (Zip Code)
(202)346-6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock ($0.01 par value)
CSGP
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
As of October 23, 2020, there were 39,418,077 shares of the registrant’s common stock outstanding.
Selling and marketing (excluding customer base amortization)
146,634
101,582
402,202
308,751
Software development
40,732
32,639
121,343
89,022
General and administrative
65,322
45,530
181,598
127,943
Customer base amortization
18,258
7,616
44,677
22,473
270,946
187,367
749,820
548,189
Income from operations
76,809
94,269
233,992
262,561
Interest (expense) income
(7,537)
4,414
(9,482)
13,304
Other (expense) income
(338)
240
29
779
Income before income taxes
68,934
98,923
224,539
276,644
Income tax expense
10,748
20,304
33,200
49,608
Net income
$
58,186
$
78,619
$
191,339
$
227,036
Net income per share - basic
$
1.49
$
2.16
$
5.07
$
6.26
Net income per share - diluted
$
1.48
$
2.15
$
5.04
$
6.20
Weighted-average outstanding shares - basic
39,159
36,333
37,718
36,293
Weighted-average outstanding shares - diluted
39,401
36,652
37,970
36,615
See accompanying notes.
4
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Net income
$
58,186
$
78,619
$
191,339
$
227,036
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment
7,535
(2,161)
(4,551)
(2,548)
Unrealized gain on investments
—
—
189
—
Reclassification adjustment for realized loss on investments included in net income
—
—
541
—
Total other comprehensive income (loss)
7,535
(2,161)
(3,821)
(2,548)
Total comprehensive income
$
65,721
$
76,458
$
187,518
$
224,488
See accompanying notes.
5
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash, cash equivalents and restricted cash
$
3,867,805
$
1,070,731
Accounts receivable
119,219
96,788
Less: Allowance for credit losses
(14,205)
(4,548)
Accounts receivable, net
105,014
92,240
Prepaid expenses and other current assets
34,414
36,194
Total current assets
4,007,233
1,199,165
Long-term investments
—
10,070
Deferred income taxes, net
3,891
5,408
Property and equipment, net
127,280
107,529
Lease right-of-use assets
106,320
115,084
Goodwill
2,015,079
1,882,020
Intangible assets, net
414,608
421,196
Deferred commission costs, net
93,006
89,374
Deposits and other assets
15,102
9,232
Income tax receivable
14,806
14,908
Total assets
$
6,797,325
$
3,853,986
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
20,266
$
7,640
Accrued wages and commissions
63,341
53,087
Accrued expenses
54,753
38,680
Income taxes payable
256
10,705
Lease liabilities
31,494
29,670
Deferred revenue
75,001
67,274
Total current liabilities
245,111
207,056
Long-term debt, net
986,413
—
Deferred income taxes, net
97,022
87,096
Income taxes payable
21,114
20,521
Lease and other long-term liabilities
129,607
133,720
Total liabilities
1,479,267
448,393
Total stockholders' equity
$
5,318,058
$
3,405,593
Total liabilities and stockholders’ equity
$
6,797,325
$
3,853,986
See accompanying notes.
6
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained Earnings
Total Stockholders’ Equity
Shares
Amount
Balance at December 31, 2019
36,668
$
366
$
2,473,338
$
(8,585)
$
940,474
$
3,405,593
Net income
—
—
—
—
72,793
72,793
Other comprehensive loss
—
—
—
(12,219)
—
(12,219)
Exercise of stock options
41
1
9,232
—
—
9,233
Restricted stock grants
83
1
(1)
—
—
—
Restricted stock grants surrendered
(56)
(1)
(30,144)
—
—
(30,145)
Stock-based compensation expense
—
—
15,006
—
—
15,006
Employee stock purchase plan
4
—
2,550
—
—
2,550
Balance at March 31, 2020
36,740
$
367
$
2,469,981
$
(20,804)
$
1,013,267
$
3,462,811
Net income
—
—
—
—
60,360
60,360
Other comprehensive income
—
—
—
863
—
863
Exercise of stock options
11
—
2,924
—
—
2,924
Restricted stock grants
11
—
—
—
—
—
Restricted stock grants surrendered
(17)
—
(3,509)
—
—
(3,509)
Stock-based compensation expense
—
—
8,609
—
—
8,609
Employee stock purchase plan
4
—
2,292
—
—
2,292
Stock issued for equity offerings, net of transaction costs
2,634
26
1,689,945
—
—
1,689,971
Balance at June 30, 2020
39,383
$
393
$
4,170,242
$
(19,941)
$
1,073,627
$
5,224,321
Net income
—
—
—
—
58,186
58,186
Other comprehensive income
—
—
—
7,535
—
7,535
Exercise of stock options
44
—
9,714
—
—
9,714
Restricted stock grants
3
—
—
—
—
—
Restricted stock grants surrendered
(3)
—
(398)
—
—
(398)
Stock-based compensation expense
—
—
16,542
—
—
16,542
Employee stock purchase plan
3
—
2,158
—
—
2,158
Balance at September 30, 2020
39,430
$
393
$
4,198,258
$
(12,406)
$
1,131,813
$
5,318,058
See accompanying notes.
7
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained Earnings
Total Stockholders’ Equity
Shares
Amount
Balance at December 31, 2018
36,446
$
364
$
2,419,812
$
(11,688)
$
613,454
$
3,021,942
Cumulative effect of adoption of new accounting standard, net of tax
—
—
—
—
12,057
12,057
Balance at January 1, 2019
36,446
$
364
$
2,419,812
$
(11,688)
$
625,511
$
3,033,999
Net income
—
—
—
—
85,169
85,169
Other comprehensive income
—
—
—
380
—
380
Exercise of stock options
79
1
10,637
—
—
10,638
Restricted stock grants
132
1
(1)
—
—
—
Restricted stock grants surrendered
(43)
—
(18,679)
—
—
(18,679)
Stock-based compensation expense
—
—
12,034
—
—
12,034
Management stock purchase plan
—
—
3,491
—
—
3,491
Employee stock purchase plan
4
—
1,582
—
—
1,582
Balance at March 31, 2019
36,618
$
366
$
2,428,876
$
(11,308)
$
710,680
$
3,128,614
Net income
—
—
—
—
63,248
63,248
Other comprehensive loss
—
—
—
(767)
—
(767)
Exercise of stock options
15
—
3,001
—
—
3,001
Restricted stock grants
4
—
—
—
—
—
Restricted stock grants surrendered
(17)
—
(5,546)
—
—
(5,546)
Stock-based compensation expense
—
—
13,706
—
—
13,706
Employee stock purchase plan
4
—
1,815
—
—
1,815
Balance at June 30, 2019
36,624
$
366
$
2,441,852
$
(12,075)
$
773,928
$
3,204,071
Net income
—
—
—
—
78,619
78,619
Other comprehensive loss
—
—
—
(2,161)
—
(2,161)
Exercise of stock options
20
—
4,697
—
—
4,697
Restricted stock grants
8
—
—
—
—
—
Restricted stock grants surrendered
(5)
—
(815)
—
—
(815)
Stock-based compensation expense
—
—
13,002
—
—
13,002
Employee stock purchase plan
3
—
1,753
—
—
1,753
Balance at September 30, 2019
36,650
$
366
$
2,460,489
$
(14,236)
$
852,547
$
3,299,166
See accompanying notes.
8
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
2020
2019
Operating activities:
Net income
$
191,339
$
227,036
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
83,911
57,235
Amortization of deferred commissions costs
45,017
39,189
Amortization of senior notes discount and issuance costs
1,082
657
Non-cash lease expense
18,801
16,369
Stock-based compensation expense
40,783
38,984
Deferred income taxes, net
6,812
13,288
Credit loss expense
21,395
7,458
Other operating activities, net
(12)
—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
(34,131)
(8,797)
Income taxes payable
(9,838)
7,784
Prepaid expenses and other current assets
4,145
(754)
Deferred commissions
(48,704)
(48,791)
Other assets
1,521
(43)
Accounts payable and other liabilities
47,341
7,664
Lease liabilities
(21,247)
(19,787)
Deferred revenue
7,123
12,525
Net cash provided by operating activities
355,338
350,017
Investing activities:
Proceeds from sale and settlement of investments
10,259
—
Purchases of property and equipment and other assets
(42,137)
(44,162)
Cash paid for acquisitions, net of cash acquired
(192,002)
(13,721)
Net cash used in investing activities
(223,880)
(57,883)
Financing activities:
Proceeds from long-term debt
1,744,210
—
Payments of debt issuance costs
(15,747)
—
Payments of long-term debt
(745,000)
—
Repurchase of restricted stock to satisfy tax withholding obligations
(34,051)
(25,040)
Proceeds from equity offering, net of transaction costs
1,689,971
—
Proceeds from exercise of stock options and employee stock purchase plan
28,169
22,970
Other financing activities
(1,650)
(123)
Net cash provided by (used in) financing activities
2,665,902
(2,193)
Effect of foreign currency exchange rates on cash and cash equivalents
(286)
(738)
Net increase in cash, cash equivalents and restricted cash
2,797,074
289,203
Cash, cash equivalents and restricted cash at the beginning of period
1,070,731
1,100,416
Cash, cash equivalents and restricted cash at the end of period
$
3,867,805
$
1,389,619
Supplemental cash flow disclosures:
Interest paid
$
5,948
$
1,500
Income taxes paid
$
36,475
$
41,699
Supplemental non-cash investing and financing activities:
Consideration owed for acquisitions
$
—
$
1,650
See accompanying notes.
9
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1.ORGANIZATION
CoStar Group, Inc. (the “Company” or “CoStar”) provides information, analytics, online marketplace and auction services to the commercial real estate and related business community through its comprehensive, proprietary database of commercial real estate information and related tools. The Company provides online marketplaces for commercial real estate, apartment rentals, lands for sale and businesses for sale, and its services are typically distributed to its clients under subscription-based license agreements that renew automatically, a majority of which have a term of at least one year. The Company operates within two operating segments, North America, which includes the United States ("U.S.") and Canada, and International, which primarily includes Europe, Asia-Pacific, and Latin America.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Accounting policies are consistent for each operating segment.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of the Company’s management, the financial statements reflect all adjustments, consisting only of a normal recurring nature, necessary to present fairly the Company’s financial position at September 30, 2020 and December 31, 2019, the results of its operations for the three and nine months ended September 30, 2020 and 2019, its comprehensive income for the three and nine months ended September 30, 2020 and 2019, its changes in stockholders' equity for the three and nine months ended September 30, 2020 and 2019, and its cash flows for the nine months ended September 30, 2020 and 2019.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, allowance for credit losses, the useful lives and recoverability of long-lived and intangible assets, and goodwill, income taxes, accounting for business combinations, stock-based compensation, estimating the Company's incremental borrowing rate for its leases, and contingencies, among others. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ from these estimates.
Revenue Recognition
The Company derives revenues primarily by (i) providing access to its proprietary database of commercial real estate information and (ii) providing online marketplaces for professional property management companies, property owners, brokers and landlords, in each case, typically through a fixed monthly fee for its subscription-based services. The Company's subscription-based services consist primarily of information, analytics and online marketplace services offered over the Internet to commercial real estate industry and related professionals. Subscription contract rates are based on the number of sites, number of users, organization size, the client’s business focus, geography, the number and types of services to which a client subscribes, the number of properties a client advertises and the prominence and placement of a client's advertised properties in
10
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
the search results. The Company’s subscription-based license agreements typically renew automatically, and a majority have a term of at least one year.
The Company also provides (i) market research, portfolio and debt analysis, management and reporting capabilities, (ii) real estate and lease management solutions, including lease administration and abstraction services, to commercial customers, real estate investors, and lenders via the Company’s other service offerings, (iii) benchmarking and analytics for the hospitality industry through STR, LLC and STR Global, Ltd. (together with STR, LLC, referred to as “STR”)and (iv) an online auction platform for commercial real estate through Ten-X, LLC and its subsidiaries which were acquired in June 2020. See Note 5 for details of the acquisition.
The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers, (ii) identification of distinct performance obligations in the contract, (iii) determination of contract transaction price, (iv) allocation of contract transaction price to the performance obligations, and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation(s).
The Company recognizes revenues upon the satisfaction of its performance obligation(s) (upon transfer of control of promised services to its customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those services. Revenues from subscription-based services are recognized on a straight-line basis over the term of the agreement.
In limited circumstances, the Company's contracts with customers include promises to transfer multiple services, such as contracts for its subscription-based services and professional services. For these contracts, the Company accounts for individual performance obligations separately if they are distinct, which involves the determination of the standalone selling price for each distinct performance obligation.
Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of the Company's fulfillment of its performance obligation(s) and is recognized as those obligations are satisfied.
Contract assets represent a conditional right to consideration for satisfied performance obligations that become a receivable when the conditions are satisfied. Contract assets are generated when contractual billing schedules differ from revenue recognition timing.
Certain sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions incurred for obtaining new contracts are deferred and then amortized as selling and marketing expenses on a straight-line basis over a period of benefit that the Company has determined to be three years. The three-year amortization period was determined based on several factors, including the nature of the technology and proprietary data underlying the services being purchased, customer contract renewal rates and industry competition. Certain commission costs are not capitalized as they do not represent incremental costs of obtaining a contract.
See Note 3 for further discussion of the Company's revenue recognition.
Cost of Revenues
Cost of revenues principally consists of salaries, benefits, bonuses and stock-based compensation expenses and other indirect costs for the Company's researchers who collect and analyze the commercial real estate data that is the basis for the Company's information, analytics and online marketplaces and for employees that support these products. Additionally, cost of revenues includes the cost of data from third-party data sources, credit card and other transaction fees relating to processing customer transactions, which are expensed as incurred, and the amortization of acquired trade names, technology and other intangible assets.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs include digital marketing, television, company-sponsored events, print and other media advertising. Advertising costs were approximately $79 million and $44 million for the three months ended September 30, 2020 and 2019, respectively, and $202 million and $130 million for the nine months ended September 30, 2020 and 2019, respectively.
11
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Foreign Currency
The Company’s reporting currency is the U.S. dollar. The functional currency for the majority of its operations is the local currency, with the exception of certain international locations of STR for which the functional currency is the British Pound. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars using the exchange rates in effect as of the balance sheet date. Gains and losses resulting from translation are included in accumulated other comprehensive loss. Currency gains and losses on the translation of intercompany loans made to foreign subsidiaries that are of a long-term investment nature are also included in accumulated other comprehensive loss. Gains and losses resulting from transactions denominated in a currency other than the functional currency of the entity are included in other (expense) income in the condensed consolidated statements of operations using the average exchange rates in effect during the period. The Company recognized net foreign currency losses of $0.2 million and gains of $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and net foreign currency gains of $0.7 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively, which are included in other (expense) income on the condensed consolidated statements of operations.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss were as follows (in thousands):
September 30, 2020
December 31, 2019
Foreign currency translation adjustment
$
(12,406)
$
(7,855)
Net unrealized loss on investments, net of tax
—
(730)
Total accumulated other comprehensive loss
$
(12,406)
$
(8,585)
During the nine months ended September 30, 2020, the Company sold its long-term variable debt instruments with an auction reset feature, referred to as auction rate securities ("ARS") and reclassified out of accumulated other comprehensive loss a realized loss of $0.5 million to earnings which is included in other (expense) income in the condensed consolidated statements of operations. There were no amounts reclassified out of accumulated other comprehensive loss to the condensed consolidated statements of operations for the three and nine months ended September 30, 2019.
See Note 6 for additional information regarding investments.
Income Taxes
Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and the basis reported in the Company’s condensed consolidated financial statements. Deferred tax liabilities and assets are determined based on the difference between the financial statement and the tax basis of assets and liabilities using enacted rates in effect during the year in which the Company expects differences to reverse. Valuation allowances are provided against assets, including net operating losses, if the Company determines it is more likely than not that some portion or all of an asset may not be realized. Interest and penalties related to income tax matters are recognized in income tax expense.
See Note 11 for additional information regarding income taxes.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period on a basic and diluted basis.
12
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share data):
Three Months Ended September 30,
Nine Months Ended September 30,
Numerator:
2020
2019
2020
2019
Net income
$
58,186
$
78,619
$
191,339
$
227,036
Denominator:
Denominator for basic net income per share — weighted-average outstanding shares
39,159
36,333
37,718
36,293
Effect of dilutive securities:
Stock options, restricted stock awards and restricted stock units
242
319
252
322
Denominator for diluted net income per share — weighted-average outstanding shares
39,401
36,652
37,970
36,615
Net income per share — basic
$
1.49
$
2.16
$
5.07
$
6.26
Net income per share — diluted
$
1.48
$
2.15
$
5.04
$
6.20
The Company’s potentially dilutive securities include outstanding stock options and unvested stock-based awards which include restricted stock awards that vest over a specific service period, restricted stock awards with a performance and a market condition, restricted stock units and awards of matching restricted stock units ("Matching RSUs") awarded under the Company's Management Stock Purchase Plan. Shares underlying unvested restricted stock awards that vest based on performance and market conditions that have not been achieved as of the end of the period are not included in the computation of basic or diluted net income per share. Diluted net income per share considers the impact of potentially dilutive securities except when the inclusion of the potentially dilutive securities would have an anti-dilutive effect.
The following table summarizes the shares underlying the unvested performance-based restricted stock and anti-dilutive securities excluded from the basic and diluted earnings per share calculations (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Performance-based restricted stock awards
79
60
79
90
Anti-dilutive securities
37
7
71
82
Stock-Based Compensation
Equity instruments issued in exchange for services performed by officers, employees, and directors of the Company are accounted for using a fair-value based method and the fair value of such equity instruments is recognized as expense in the consolidated statements of operations.
For stock-based awards that vest over a specific service period, compensation expense is measured based on the fair value of the awards at the grant date, and is recognized on a strai