CoStar Group (CSGP) 10-K risk factor changes: FY2016 vs FY2015

Forward-looking statements include information that is not purely historic fact and include, without limitation, statements concerning our financial outlook for [removed: 2016] [added: 2017] and beyond, our possible or assumed future results of operations generally, and other statements and information regarding assumptions about our revenues, EBITDA, adjusted EBITDA, non-generally accepted accounting principles (“GAAP”) net income, non-GAAP net income per share, net income (loss), net income (loss) per share, fully diluted net income (loss) per share, weighted-average outstanding shares, taxable income (loss), cash flow from operating activities, available cash, operating costs, amortization expense, intangible asset recovery, capital and other expenditures, effective tax rate, equity compensation charges, future taxable income, [removed: purchase amortization,] pending acquisitions, the anticipated benefits of completed or proposed acquisitions, the anticipated benefits of cross-selling efforts, product development and release, sales and marketing campaigns, product integrations, elimination and de-emphasizing of services, contract renewal rate, the timing of future payments of principal under our $400.0 million term loan facility available to us under a credit agreement dated April 1, 2014 (the “2014 Credit Agreement”), expectations regarding our compliance with financial and restrictive covenants in the 2014 Credit Agreement, financing plans, geographic expansion, capital structure, contractual obligations, legal proceedings and claims, our database, database growth, services and facilities, employee relations, future economic performance, our ability to liquidate or realize our long-term investments, management’s plans, goals and objectives for future operations, and growth and markets for our stock.

The following important factors, in addition to those discussed or referred to under the heading “Risk Factors,” and other unforeseen events or circumstances, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements: commercial real estate market conditions; general economic [removed: conditions;] [added: conditions, both domestic and international;] our ability to identify, acquire and integrate acquisition candidates; our ability to realize the expected benefits, cost savings or other synergies from acquisitions, including the acquisitions of [removed: Apartments.com, Apartment Finder] [added: Thomas Daily, Westside Rentals] and the assets of Belbex, on a timely basis or at all; our ability to combine acquired businesses successfully or in a timely and cost-efficient manner; business disruption relating to integration of acquired businesses or other business initiatives; [added: our ability to transition] the [added: Westside Rentals service platform to our model; the] amount of investment for sales and marketing and our ability to realize a return on investments in sales and marketing; our ability to effectively and strategically combine, eliminate or de-emphasize service offerings; reductions in revenues as a result of service changes; the time and resources required to develop upgraded or new services and to expand service offerings; changes or consolidations within the commercial real estate industry; customer retention; our ability to attract new clients; our ability to sell additional services to existing clients; our ability to integrate our North America and International product offerings; our ability to [added: integrate the backend systems of CoStar and LoopNet and subsequently create operating efficiencies and provide improved data to our customers; our ability to] successfully [added: transition LoopNet to a pure marketing site, where all listings are paid and searches are free, in a timely manner and minimize the impact of that transition on revenue; our ability to successfully] introduce [added: and cross-sell] new products or upgraded services in U.S. and foreign markets; our ability to attract consumers to our online marketplaces; the success of our marketing campaigns in generating brand awareness and site traffic; competition; foreign currency fluctuations; global credit market conditions affecting investments; our ability to continue to expand successfully, timely and in a cost-efficient manner, including internationally; our ability to effectively penetrate and gain acceptance in new [removed: sectors;] [added: sectors and geographies;] our ability to control costs; litigation; changes in accounting policies or practices; release of new and upgraded services or entry into new markets by us or our competitors; data quality; expansion, growth, development or reorganization of our sales force; employee retention; technical problems with our services; managerial execution; changes in relationships with real estate brokers, property managers and other strategic partners; legal and regulatory issues; and successful adoption of and training on our services.

If cancellations, reductions of services, and failures to pay increase, and we are unable to offset the resulting decrease in [removed: revenue] [added: revenues] by increasing sales to new or existing customers, our revenues may decline or grow at lower rates.

Our ability to build and develop a strong sales force may be affected by a number of factors, including: our ability to attract, integrate and motivate sales personnel; our ability to effectively train our sales force; the ability of our sales force to sell an increased number and different types of services; our ability to manage effectively an outbound telesales group; the length of time it takes new sales personnel to become productive; the competition we face from other companies in hiring and retaining sales personnel; our ability to effectively structure our sales force; and our ability to effectively manage a multi-location sales [removed: organization.][added: organization, including field sales personnel.]

Our [removed: competitors] [added: competition] for advertisers may have significant brand recognition as well as greater numbers of direct sales personnel than we have and may generate more web traffic than we do, which may provide a competitive advantage.

We may be unable to increase awareness of our brands, including CoStar, LoopNet, Apartments.com, [removed: Apartment Finder,] BizBuySell and LandsofAmerica, which could adversely affect our business.

Our ability to generate [removed: revenue] [added: revenues] from our marketplace businesses depends, in part, on our ability to attract users to our websites.

Our marketing expenses [removed: have increased and] may [removed: continue to] increase in connection with our efforts to maintain or increase traffic to our websites.

Even if we are able to attract additional users, increases in our operating expenses could negatively impact our operating results if we are unable to generate more [removed: revenue] [added: revenues] through increased sales of subscriptions to our marketplace products.

If we are unable to increase traffic to our marketplaces, or if we are unable to generate enough additional [removed: revenue] [added: revenues] to offset increases in expenses related to increasing traffic to our marketplaces, our business and operating results could be adversely affected.

Our marketplace businesses, including LoopNet, the Apartments.com network of rental websites, CoStar Showcase, LandandFarm.com and LandsofAmerica.com, depend on advertising [removed: revenue] [added: revenues] generated primarily through sales to persons in the real estate industry, including property managers and owners, and other advertisers.

| • | the success of any [removed: increased] marketing and product development efforts directed at attracting additional users and advertisers to our marketplaces; |

| • | offering an attractive return on investment to our advertisers for their advertising [removed: spending] [added: dollars spent] with us. |

[removed: We do not have long-term contracts with most] [added: Many] of the advertisers who advertise on our [removed: marketplaces.][added: marketplaces do not have long-term contracts.]

If current advertisers reduce or end their advertising spending with us and we are unable to attract new advertisers, our advertising [removed: revenue] [added: revenues] and business, results of operations and financial condition could be adversely affected.

In addition, acquisitions involve numerous risks, including the ability to realize or capitalize on synergies created through combinations; managing the integration of personnel and [removed: products;] [added: products or services;] potential increases in operating costs; managing geographically remote operations; the diversion of management’s attention from other business concerns and potential disruptions in ongoing operations during integration; the inherent risks in entering markets and sectors in which we have either limited or no direct experience; and the potential loss of key employees, clients or vendors and other business partners of the acquired companies.

The price could fluctuate widely based on numerous factors, including: economic [removed: factors;] [added: factors or conditions;] quarter-to-quarter variations in our operating results; changes in analysts’ estimates of our earnings; announcements by us or our competitors of technological innovations, new services, or other significant or strategic information; general conditions in the commercial real estate industry; [added: general conditions of local, national or global economies;] developments or disputes concerning copyrights or proprietary rights or other legal proceedings; and regulatory developments.

In addition, the stock market in general, and the shares of Internet-related and other technology companies in particular, have [added: historically] experienced extreme price fluctuations.

Our future business and financial success will depend on our ability to continue to anticipate the needs [removed: of,] [added: of customers] and [added: potential customers, and] to introduce new and upgraded services into the marketplace.

As we continue to combine our operations with those that we have acquired, we must continue to assess the purposes for which various services may be used alone or together, and how we can best address those uses through stand-alone services or combinations [removed: or] [added: of] coordinating applications thereof.

In [removed: February] 2015, we launched the [removed: improved] [added: current] Apartments.com [removed: website] and [removed: in December 2015, we launched] the [removed: new] ApartmentFinder.com [removed: website,] [added: websites,] both after [removed: undergoing] [added: completing] extensive product development.

The launch of the sites and/or the marketing campaign may not [removed: result in increased] [added: continue to increase] brand awareness, site traffic and/or revenues.

If we are unsuccessful in obtaining greater market share, we may not be able to offset the expenses associated with the [removed: new] launch and marketing campaign, which could have a material adverse effect on our financial results.

For example, we continue to assess [removed: whether to transition] the [added: timing and potential impact of transitioning the] LoopNet marketplace to a pure marketing site for commercial real estate where, eventually, all listings would be paid and users could search the site for free.

We [removed: would] expect to see a short-term reduction in revenues and [removed: earnings if] [added: earnings, as well as reduced search engine optimization, when] we implement this transition.

Although we [removed: are assessing] [added: continue to assess] the [added: timing and] best strategy to implement this shift and [removed: will] [added: plan to] seek to convert customers to higher value, more profitable annual subscription information services, which should increase revenues and earnings over time, we cannot predict with certainty whether we will be successful in shifting customers to higher value, more profitable subscriptions and, consequently, in offsetting any reduction in [removed: revenue and earnings; therefore, if we make this transition, our] revenues and [removed: earnings may ultimately decline.][added: earnings.]

In addition, if we incur significant costs in developing new or upgraded services or combining and coordinating existing services, [added: if] we are not successful in marketing and selling these new services or upgrades, or [added: if] our customers fail to accept these new or combined and coordinating services, [removed: it] [added: then there] could [removed: have] [added: be] a material adverse effect on our results of operations [removed: by decreasing] [added: due to a decrease of] our revenues and [removed: reducing] [added: a reduction of] our profitability.

In addition, if we do not prevail on [removed: any] [added: an] intellectual property [removed: claims,] [added: claim,] this could result in a change to our methodology or information, analytics and online marketplace services and could reduce our profitability.

Any lawsuits, threatened lawsuits or government investigations in which we are [removed: involved] [added: involved, whether as plaintiff or defendant,] could cost us a significant amount of time and [removed: money to defend,] [added: money,] could distract management’s attention away from operating our business, could result in negative publicity and could adversely affect our stock price.

Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against any [removed: claims.][added: claims and we could be subject to public notice requirements that may affect our reputation in the marketplace.]

We are dependent on information technology networks and systems to process, [removed: transmit,] [added: transmit] and store electronic information and to communicate between our locations around the world and with our clients.

We collect, use and disclose personally identifiable information, including among other things names, addresses, phone [removed: numbers,] [added: numbers] and email addresses.

We [removed: also] collect, store and use sensitive or confidential transaction information and, in certain circumstances, credit card information.

As a result, we are subject to a variety of state, national, [removed: foreign,] and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal [removed: data.][added: data, including the Fair Credit Reporting Act.]

In light of the ECJ’s decision, we have [removed: begun to undertake] [added: undertaken] efforts to conform transfers of personal data from the EEA based on current regulatory obligations, the guidance of data protection authorities and evolving best practices.

Our actual or alleged failure to comply with applicable privacy or data security laws, regulations and policies, or to protect personal data, could result in enforcement actions and significant penalties against us, which could result in negative publicity, increase our operating costs, subject us to claims or other remedies and have a material adverse effect on our business, financial [removed: condition,] [added: condition] and results of operations.

Industry-wide incidents or incidents with respect to our websites, including misappropriation of third-party information, security [removed: breaches,] [added: breaches] or changes in industry standards, regulations or laws, could deter people from using the Internet or our websites to conduct transactions that involve the transmission of confidential information, which could harm our business.

Further, there is no guarantee that such compliance will prevent illegal or improper use of our payment systems or the theft, loss, or misuse of data pertaining to credit and debit cards, [removed: card holders] [added: cardholders] and transactions.

If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security [removed: measures,] [added: measures] and significantly higher credit card-related costs, each of which could harm our business, results of operations and financial condition.

As of December 31, [removed: 2015,] [added: 2016,] we had approximately [removed: $1.3] [added: $1] billion of goodwill, including [removed: $1.2] [added: $1] billion in our North America [added: operating] segment and [removed: $25.6] [added: $27] million in our International [added: operating] segment.

To generate brand awareness and site traffic for Apartments.com, we utilize a multi-channel marketing campaign.

Therefore, when we make this transition, our revenues and earnings may ultimately decline.

Further actions or inactions of the U.S. or other major national governments may also impact economic conditions, which could result in financial market disruptions or an economic downtown.

In addition, we collect personal information from tenants and landlords, including social security numbers, dates of birth, financial information, tax returns, employment information, background checks and credit scores, which is used in the apartment rental application process and for verification of landlords.

A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us.

The economic effects of “Brexit” may affect relationships with existing and future customers and could have an adverse impact on our business and operating results.

On June 23, 2016, the U.K held a referendum in which British citizens approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” The referendum is non-binding; however, if passed into law, negotiations would commence to determine the future terms of the U.K.’s relationship with the E.U. The impact to us from Brexit will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations.

This impact may affect not only our U.K. operations but operations in other parts of the E.U. Any transitional or permanent agreements resulting from such negotiations could potentially disrupt the markets we serve and the tax jurisdictions in which we operate.

As a result of the referendum, the global markets and currencies have been adversely impacted, including a sharp decline in the value of the British Pound as compared to the U.S. dollar.

A potential devaluation of the local currencies of our international customers relative to the U.S. dollar may impair the purchasing power of our international customers and could cause international customers to decrease or cancel orders, or terminate or fail to renew subscriptions for our services.

Volatility in exchange rates resulting from Brexit is expected to continue in the short term as the U.K negotiates its exit from the E.U. We translate sales and other results denominated in foreign currency into U.S. dollars for our financial statements.

During periods of a strengthening dollar, our reported international sales and earnings could be reduced because foreign currencies may translate into fewer U.S. dollars.

The announcement of Brexit and the withdrawal of the U.K. from the E.U. may create global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budgets on our products and services.

In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K determines which E.U. laws to replace or replicate, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance.

Further, Brexit may lead other E.U. member countries to consider referendums regarding their E.U. membership.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

Changes in laws, regulations or fiscal and tax policies or the manner of their interpretation or enforcement could adversely impact our financial performance.

New laws or regulations, or changes in existing laws or regulations, or the manner of their interpretation or enforcement, could increase our cost of doing business.

In particular, there may be significant changes in U.S. laws and regulations by the new U.S. presidential administration that could affect a wide variety of industries and businesses, including our business.

The new U.S. presidential administration has called for substantial change to fiscal and tax policies, which may include comprehensive tax reform.

We cannot predict the impact, if any of these changes to our business.

If the new U.S. presidential administration materially modifies U.S. laws and regulations or fiscal and tax policies, our business, financial condition, and results of operations could be adversely affected.

Our recent investments in sales and marketing activities to increase brand awareness and grow site traffic to the Apartments.com network of rental websites may not be successful.

The failure to successfully integrate Apartments.com or Apartment Finder and/or fully realize expected synergies from those acquisitions in the expected time frames or at all may adversely affect our future results and our business.

The success of the Apartments.com and Apartment Finder acquisitions depends, in part, on our ability to successfully integrate those businesses and realize the benefits and synergies we anticipate to result from the combination of our business and the businesses of Apartments.com and Apartment Finder, including anticipated growth opportunities and cost savings.

We may not be able to achieve these objectives in whole or in part, achievement of the objectives may take longer than expected, or achievement of the objectives may be more costly than expected.

Any failure to timely realize these anticipated benefits could have a material adverse effect on our revenues, expenses and operating results.

The success of the Apartments.com and Apartment Finder acquisitions will also depend in part on our ability to minimize or eliminate any difficulties that may occur in connection with the integration of our business and those acquired businesses.

The integration process could result in the loss of key employees, loss of key clients, loss of key vendors and other business partners, increases in operating costs, increases in taxes, or the disruption of each company's ongoing businesses, any or all of which could adversely affect our ability to achieve the anticipated benefits and synergies of the respective acquisition.

Our efforts to integrate the businesses may divert management's attention and other resources from uses that could otherwise have been beneficial to the Company.

In addition, management may decide to combine or eliminate products or services currently offered by one of the acquired businesses, which could also result in the loss of revenues, key employees, key clients, key vendors or other business partners.

In 2015, we also launched a wide-scale marketing campaign in an effort to increase brand awareness and site traffic for Apartments.com.

We consider our operating segments, North America and International, as our reporting units under Financial Accounting Standards Board (“FASB”) authoritative guidance for consideration of potential impairment of goodwill.

We created and compiled our standardized platform of information, analytics and online marketplace services where industry professionals and consumers of commercial real [removed: estate and] [added: estate, including] apartments, and the related business communities, can continuously interact and facilitate transactions by efficiently accessing and exchanging accurate and standardized real estate-related information.

Our subscription-based information services consist primarily of CoStar [removed: SuiteTM] [added: Suite®] services.

CoStar Suite is sold as a platform of service offerings consisting of CoStar Property Professional®, CoStar COMPS Professional® and CoStar Tenant® and through our mobile application, [removed: CoStarGo®.][added: CoStar Go®.]

We provide market [removed: research] [added: research, consulting] and analysis for commercial real estate investors and lenders via our CoStar Portfolio Strategy and CoStar Market Analytics service offerings; portfolio and debt analysis, management and reporting capabilities through our CoStar Investment Analysis and CoStar Risk Analytics service offerings; and, real estate and lease management solutions, including lease administration and abstraction services, through our CoStar Real Estate Manager service offerings.

Our LoopNet subscription-based online marketplace services enable commercial property owners, [removed: landlords,] [added: landlords] and real estate agents working on their behalf to list properties for sale or for lease and to submit detailed information about property listings.

[removed: Apartments.com] [added: Apartments.comTM] is part of our network of apartment marketing sites, which also includes [removed: ApartmentFinder.comTM] [added: ApartmentFinder.comTM, ApartmentHomeLiving.comTM, WestsideRentals.com®,] and [removed: ApartmentHomeLiving.com.][added: Apartamentos.comTM, our recently launched apartment-listing site offered exclusively in Spanish.]

Our BizBuySell services, which [removed: includes] [added: include] BizQuest®, provide an online marketplace for [removed: operating] businesses for sale.

Our LandsofAmerica services, which [removed: includes] [added: include] LandAndFarm, provide an online marketplace for rural lands for [removed: sale.][added: sale that is also accessible via our Land.com domain.]

Our subscription clients generally pay contract fees [added: in advance] on a monthly basis, but in some cases may pay us [added: in advance] on a quarterly or annual basis.

As of December 31, [removed: 2014] [added: 2015] and [removed: 2015,] [added: 2016,] our annualized net new sales of subscription-based services on annual contracts were approximately [removed: $17.3] [added: $29] million and [removed: $29.2] [added: $27] million, respectively, calculated based on the annualized amount of change in our sales resulting from new annual subscription-based contracts or upsales on existing annual subscription-based contracts, less write downs and cancellations, for the period reported.

We recognize subscription [removed: revenue] [added: revenues] on a straight-line basis over the life of the contract.

For [added: each of] the twelve months ended December 31, [removed: 2014] [added: 2015] and [removed: 2015,] [added: 2016,] our contract renewal rate for existing CoStar subscription-based services [added: on annual contracts] was approximately [removed: 92% and] 90%, [removed: respectively,] and therefore our cancellation rate for those services was approximately [removed: 8% and] 10%, [removed: respectively,] for the same time periods.

Similar to our other past acquisitions, we have been, and plan to continue, integrating, further developing and cross-selling the services offered by [removed: Apartments.com and] [added: Apartments.com,] ApartmentFinder.com and [added: Westside Rentals and] the other services we offer, including but not limited to CoStar Market Analytics.

We have incurred and plan to continue to incur product development costs to improve the online Apartments.com and ApartmentFinder.com [removed: platforms.][added: platforms and to launch and improve Apartamentos.com.]

We have [removed: increased our] [added: incurred and plan to continue to incur] sales and marketing expenses in order to support Apartments.com and to increase brand awareness.

[removed: The] [added: To generate brand awareness and site traffic for Apartments.com after launch, we utilized a] marketing campaign [removed: featured] [added: featuring] television and radio advertising, online/digital advertising, social media and out-of-home ads and [removed: was] reinforced [removed: by] [added: that advertising with] Search Engine Marketing.

We also [removed: increased our Search Engine Marketing to] support Apartment [removed: Finder.][added: Finder through Search Engine Marketing.]

In [added: early] 2016, we ran a Super Bowl ad to continue to generate brand awareness and site traffic for Apartments.com.

We expect to continue to invest in sales and marketing in [removed: 2016.][added: 2017.]

As we continue to assess the success and effectiveness of our marketing campaign, we will [removed: also seek] [added: continue] to [added: work to] determine the optimal level of marketing investment [removed: in the future.][added: for our services for future periods.]

We expect to continue our software development efforts to improve existing services, introduce new services, integrate [removed: products] and [removed: services,] cross-sell [removed: existing] services, and expand and develop supporting technologies for our [removed: research and] [added: research,] sales and marketing organizations.

[removed: Additionally, we] [added: - We] are working to [added: further] integrate the backend systems of the LoopNet and CoStar databases, so that the two services will share a unified database of information in order to create [added: operating] efficiencies [removed: in operations] and [removed: improved] [added: improve the] data [removed: for] [added: available to] our customers.

[removed: Further, we] [added: We] continue to assess [removed: whether to transition] the [added: timing and potential impact of transitioning the] LoopNet marketplace to a pure marketing site for commercial real estate where, eventually, all listings would be paid and users could search the site for free.

[added: -] We are also investing in our research [removed: capacity] [added: operations] to support continued growth of our information and analytics [removed: offerings, to support Apartments.com and Apartment Finder, to expand into additional Canadian markets and to provide services in Madrid, Spain.][added: offerings.]

We intend to continue to assess the need for additional investments in our business, in addition to the investments discussed [removed: above] [added: above,] in order to develop and distribute new services within our current platform or expand the reach of our current service offerings.

Any future product development or expansion of services, combination and coordination of services or elimination of services or [removed: internal] [added: corporate] expansion, development or restructuring efforts could reduce our profitability and increase our capital expenditures.

Any new investments, changes to our service offerings or other unforeseen events could cause us to [added: experience reduced revenues or] generate losses and negative cash flow from operations in the future.

[removed: Application of] Critical Accounting Policies [removed: and Estimates]

Our Level 3 assets consist of [removed: auction rate securities (“ARS”),] [added: ARS,] whose underlying assets are primarily student loan securities supported by guarantees from the Federal Family Education Loan Program (“FFELP”) of the U.S. Department of Education.

We have used a discounted cash flow model to determine the estimated fair value of our investment in ARS as of December 31, [removed: 2015.][added: 2016.]

The weighted average discount rate used in the discounted cash flow model as of December 31, [removed: 2014 and] 2015 [added: and 2016] was approximately [removed: 4.1% and 4.7%, respectively.][added: 5%.]

Based on this assessment of fair value, as of December 31, [removed: 2015,] [added: 2016,] we determined there was a [removed: net] decline in the fair value of our ARS investments of approximately [removed: $435,000.][added: $848,000.]

We do not expect any material changes in the near term to the underlying assumptions used to determine the unobservable inputs used to calculate the fair value of the ARS as of December 31, [removed: 2015.][added: 2016.]

We do not expect any material changes in the near term to the underlying assumptions used to calculate stock-based compensation expense for the year ended December 31, [removed: 2015.][added: 2016.]

Our assumptions regarding the future financial performance of the International reporting unit reflect our expectation as of October 1, [removed: 2015,] [added: 2016,] that revenues will continue to increase as a result of further penetration of our international subscription-based services, including into Madrid, Spain, and [added: Freiburg, Germany, and] the successful cross-selling of our services to our customers in existing markets due to the release of our upgraded international platform and expansion of coverage of our international service offerings.

These assumptions are subject to change from period to period and could be adversely impacted by the uncertainty surrounding global market conditions, commercial real estate [removed: conditions,] [added: conditions] and the competitive environment in which we operate.

As of October 1, [removed: 2015,] [added: 2016,] the date of our most recent impairment analysis, the estimated fair value of each of our reporting units substantially exceeded the carrying value of our reporting units.

There have been no events or changes in circumstances since the date of our impairment analysis on October 1, [removed: 2015] [added: 2016,] that would indicate that the carrying value of each reporting unit may not be recoverable.

This process requires us to estimate our current tax exposure and assess the temporary differences resulting from differing treatment of items, such as [removed: deferred revenue or] deductibility of certain intangible assets, for tax and accounting purposes.

The non-GAAP financial measures that we may disclose include [removed: EBITDA,] [added: net income (loss) before interest and other income (expense), income taxes, depreciation and amortization (“EBITDA”),] adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share (also referred to as “non-GAAP EPS”).

This decrease is primarily due to (i) a shift in the mix of contract terms for the Apartments Network services from a term of one year to a term of less than one year, and (ii) discontinuation of sales and marketing efforts for the LoopNet information products ahead of the integration with CoStar Suite.

As of December 31, 2015 and 2016, our annualized net bookings of subscription-based services on all contracts were approximately $25 million and $29 million, respectively, calculated based on the annualized amount of change in our sales resulting from all new subscription-based contracts or upsales on all existing subscription-based contracts, less write downs and cancellations, for the period reported.

Some key priorities for 2017 include:

We will seek to convert LoopNet information customers to higher value, more profitable annual subscription information services; however, through the transition there may be some reductions in revenues and earnings, resulting from the elimination or phase out of the LoopNet information service offerings;

We recently established our research operations headquarters in Richmond, Virginia, which is expected to be a technology innovation hub, powering the software development necessary to support the content within our information, analytics and marketing services.

In connection with the opening of the Richmond research headquarters, we plan to expand the research team to continue our investment in research operations to meet the growing content needs of our clients.

In addition, we expect continued investment in our International research operations in Madrid, Spain and the U.K;

- We recently launched Apartamentos.com, an apartment-listing site offered exclusively in Spanish built and tailored to meet the needs of Spanish language households in the U.S. We expect an increase in traffic for the network of apartment marketing sites and as well as a slight increase in costs to support this site; and

- On January 31, 2017, we added WestsideRentals.com to our network of apartment marketing sites through our acquisitions of Koa Lei, Inc. (doing business as Westside Rentals and now known as Westside Rentals, LLC) and Westside Credit Services, LLC.

WestsideRentals.com is a rental website specializing in Southern California real estate rentals.

As we transition from the current renter-paid subscription revenue model to an advertising model, we expect to incur losses associated with this business integration.

| Cost of revenues | 156,979 | | | | 27 | | | 188,885 | | | | 27 | | | 173,814 | | | | 21 | |

| General and administrative | 103,916 | | | | 18 | | | 115,507 | | | | 16 | | | 123,297 | | | | 15 | |

| Customer base amortization | 28,432 | | | | 5 | | | 27,931 | | | | 4 | | | 22,731 | | | | 3 | |

| Income from operations | 80,878 | | | | 14 | | | 11,455 | | | | 2 | | | 144,905 | | | | 17 | |

| Interest and other income | 516 | | | | — | | | 537 | | | | — | | | 1,773 | | | | — | |

| Income before income taxes | 70,913 | | | | 12 | | | 2,581 | | | | 1 | | | 136,662 | | | | 16 | |

The following table provides our revenues by type of service (in thousands of dollars and as a percentage of total revenue):

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| | Year Ended December 31, | | | | | | | | | | | | | | | | | | | |

| Information and analytics | | | | | | | | | | | | | | | | | | | | |

| CoStar Suite(1) | $ | 322,696 | | | 56 | % | | $ | 360,440 | | | 50 | % | | $ | 408,456 | | | 49 | % |

| Information services(2) | 72,525 | | | | 13 | | | 75,790 | | | | 11 | | | 77,178 | | | | 9 | |

| Online marketplaces | | | | | | | | | | | | | | | | | | | | |

| Multifamily(3) | 76,785 | | | | 13 | | | 160,630 | | | | 23 | | | 224,835 | | | | 27 | |

| Commercial property and land(4) | 103,930 | | | | 18 | | | 114,904 | | | | 16 | | | 127,161 | | | | 15 | |

| Total revenues | $ | 575,936 | | | 100 | % | | $ | 711,764 | | | 100 | % | | $ | 837,630 | | | 100 | % |

(1) CoStar Suite is comprised of CoStar Property Professional, CoStar COMPS Professional, CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy.

(2) Information services is comprised of LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam; Belbex and Thomas Daily.

(3) Multifamily is comprised of Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com.

(4) Commercial property and land is comprised of LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica and LandAndFarm; and CoStar Private Sale Network.

The following table provides a comparison of our selected consolidated results of operations for the year ended December 31, 2016 and 2015 (in thousands of dollars):

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | |

| | 2016 | | | | 2015 | | | | Increase (Decrease) ($) | | | | Increase (Decrease) (%) | |

| CoStar Suite | $ | 408,456 | | | $ | 360,440 | | | $ | 48,016 | | | 13 | % |

| Information services | 77,178 | | | | 75,790 | | | | 1,388 | | | | 2 | |

Through an exclusive agreement with Move, Inc., a subsidiary of News Corp., Apartments.com is also the exclusive third-party provider of apartment community listings across Move’s family of websites, which include realtor.com®, doorsteps.com and move.com.

CoStar Suite is our primary service offering in our North America and International operating segments.

Annual and quarterly advance payments result in deferred revenue, substantially reducing the working capital requirements generated by accounts receivable.

The recent decrease in our contract renewal rate is related to the execution of annual contracts by many of our LoopNet customers, who historically have not signed long term agreements and typically have a lower renewal rate than the rest of our subscription-based customers.

Apartment Rental Marketplaces

On April 1, 2014 (the “Closing Date”), we increased our presence in the multifamily vertical by acquiring from Classified Ventures, LLC (“CV”), certain assets and assuming certain liabilities, in each case, related to the Apartments.com business (collectively referred to as “Apartments.com”), a national online apartment rentals resource for renters, property managers and owners.

Apartments.com offers renters a database of apartment listings and provides professional property management companies and landlords an advertising destination.

Renters can conduct personalized searches of apartment listings and view video demonstrations and community reviews through the Apartments.com website and mobile applications.

The Apartments.com network of rental websites also includes ApartmentHomeLiving.com, another national online apartment rentals resource.

Apartments.com draws on CoStar’s multifamily database, which contains detailed information on apartment properties.

We designed the improved Apartments.com website, which was launched in February 2015, to meet renter preferences and demands, which we believe will drive traffic to the site and attract advertisers who prefer to advertise on heavily trafficked apartment websites.

The site provides a comprehensive selection of rentals, information on actual availabilities and rents, and in-depth data on neighborhoods, including restaurants, nightlife, history, schools and other facts important to renters.

To help renters find the information that meets their needs, the site also offers innovative search tools such as the PolygonTM Search, which allows renters to specifically define the area in which they want to find an apartment, and Plan Commute tools, which allows renters to search property listings that meet their transportation needs.

To further support our expansion into the multifamily vertical, on June 1, 2015, we acquired Network Communications, Inc. (“NCI”), including its Apartment Finder business (collectively referred to as “Apartment Finder”).

Apartment Finder provides lead generation, advertising, and Internet marketing solutions to property managers and owners through its main service, ApartmentFinder.com.

Similar to Apartments.com, we developed technology to allow ApartmentFinder.com to draw on CoStar’s multifamily database.

In December 2015, we launched the new ApartmentFinder.com website to meet renter preferences and demands, which we believe will drive traffic to the site and attract advertisers who prefer to advertise on heavily trafficked apartment websites.

We also have phased out print advertising from Apartment Finder and moved to an all-digital offering.

In 2015, we entered into an agreement to be the exclusive third party provider of apartment community listings on the websites owned and operated by News Corp. subsidiary Move, Inc.- realtor.com®, move.com, and doorsteps.com - with advertiser content from Apartments.com and ApartmentFinder.com.

Through this agreement, we are able to promote the apartment communities of our advertisers across six major apartment and real estate rental websites, increasing traffic across our network of apartment marketing websites, and in turn increasing the lead flow to our advertisers’ communities.

In conjunction with the launch of the improved Apartments.com website, we embarked on a wide-scale marketing campaign in 2015 to generate brand awareness and site traffic for Apartments.com.

The launch of the improved Apartments.com website in February 2015 and the new ApartmentFinder.com website in December 2015 are examples of our software development efforts to improve existing services, introduce new services, integrate products and services, and cross-sell existing services.

We believe the improved sites, enhanced search capabilities, availability of information regarding real-time vacancies, and our continued development and introduction of enhancements to our online apartment rental marketplaces will attract more consumers, making these sites more attractive to property managers, which will increase our cross-selling opportunities.

Our software development initiatives in 2015 included enhancing our new CoStar Lease Analysis® integrated workflow tool to provide users a simple way to produce understandable cash flows for leases, and to enhance other lease comparable services.

We believe greater functionality makes our services valuable to an even broader audience and helps us increase sales of our services to brokers, banks, owners and institutional investors.

We expect technology enhancements to drive continued revenue growth in 2016 and for the foreseeable future.

We evaluate potential changes to our service offerings from time to time in order to better align the services we offer with customers’ needs.

Further, in some cases, when integrating and coordinating our services and assessing industry and client needs, we may decide to combine, shift focus from, de-emphasize, phase out, or eliminate a service that, among other things, overlaps or is redundant with other services we offer.

In the event that we eliminate or phase out particular service offerings, we may experience reduced revenues and earnings.

The decision to eliminate or phase out a service offering may also ultimately result in increased revenues and earnings from sales of other services we offer in lieu of the eliminated or phased out services.

For example, we recently eliminated certain Apartment Finder services and phased out Apartment Finder print advertising and moved to an all-digital offering.

We expect a short-term reduction in revenues and associated costs resulting from the elimination of these Apartment Finder services.

If and when we implement such a shift, we will seek to convert LoopNet marketplace customers to higher value, more profitable annual subscription information services, which should increase revenues and earnings over time.

However, we cannot predict with certainty the amount or timing of any reductions in revenues and earnings or subsequent increases in revenues and earnings, if any, resulting from any eliminations or phasing out of the LoopNet information services or any other service offering, if implemented.

Our revenues have increased as a result of revenue from acquired businesses and from cross-selling opportunities among the customers of CoStar and the acquired companies.

We expect to continue to increase revenues as a result of such cross-selling opportunities.

We may incur increased expenses in connection with any marketing and sales campaigns involving cross-selling opportunities and initiatives, and in connection with promotion of our new services and brands.

We are expanding the geographic reach of our North America services.

In 2014, we began offering our services in Toronto, Canada.

Building on our experience in Toronto, we have expanded and are continuing to expand our research into additional Canadian cities.

We provide information, analytics and online marketplace services to the commercial real estate and related business community in the [removed: U.S.] [added: U.S., the U.K.,] and parts of [removed: the U.K.,] Canada, [removed: Spain] [added: Spain, Germany] and France.

Our functional currency for our operations in the U.K., Canada, [removed: Spain] [added: Spain, Germany] and France is the local currency.

For the year ended December 31, [removed: 2015, revenue] [added: 2016, revenues] denominated in foreign currencies was approximately [removed: 4.1%] [added: 4%] of total revenue.

For the year ended December 31, [removed: 2015,] [added: 2016,] our [removed: revenue] [added: revenues] would have decreased by approximately [removed: $2.9] [added: $3] million if the U.S. dollar exchange rate used strengthened by 10%.

A 10% strengthening of the U.S. dollar exchange rate against all currencies with which we have exposure at December 31, [removed: 2015] [added: 2016] would have resulted in an increase of approximately [removed: $2.9 million] [added: $89,000] in the carrying amount of net assets.

For the year ended December 31, [removed: 2015,] [added: 2016,] our [removed: revenue] [added: revenues] would have increased by approximately [removed: $2.9] [added: $3] million if the U.S. dollar exchange rate used weakened by 10%.

A 10% weakening of the U.S. dollar exchange rate against all currencies with which we have exposure at December 31, [removed: 2015] [added: 2016] would have resulted in a decrease of approximately [removed: $2.9 million] [added: $89,000] in the carrying amount of net assets.

As of December 31, [removed: 2015,] [added: 2016,] accumulated other comprehensive loss included a loss from foreign currency translation adjustments of approximately [removed: $7.2] [added: $12] million.

We do not have material exposure to market risks associated with changes in interest rates related to cash equivalent securities held as of December 31, [removed: 2015.][added: 2016.]

As of December 31, [removed: 2015,] [added: 2016,] we had [removed: $421.8] [added: $567] million of cash and cash equivalents.

As of December 31, [removed: 2015,] [added: 2016,] we had [removed: $365.0] [added: $345] million of long-term debt bearing interest at a variable rate of LIBOR plus [removed: 2.00%,] [added: 2%,] subject to adjustment based on our First Lien Secured Leverage Ratio (as defined in the 2014 Credit Agreement).

Based on our outstanding borrowings as of December 31, [removed: 2015,] [added: 2016,] an increase in the interest rate by 25 basis points would result in an increase of approximately $900,000 in interest expense [added: annually and a decrease in the interest rate by 25 basis points would result in a decrease of approximately $900,000 in interest expense] annually.

As of December 31, [removed: 2015, $16.8] [added: 2016, $11] million of our investments in [removed: auction rate securities] [added: ARS] failed to settle at auction.

Based on an assessment of fair value of these investments in ARS as of December 31, [removed: 2015,] [added: 2016,] we determined that there was a [removed: net] decline in the fair value of our ARS investments of approximately [removed: $435,000,] [added: $848,000,] which was deemed to be a temporary impairment and recorded as an unrealized loss in accumulated other comprehensive loss in stockholders’ equity.

We had approximately [removed: $1.5] [added: $1] billion in intangible assets as of December 31, [removed: 2015.][added: 2016.]

As of December 31, [removed: 2015,] [added: 2016,] we believe our intangible assets will be recoverable, however, changes in the economy, the business in which we operate and our own relative performance could change the assumptions used to evaluate intangible asset recoverability.

Based on our outstanding borrowings as of December 31, 2015, a decrease in the interest rate by 25 basis points would result in a decrease of approximately $900,000 in interest expense annually.

CoStar Group, Inc., a Delaware corporation, founded in 1987, is the number one provider of information, analytics and online marketplaces to the commercial real estate industry in the United States (“U.S.”) and United Kingdom (“U.K.”) based on the fact that we offer the most comprehensive commercial real estate database available; have the largest research department in the industry; own and operate [removed: the] leading online marketplaces for commercial real estate and apartment listings in the U.S. based on the [removed: number] [added: numbers] of unique visitors and site visits per month; provide more information, analytics and marketing services than any of our competitors and believe that we generate more revenues than any of our commercial real estate information competitors.

We manage our business geographically in two operating segments, with our primary areas of measurement and decision-making being North America, which includes the U.S. and [removed: parts of] Canada, and International, which includes [removed: parts of] the U.K., [removed: Spain] [added: Spain, Germany] and France.

Over time, we have expanded our services for commercial real estate information, analytics and online marketplaces in an effort to continue to meet the needs of [removed: this] [added: the] industry as it grows and evolves.

We have also extended our offering of comprehensive commercial real estate information geographically to include [removed: London and other parts of] the U.K., Canada, [removed: France and] Spain, [added: Germany and France,] through acquisitions and internal growth and development.

[removed: The revenues;] [added: Revenues;] net income [added: (loss)] before [removed: interest,] [added: interest and other] income [added: (expense), income] taxes, depreciation and amortization (“EBITDA”); and total assets and liabilities for each of our segments are set forth in Note 12 to our consolidated financial statements.

We have five flagship brands - [removed: CoStar, LoopNet, Apartments.com, BizBuySell] [added: CoStar®, LoopNet®, Apartments.comTM, BizBuySell®] and [removed: LandsofAmerica.][added: LandsofAmericaTM.]

Our subscription-based information services consist primarily of CoStar [removed: SuiteTM] [added: Suite®] services.

CoStar Suite is sold as a platform of service offerings consisting of CoStar Property Professional®, CoStar COMPS Professional® and CoStar Tenant® and through our mobile application, [removed: CoStarGo®.][added: CoStar Go®.]

Our LoopNet [added: subscription-based] online marketplace enables commercial property owners, landlords, and real estate agents working on their behalf to list properties for sale or for lease and to submit detailed information about property listings.

[removed: We are] [added: In 2016, we began] working to [added: further] integrate the backend systems of the LoopNet and CoStar databases, so that the two services will share a unified database of [removed: information.][added: information in order to create operating efficiencies and improve the data available to our customers.]

Apartments.comTM is part of our network of apartment marketing sites, which also includes [removed: ApartmentFinder.comTM] [added: ApartmentFinder.comTM, ApartmentHomeLiving.comTM, WestsideRentals.com®,] and [removed: ApartmentHomeLiving.com.][added: Apartamentos.comTM, our recently launched apartment-listing site offered exclusively in Spanish.]

[removed: CoStar] [added: We] designed the [removed: Apartments.com and] [added: Apartments.com,] ApartmentFinder.com [added: and Apartamentos.com] websites, which were launched in February [added: 2015, December] 2015 and [removed: December 2015,] [added: February 2017,] respectively, to meet renter preferences and demands, which we believe will drive traffic to those sites and attract advertisers who prefer to advertise on heavily trafficked apartment websites.

[removed: In 2015, we entered into an agreement to be] [added: We are] the exclusive third party provider of [removed: apartment community] listings [removed: on the] [added: in apartment communities with 50 units or more to] websites owned and operated by News Corp. subsidiary Move, [removed: Inc.-] [added: Inc. -] realtor.com®, [removed: Move.com,] [added: move.com,] and [removed: Doorsteps.com] [added: doorsteps.com] - with advertiser content from Apartments.com and ApartmentFinder.com.

[removed: Through this agreement, we are able] [added: This arrangement enables us] to promote the apartment communities of our advertisers across [removed: six] [added: the “Apartments Network” consisting of Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, Apartamentos.com, WestsideRentals.com, realtor.com, move.com and doorsteps.com - eight] major apartment and real estate rental websites, increasing traffic across our network of apartment marketing websites, and in turn increasing the lead flow to our advertisers’ communities.

We provide market [removed: research] [added: research, consulting] and analysis for commercial real estate investors and lenders via our CoStar Portfolio Strategy and CoStar Market Analytics service offerings; portfolio and debt analysis, management and reporting capabilities through our CoStar Investment Analysis and CoStar Risk Analytics service offerings; and real estate and lease management solutions, including lease administration and abstraction services, through our CoStar Real Estate Manager service offerings.

Our standardized platform includes the most comprehensive proprietary database in the industry; the largest research department in the industry; proprietary data collection, information management and quality control systems; a large in-house product development team; a broad suite of web-based information, analytics and online marketplaces; a large team of analysts and economists; and a [removed: large] [added: large, diverse] base of clients.

Our database has been developed and enhanced for more than [removed: 28] [added: 29] years by a research department that makes thousands of daily database updates.

Our comprehensive commercial real estate database powers our information services, sources data used in our analytic services and provides content for [removed: some] [added: most] of our online marketplace services.

Our subscription-based services consist primarily of [removed: similar] [added: information, analytics, and online marketplace] services offered over the Internet to commercial real estate industry and related professionals.

[removed: On] [added: Our more recent acquisitions include the] April 1, [removed: 2014, we purchased from Classified Ventures, LLC (“CV”)] [added: 2014 purchase of] certain assets and [removed: assumed] [added: assumption of] certain liabilities related to the Apartments.com business (collectively referred to as “Apartments.com”), a national online apartment rentals resource for renters, property managers and [removed: owners.][added: owners, from Classified Ventures, LLC (“CV”).]

[removed: Further, on] [added: On] July 1, 2015, we expanded our International services into [removed: Madrid] [added: Madrid, Spain] through the acquisition of the assets of [removed: Belbex Corporate, S.L.,] [added: Belbex,] a small commercial real estate information provider operating in Madrid, Spain.

We expect to continue our software development efforts to improve existing services, introduce new services, integrate [removed: products] and [removed: services,] cross-sell existing services, and expand and develop supporting technologies for our [removed: research and] [added: research,] sales and marketing organizations.

The launch of the [removed: improved] Apartments.com website [removed: in February 2015] and the [removed: new] ApartmentFinder.com website in [removed: December] 2015 are examples of our software development efforts to improve existing services, introduce new services, [removed: integrate products] and [removed: services,] [added: integrate] and cross-sell existing services.

We believe the improved sites, enhanced search capabilities, availability of information regarding real-time [removed: vacancies,] [added: vacancies] and our continued development and introduction of enhancements to our online apartment rental marketplaces [removed: will attract] [added: have attracted] more consumers, making [removed: these] [added: the] sites more attractive to property managers, which [removed: will increase] [added: has also increased] our cross-selling opportunities.

We believe greater functionality makes our services valuable to an even broader audience and helps us increase sales of our services to brokers, banks, [removed: owners and] [added: owners,] institutional [removed: investors.][added: investors and other industry participants.]

We expect technology enhancements to drive continued revenue growth in [removed: 2016] [added: 2017] and [removed: for] the foreseeable future.

We [removed: also] continue to assess [removed: whether to transition] the [added: timing and potential impact of transitioning the] LoopNet marketplace to a pure marketing site for commercial real estate where, eventually, all listings would be paid and users could search the site for free.

[removed: If and when] [added: When] we implement [removed: such a] [added: this] shift, we will seek to convert LoopNet [removed: marketplace] [added: information] customers to higher value, more profitable annual subscription information services, which should increase revenues and earnings over time.

However, we cannot predict with certainty the amount or timing of any reductions in revenues and earnings or subsequent increases in revenues and earnings, if any, resulting from [removed: any eliminations] [added: the elimination] or phasing out of the LoopNet information services or any other service offering, if implemented.

Our revenues have increased as a result of [removed: revenue] [added: revenues] from acquired businesses and from cross-selling opportunities among the customers of CoStar and the acquired companies.

In the second quarter of 2015, we began offering services in Calgary and [removed: Vancouver and are currently researching commercial real estate in the Canadian cities of Ottawa and Edmonton.][added: Vancouver.]

We have invested in the expansion and development of our field sales force to support the growth and expansion of our company [added: and our service offerings] in North America and internationally.

We are also investing in our research [removed: capacity] [added: operations] to support continued growth of our information and analytics offerings, to support [added: the] Apartments.com [removed: and Apartment Finder,] [added: network,] to expand into additional Canadian markets and to provide services in Madrid, [removed: Spain.][added: Spain and key markets in Germany.]

We intend to continue to assess the need for additional investments in our business, in addition to the investments discussed [removed: above] [added: above,] in order to develop and distribute new services within our current [removed: platform,] [added: platform or] expand the reach of our current service [removed: offerings or to integrate new or current offerings to provide a more robust, efficient or complete service offering.][added: offerings.]

Any future product development or expansion of services, combination and coordination of services or elimination of services or [removed: internal] [added: corporate] expansion, development or restructuring efforts could reduce our profitability and increase our capital expenditures.

We are committed to [removed: supporting] [added: continuing to support] and [removed: improving] [added: improve] our information, analytics and online marketplace solutions.

The commercial real estate and related business community [removed: generally has] [added: historically] operated in an inefficient marketplace because of the fragmented approach to gathering and exchanging information within the marketplace.

Various organizations, including hundreds of brokerage firms, directory publishers and local research companies, [removed: collect] [added: collected] data on specific markets and [removed: develop] [added: developed] software to analyze the information they [removed: have] independently gathered.

This highly fragmented methodology [removed: has] resulted in duplication of effort in the collection and analysis of information, excessive internal cost and the creation of non-standardized data containing varying degrees of accuracy and comprehensiveness, resulting in a formidable information gap.

The creation of a standardized information platform for commercial real estate requires [removed: an] infrastructure including a standardized database, accurate and comprehensive research capabilities, experienced analysts, easy to use technology and intensive participant interaction.

Apartments.com and Apartamentos.com also offer Plan Commute tools, which allow renters to search property listings that meet their transportation needs.

On January 31, 2017, we acquired WestsideRentals.com, an apartment marketing site specializing in Southern California real estate rentals, and added it to our network of apartment marketing sites.

Our BizBuySell services, which include BizQuest®, provide an online marketplace for businesses for sale.

Our LandsofAmerica services, which include LandAndFarm, provide an online marketplace for rural lands for sale that is also accessible via our Land.com domain.

On July 1, 2015, we acquired the assets of Belbex Corporate, S.L. (“Belbex”), a small commercial real estate information provider operating in Madrid, Spain.

On May 3, 2016, we acquired Thomas Daily GmbH (“Thomas Daily”), a commercial real estate news and information provider operating in Freiburg, Germany.

Most recently, on January 31, 2017, we acquired Koa Lei, Inc. (doing business as Westside Rentals and now known as Westside Rentals, LLC), an online marketplace specializing in Southern California real estate rentals, and its affiliated entity Westside Credit Services, LLC, a provider of credit checks and tenant screening for landlords in the Southern California real estate rental market.

In addition, we recently launched Apartamentos.com, an apartment-listing site offered exclusively in Spanish built and tailored to meet the needs of Spanish language households in the U.S., which is believed to represent approximately 20 percent of the U.S. renter population.

In the second quarter of 2016, we began offering services in Ottawa and in the third quarter of 2016, we began offering services in Edmonton.

Further, on May 3, 2016, we expanded our International services into key markets in Germany, through the acquisition of Thomas Daily, a commercial real estate news and information provider operating in Freiburg, Germany.

We recently established our research operations headquarters in Richmond, Virginia, and plan to expand our research team and continue investing in research operations to meet the growing content needs of our clients.

We recently established our research operations headquarters in Richmond, Virginia.

We expect the Richmond research headquarters will be a technology innovation hub, powering the software development necessary to support the content within our information, analytics and marketing services.

CoStar utilizes high-tech, field research vehicles across the U.S., Canada, the U.K. and Spain.

Our information technology team is responsible for developing, improving and maintaining CoStar's information, analytics and online marketplace services.

CoStar Market AnalyticsTM CoStar Market Analytics is an analytics platform for owners, investors and lenders, and provides a comprehensive view of the commercial real estate market, including competitive properties, sale comparables, lease comparables, market trends, economic forecasting, etc.

CoStar Portfolio Strategy leverages its staff of analysts, economists, and strategists to consult with clients on investment and lending strategies, including custom strategic research and portfolio strategy, target market selection, capital-raising initiatives, relative value and custom scenario analyses, and acquisition and disposition studies.

Clients for CoStar Risk Analytics COMPASS services or data include most of the Systemically Important Financial Institutions (“SIFIs”) as well as a large number of other top-500 banks, insurance companies, hedge funds and government financial regulators.

Apartamentos.comTM Apartamentos.com, part of our network of apartment marketing sites, provides Spanish speaking renters with a national online apartment rentals resource offered exclusively in Spanish, with the same primary features found on Apartments.com.

WestsideRentals.com® WestsideRentals.com, part of our network of apartment marketing sites, specializes in Southern California real estate rentals.

The LandsofAmerica.com and LandAndFarm.com websites are also accessible via our Land.com domain.

We also support Apartment Finder through Search Engine Marketing.

In early 2016, we ran a Super Bowl ad to continue to generate brand awareness and site traffic for Apartments.com.

We currently plan to continue to utilize these marketing methods and will continue to work to determine the optimal level of marketing investment for our services for future periods.

We will also continue to focus on upselling LoopNet information users to CoStar as we phase out the LoopNet information service offerings.

In common with many German companies, employees in our German subsidiary, Thomas Daily GmbH, have elected three fellow employees to form a Works Council, which represents our employees at the location and has certain rights to receive information from us and engage us in discussions under applicable law.

The listing process is efficient and enables comprehensive information about listed properties to be provided.

Our more recent acquisitions include the acquisition of LoopNet, an online marketplace that enables property owners, landlords, and commercial real estate agents working on their behalf to list properties for sale or for lease and to submit detailed information about property listings, in April 2012.

Our software development initiatives in 2015 included enhancing our new CoStar Lease Analysis® integrated workflow tool to provide users a simple way to produce understandable cash flows for leases, and to enhance other lease comparable services.

For example, we recently eliminated certain Apartment Finder services and phased out Apartment Finder print advertising and moved to an all-digital offering.

We expect a short-term reduction in revenues and associated costs resulting from the elimination of these Apartment Finder services.

Additionally, we are working to integrate the backend systems of the LoopNet and CoStar databases, so that the two services will share a unified database of information in order to create efficiencies in operations and improved data for our customers.

Our information technology team is responsible for developing, improving and maintaining CoStar services, including but not limited to CoStar Property Professional®, CoStar COMPS Professional®, CoStar Tenant®, CoStar Showcase®, CoStarGo®, CoStar Connect®, CoStar Lease Analysis®, CoStar Multifamily®, LoopNet Premium Lister®, LoopNet Premium SearcherTM, LoopLink®, CoStar Portfolio Strategy® products and services, CoStar Market AnalyticsTM products and services, CoStar Investment Analysis® Portfolio Maximizer and CoStar Investment Analysis® Request, CoStar Real Estate Manager® products and services, Apartments.comTM products and services and ApartmentFinder.comTM products and services.

- CoStar Multifamily® CoStar Multifamily information, included as part of CoStar Property Professional, provides subscribers a comprehensive multifamily property database combined with analytic and forecasting tools that enable them to make investment decisions about multifamily properties.

CoStar Multifamily provides information about buildings with five or more units, including rents and occupancy rates, comparable sales transactions, construction locations, floor plans, high-resolution property images and detailed information about amenities and concessions.

CoStar Portfolio Strategy and CoStar Market Analytics cover metropolitan areas throughout the U.S. and parts of the U.K., Canada and Europe, with offerings including historical and forecast market data and analysis by market and property type, and services including access to CoStar Portfolio Strategy’s analysts, economists, and strategists to develop and deliver custom research solutions.

Key tools include analysis of underlying property data, assessment of current market fundamentals, forecasts of future market performance, and credit default models.

Apartments.comTM Our subsidiary, Apartments, LLC (doing business as Apartments.com), operates an online apartment marketplace that offers renters a searchable database of apartment listings and provides professional property management companies and landlords with an advertising destination.

In conjunction with the launch of the improved Apartments.com website, we embarked on a wide-scale marketing campaign in 2015 to generate brand awareness and site traffic for Apartments.com.

We currently plan to continue to utilize these marketing methods.

For the fiscal year ended December 31, [removed: 2015][added: 2016]

[removed: ][added: ]

Based on the closing price of the common stock on June 30, [removed: 2015] [added: 2016] on the Nasdaq Global Select Market, the aggregate market value of registrant’s common stock held by non-affiliates of the registrant as of June 30, [removed: 2015] [added: 2016] was approximately [removed: $6.4] [added: $7] billion.

As of February [removed: 19, 2016,] [added: 17, 2017,] there were [removed: 32,513,536] [added: 32,599,696] shares of the registrant’s common stock outstanding.

Portions of the registrant’s definitive proxy statement, which is expected to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, [removed: 2015,] [added: 2016,] are incorporated by reference into Part III of this Report.

| Item 1. | [removed: [Business](#sAB11BB725D0C716518B9B8FFC2F17C34)] [added: [Business](#s96B6221D7EB5150251FF16C89EABCA13)] | [removed: [4](#sAB11BB725D0C716518B9B8FFC2F17C34)] [added: [4](#s96B6221D7EB5150251FF16C89EABCA13)] |

| Item 1A. | [Risk [removed: Factors](#s4F271A73A374818A9729B8FFC3201195)] [added: Factors](#s4E03E5E86E317B1485D316C89EDDE98F)] | [removed: [16](#s4F271A73A374818A9729B8FFC3201195)] [added: [17](#s4E03E5E86E317B1485D316C89EDDE98F)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s49596E0F752BCAA4AEC8B8FFC33FE2E5)] [added: Comments](#s9FB2A7C928B10BCBB23E16C89EFF0AFD)] | [removed: [29](#s49596E0F752BCAA4AEC8B8FFC33FE2E5)] [added: [30](#s9FB2A7C928B10BCBB23E16C89EFF0AFD)] |

| Item 2. | [removed: [Properties](#sE3950307C5B48F166270B8FFC36EC053)] [added: [Properties](#s2D5DAC6946C39A3A8BB816C89F5735E9)] | [removed: [29](#sE3950307C5B48F166270B8FFC36EC053)] [added: [30](#s2D5DAC6946C39A3A8BB816C89F5735E9)] |

| Item 3. | [Legal [removed: Proceedings](#sB1DEAF98FCDD87F0B89EB8FFC39C5570)] [added: Proceedings](#sFB66F3E35C4EE5B8A9FE16C89F5A226D)] | [removed: [29](#sB1DEAF98FCDD87F0B89EB8FFC39C5570)] [added: [30](#sFB66F3E35C4EE5B8A9FE16C89F5A226D)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s8A209B2944EC61D08727B8FFC3BCBDA5)] [added: Disclosures](#sCCBB03D2B791E676D3E116C89F8521B2)] | [removed: [30](#s8A209B2944EC61D08727B8FFC3BCBDA5)] [added: [30](#sCCBB03D2B791E676D3E116C89F8521B2)] |

| Item 5. | [Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s99A8FD567ED553C61E82B8FFAF906769)] [added: Securities](#s64F4386B38AA60CC4EF216C8873E6C60)] | [removed: [30](#s99A8FD567ED553C61E82B8FFAF906769)] [added: [31](#s64F4386B38AA60CC4EF216C8873E6C60)] |

| Item 6. | [Selected Consolidated Financial and Operating [removed: Data](#s63B97F3C0AF09DA8070CB8FFAE48906B)] [added: Data](#s732EEC7E39CAEC974EEC16C885D0B417)] | [removed: [33](#s63B97F3C0AF09DA8070CB8FFAE48906B)] [added: [33](#s732EEC7E39CAEC974EEC16C885D0B417)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sAA2CACC9AAD4D24CB71DB8FFC4674507)] [added: Operations](#sA71AB63D6852B317698A16C8A02B59FE)] | [removed: [34](#sAA2CACC9AAD4D24CB71DB8FFC4674507)] [added: [34](#sA71AB63D6852B317698A16C8A02B59FE)] |

| Item 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#sA66BAB0AA01FC78DA9B9B8FFC73582C9)] [added: Risk](#s3E937C25AE60E5F39C1E16C87FC3EE6B)] | [removed: [53](#sA66BAB0AA01FC78DA9B9B8FFC73582C9)] [added: [51](#s3E937C25AE60E5F39C1E16C87FC3EE6B)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sD4CAB4444442811757B0B8FFC74427C0)] [added: Data](#s71F70495F798FA633D0516C8A34347FB)] | [removed: [54](#sD4CAB4444442811757B0B8FFC74427C0)] [added: [52](#s71F70495F798FA633D0516C8A34347FB)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s5806BF059EF32846A027B8FFC783DDBD)] [added: Disclosure](#s54ECBA622A0CE8AD092F16C8A36DD03F)] | [removed: [54](#s5806BF059EF32846A027B8FFC783DDBD)] [added: [52](#s54ECBA622A0CE8AD092F16C8A36DD03F)] |

| Item 9A. | [Controls and [removed: Procedures](#s039BF1BB440A9479969EB8FFC7A2DBD1)] [added: Procedures](#sD21623A27E5B52D6F84216C8A38D22EC)] | [removed: [54](#s039BF1BB440A9479969EB8FFC7A2DBD1)] [added: [52](#sD21623A27E5B52D6F84216C8A38D22EC)] |

| Item 9B. | [Other [removed: Information](#sECA5CBA4EC2AC453E94CB8FFC7E0339A)] [added: Information](#s45789669C09496EB29C916C8A3C1BA9A)] | [removed: [55](#sECA5CBA4EC2AC453E94CB8FFC7E0339A)] [added: [53](#s45789669C09496EB29C916C8A3C1BA9A)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s4E1F69A2BA37C754A925B8FFC82EBE32)] [added: Governance](#s5FE62CA484CD45DE612216C8A4338275)] | [removed: [55](#s4E1F69A2BA37C754A925B8FFC82EBE32)] [added: [53](#s5FE62CA484CD45DE612216C8A4338275)] |

| Item 11. | [Executive [removed: Compensation](#s40EE4AE44447AC33665AB8FFC84EEA19)] [added: Compensation](#s39A5C13D5B41448E83D616C8A436556D)] | [removed: [55](#s40EE4AE44447AC33665AB8FFC84EEA19)] [added: [53](#s39A5C13D5B41448E83D616C8A436556D)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s091452224989F14A05D2B8FFC87C0F40)] [added: Matters](#s3389847528B0BBE4AE1316C8A467F700)] | [removed: [55](#s091452224989F14A05D2B8FFC87C0F40)] [added: [53](#s3389847528B0BBE4AE1316C8A467F700)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sB1A23BE6A266EECB488BB8FFC89CE43E)] [added: Independence](#s739003311CFDFA7BB88316C8A487D3E6)] | [removed: [55](#sB1A23BE6A266EECB488BB8FFC89CE43E)] [added: [53](#s739003311CFDFA7BB88316C8A487D3E6)] |

| Item 14. | [Principal Accountant Fees and [removed: Services](#sECCCF915EE7DEF58D39AB8FFC8DA9FA1)] [added: Services](#s484DFBD7A3CD33F7060316C8A4DA08E6)] | [removed: [55](#sECCCF915EE7DEF58D39AB8FFC8DA9FA1)] [added: [53](#s484DFBD7A3CD33F7060316C8A4DA08E6)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#s0A9E4FDAB987A48467E6B8FFA88EAD20)] [added: Schedules](#sA973291A47DFB01D5E4B16C87E0D2AC1)] | [removed: [56](#s0A9E4FDAB987A48467E6B8FFA88EAD20)] [added: [54](#sA973291A47DFB01D5E4B16C87E0D2AC1)] |

| | [Index to [removed: Exhibits](#s743CC509C061A5E9CE44B8FFC9767E5D)] [added: Exhibits](#sC17F36B441BFEAB4191A16C8A55FC16B)] | [removed: [59](#s743CC509C061A5E9CE44B8FFC9767E5D)] [added: [57](#sC17F36B441BFEAB4191A16C8A55FC16B)] |

| | [Index to Consolidated Financial [removed: Statements](#sA4C7B6CA38458AA7868CB8FFC995C11A)] [added: Statements](#s434B4A8C5C1BCF8B963E16C8A58139EB)] | [removed: [F-1](#sA4C7B6CA38458AA7868CB8FFC995C11A)] [added: [F-1](#s434B4A8C5C1BCF8B963E16C8A58139EB)] |

10-K 1 csgp20161231-10k.htm 2016 10-K

| | [Signatures](#s7F530686449F044B2B6B16C8A55A3F59) | [55](#s7F530686449F044B2B6B16C8A55A3F59) |

10-K 1 csgp20151231-10k.htm 2015 10-K

| | [Signatures](#sEE56C4247D7884C4109DB8FFC938C7C3) | [57](#sEE56C4247D7884C4109DB8FFC938C7C3) |

In addition to [removed: two downtown Washington, DC leased facilities (including our headquarters) and our London, England] [added: the Richmond research] facility, [added: we also operate] our research [removed: operations are principally run] [added: functions] out of leased spaces in San Diego, California; Columbia, Maryland; [removed: Atlanta, Georgia;] and Glasgow, Scotland.

These locations include, among others, the following: [added: Atlanta, Georgia; Austin, Texas;] Boston, Massachusetts; Chicago, Illinois; [added: Irvine, California;] Los Angeles, California; [removed: Norcross, Georgia;] and San Francisco, California.

In addition to our downtown Washington, DC leased facility and our London, England facility, we established our research operations headquarters in Richmond, Virginia in the fourth quarter of 2016, in which we occupy 99,075 square feet of office space.

| Year Ended December 31, [removed: 2014] [added: 2016] | | | | | | | |

As of February 1, [removed: 2016,] [added: 2017,] there were [removed: 1,093] [added: 1,280] holders of record of our common stock.

We did not issue any unregistered securities during the [removed: year] [added: years] ended December 31, [removed: 2015.][added: 2015 and 2016.]

The following table is a summary of our repurchases of common stock during each of the three months in the quarter ended December 31, [removed: 2015:][added: 2016:]

| Month, [removed: 2015] [added: 2016] | | Total Number of Shares Purchased | | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |

| October 1 through 31 | | [removed: 44] [added: 399] | | | [removed: $190.87] [added: $216.06] | | — | | — |

(1) The number of shares purchased consists of shares of common stock tendered by employees to the Company to satisfy the employees’ minimum tax withholding obligations arising as a result of vesting of restricted stock grants under the Company’s 2007 Stock Incentive Plan, as amended, which shares were purchased by the Company based on their fair market value on the vesting [removed: date.][added: date or the immediately preceding business day.]

The comparison covers the period beginning December 31, [removed: 2010,] [added: 2011,] and ending on December 31, [removed: 2015,] [added: 2016,] and assumes the reinvestment of any dividends.

[removed: ][added: ]

| Company / Index | | [removed: 12/31/10 | | |] 12/31/11 | | | [added: |] 12/31/12 | | | [added: |] 12/31/13 | | | [added: |] 12/31/14 | | | [added: |] 12/31/15 | | [added: | | 12/31/16 | | |]

| First Quarter | $ | 199.73 | | | $ | 148.90 | |

| Second Quarter | $ | 218.66 | | | $ | 176.85 | |

| Third Quarter | $ | 224.10 | | | $ | 204.82 | |

| Fourth Quarter | $ | 215.75 | | | $ | 180.29 | |

| December 1 through 31 | | 9,600 | | | 183.88 | | — | | — |

| Total | | 9,999 | (1) | | $185.16 | | — | | — |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| CoStar Group, Inc. | | $ | 100.00 | | | $ | 133.93 | | | $ | 276.61 | | | $ | 275.18 | | | $ | 309.74 | | | $ | 282.47 | |

| S&P 500 Index | | 100.00 | | | | 116.00 | | | | 153.57 | | | | 174.60 | | | | 177.01 | | | | 198.18 | | |

| S&P 500 Internet Software & Services Index | | 100.00 | | | | 119.83 | | | | 178.29 | | | | 190.06 | | | | 253.38 | | | | 266.49 | | |

| First Quarter | $ | 214.00 | | | $ | 166.78 | |

| Second Quarter | $ | 188.95 | | | $ | 150.55 | |

| Third Quarter | $ | 160.10 | | | $ | 138.76 | |

| Fourth Quarter | $ | 188.39 | | | $ | 137.60 | |

| December 1 through 31 | | 2,936 | | | 208.31 | | — | | — |

| Total | | 2,980 | (1) | | $208.05 | | — | | — |

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| CoStar Group, Inc. | | 100 | | | 115.93 | | | 155.26 | | | 320.67 | | | 319.02 | | | 359.09 | |

| S&P 500 Index | | 100 | | | 102.11 | | | 118.45 | | | 156.82 | | | 178.29 | | | 180.75 | |

| S&P 500 Internet Software & Services Index | | 100 | | | 105.26 | | | 126.13 | | | 187.67 | | | 200.05 | | | 266.70 | |

The following table provides selected consolidated financial and other operating data for the five years ended December 31, [removed: 2015.][added: 2016.]

The consolidated [removed: statement] [added: statements] of operations data shown below for each of the three years ended December 31, [removed: 2013,] 2014, [added: 2015,] and [removed: 2015] [added: 2016] and the consolidated balance sheet data as of December 31, [removed: 2014 and] 2015 [added: and 2016] are derived from audited consolidated financial statements that are included in this report.

The consolidated [removed: statement] [added: statements] of operations data for each of the years ended December 31, [removed: 2011 and] 2012 and [added: 2013 and] the consolidated balance sheet data as of December 31, [removed: 2011,] 2012, [added: 2013,] and [removed: 2013] [added: 2014] shown below are derived from audited consolidated financial statements for those years that are not included in this report.

| Consolidated [removed: Statement] [added: Statements] of Operations Data: | [removed: 2011 | | | |] 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | [added: | 2016 | | |]

| Revenues | $ | [removed: 251,738] [added: 349,936] | | | $ | [removed: 349,936] [added: 440,943] | | | $ | [removed: 440,943] [added: 575,936] | | | $ | [removed: 575,936] [added: 711,764] | | | $ | [removed: 711,764] [added: 837,630] | |

| Cost of revenues | [removed: 88,167 | | | |] 114,866 | | | | 129,185 | | | | 156,979 | | | | 188,885 | | | [added: | 173,814 | | |]

| Gross margin | [removed: 163,571 | | | |] 235,070 | | | | 311,758 | | | | 418,957 | | | | 522,879 | | | [added: | 663,816 | | |]

| Operating expenses | [removed: 141,800 | | | |] 207,630 | | | | 257,604 | | | | 338,079 | | | | 511,424 | | | [added: | 518,911 | | |]

| Income from operations | [removed: 21,771 | | | |] 27,440 | | | | 54,154 | | | | 80,878 | | | | 11,455 | | | [added: | 144,905 | | |]

| Interest and other income | [removed: 798 | | | |] 526 | | | | 326 | | | | 516 | | | | 537 | | | [added: | 1,773 | | |]

| Interest and other expense | [removed: — | | | |] (4,832 | | ) | | (6,943 | | ) | | (10,481 | | ) | | (9,411 | | ) | [added: | (10,016 | | ) |]

| Income before income taxes | [removed: 22,569 | | | |] 23,134 | | | | 47,537 | | | | 70,913 | | | | 2,581 | | | [added: | 136,662 | | |]

| Income tax expense, net | [removed: 7,913 | | | |] 13,219 | | | | 17,803 | | | | 26,044 | | | | 6,046 | | | [added: | 51,591 | | |]

| Net income (loss) | $ | [removed: 14,656 | | | $ |] 9,915 | | | $ | 29,734 | | | $ | 44,869 | | | $ | (3,465 | ) | [added: | $ | 85,071 | |]

| Net income (loss) per share — basic | $ | [removed: 0.63 | | | $ |] 0.37 | | | $ | 1.07 | | | $ | 1.48 | | | $ | (0.11 | ) | [added: | $ | 2.64 | |]

| Net income (loss) per share — diluted | $ | [removed: 0.62 | | | $ |] 0.37 | | | $ | 1.05 | | | $ | 1.46 | | | $ | (0.11 | ) | [added: | $ | 2.62 | |]

| Weighted average shares outstanding — basic | [removed: 23,131 | | | |] 26,533 | | | | 27,670 | | | | 30,215 | | | | 31,950 | | | [added: | 32,167 | | |]

| Weighted average shares outstanding — diluted | [removed: 23,527 | | | |] 26,949 | | | | 28,212 | | | | 30,641 | | | | 31,950 | | | [added: | 32,436 | | |]

| Consolidated Balance Sheet Data: | [removed: 2011 | | | |] 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | [added: | 2016 | | |]

| Cash, cash [removed: equivalents, short-term] [added: equivalents] and long-term investments | $ | [removed: 573,379] [added: 177,726] | | | $ | [removed: 177,726] [added: 277,943] | | | $ | [removed: 277,943] [added: 544,163] | | | $ | [removed: 544,163] [added: 437,325] | | | $ | [removed: 437,325] [added: 577,175] | |

| Working capital | [removed: 521,401 | | | |] 97,925 | | | | 196,913 | | | | 480,521 | | | | 337,452 | | | [added: | 472,545 | | |]

| Total assets | [removed: 770,117 | | | |] 1,155,583 | | | | 1,250,440 | | | | 2,070,483 | | | | 2,079,571 | | | [added: | 2,185,063 | | |]

| Total long-term liabilities | [removed: 49,158 | | | |] 230,536 | | | | 213,674 | | | | 440,982 | | | | 400,510 | | | [added: | 375,904 | | |]

| Stockholders’ equity | [removed: 659,177 | | | |] 826,343 | | | | 927,862 | | | | 1,513,546 | | | | 1,543,780 | | | [added: | 1,654,213 | | |]

As of December 31, [removed: 2015,] [added: 2016,] we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

In connection with the preparation of the Company's annual financial statements, management of the Company has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2015] [added: 2016] based on criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO Framework”).

Based on this assessment, management [removed: did not identify any material weakness in the Company's internal control, and management] has concluded that the Company's internal control over financial reporting was effective as of December 31, [removed: 2015.][added: 2016.]

On June 1, 2015, we completed the acquisition of Apartment Finder.

As permitted by the Securities and Exchange Commission, we have elected to exclude the accounts receivable and revenue of Apartment Finder from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2015.

All other account balances were integrated into our control environment.

The excluded financial position of Apartment Finder represented approximately 0.1% of our total assets at December 31, 2015, and approximately 5.7% of our total revenue for the year ended December 31, 2015.

We will include the internal controls of Apartment Finder accounts receivable and revenue in our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016.

The remaining information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2016] [added: 2017] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2016] [added: 2017] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2016] [added: 2017] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2016] [added: 2017] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2016] [added: 2017] annual meeting of stockholders.

Years Ended December 31, [removed: 2013,] 2014, [added: 2015,] and [removed: 2015] [added: 2016] (in thousands):

Pursuant to the requirements of Section 13 of the Securities Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, District of Columbia, on the [removed: 25th] [added: 23rd] day of February [removed: 2016.][added: 2017.]

| /s/ Michael R. Klein | | Chairman of the Board | | February [removed: 25, 2016] [added: 23, 2017] |

| /s/ Andrew C. Florance | | Chief Executive Officer and | | February [removed: 25, 2016] [added: 23, 2017] |

| /s/ Scott T. Wheeler | | Chief Financial Officer | | February [removed: 25, 2016] [added: 23, 2017] |

| /s/ Michael J. Glosserman | | Director | | February 23, [removed: 2016] [added: 2017] |

| /s/ Warren H. Haber | | Director | | February [removed: 18, 2016] [added: 23, 2017] |

| /s/ John W. Hill | | Director | | February [removed: 25, 2016] [added: 23, 2017] |

| /s/ Christopher J. Nassetta | | Director | | February 17, [removed: 2016] [added: 2017] |

| /s/ David J. Steinberg | | Director | | February [removed: 17, 2016] [added: 23, 2017] |

| [removed: 2.1] [added: 2.1] | | Agreement and Plan of Merger, dated as of April 27, 2015, by and among CoStar Realty Information, Inc., Orange, LLC, Network Communications, Inc., and Shareholder Representative Services LLC (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 29, 2015). |

| [removed: *10.1] [added: *10.3] | | CoStar Group, Inc. [removed: 1998] [added: 2007] Stock Incentive [removed: Plan, as amended] [added: Plan French Sub-Plan] (Incorporated by reference to Exhibit [removed: 10.1] [added: 10.3] to the Registrant’s Report on Form [removed: 10-Q for the quarter ended September 30, 2005).] [added: 10-K filed February 29, 2008).] |

| [removed: *10.3] [added: *10.20] | | CoStar Group, Inc. [removed: 2007 Stock] [added: 2016 Cash] Incentive Plan [removed: French Sub-Plan] (Incorporated by reference to Exhibit [removed: 10.3] [added: 10.2] to the Registrant’s [added: Quarterly] Report on Form [removed: 10-K for the year ended December 31, 2007).] [added: 10-Q filed July 28, 2016).] |

| [removed: *10.4] [added: *10.13] | | Form of [added: 2007 Plan Incentive] Stock Option [added: Grant] Agreement between the Registrant and certain of its [removed: officers, directors] [added: officers] and employees (Incorporated by reference to Exhibit 10.8 to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2004).] [added: filed February 24, 2009).] |

| [removed: *10.5] [added: *10.14] | | Form of [added: 2007 Plan Incentive] Stock Option [added: Grant] Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit [removed: 10.8.1] [added: 10.9] to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2004).] [added: filed February 24, 2009).] |

| [removed: *10.6] [added: *10.11] | | Form of [added: 2007 Plan] Restricted Stock [added: Grant] Agreement between the Registrant and certain of its officers, directors and employees (Incorporated by reference to Exhibit [removed: 10.9] [added: 99.1] to the Registrant’s Report on Form [removed: 10-K for the year ended December 31, 2004).] [added: 8-K filed June 22, 2007).] |

| [removed: *10.7] [added: *10.12] | | Form of 2007 Plan Restricted Stock [removed: Grant] [added: Unit] Agreement between the Registrant and certain of its [removed: officers, directors] [added: officers] and employees (Incorporated by reference to Exhibit [removed: 99.1] [added: 10.8] to the [removed: Registrant’s] [added: Registrant's] Report on Form [removed: 8-K] [added: 10-K] filed [removed: June 22, 2007).] [added: February 20, 2014).] |

| [removed: *10.8] [added: *10.18] | | Form of 2007 Plan [added: French Sub-Plan] Restricted Stock [removed: Unit] Agreement between the Registrant and certain of its [removed: officers and] employees (Incorporated by reference to Exhibit [removed: 10.8] [added: 10.10] to the [removed: Registrant's] [added: Registrant’s] Report on Form 10-K [removed: for the year ended December 31, 2013).] [added: filed February 29, 2008).] |

| [removed: *10.9] [added: *10.15] | | Form of 2007 Plan [removed: Incentive] [added: Nonqualified] Stock Option Grant Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit [removed: 10.8] [added: 10.10] to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2008).] [added: filed February 24, 2009).] |

| [removed: *10.10] [added: *10.17] | | Form of 2007 Plan [removed: Incentive] [added: Nonqualified] Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit [removed: 10.9] [added: 10.12] to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2008).] [added: filed February 24, 2009).] |

| [removed: *10.11] [added: *10.16] | | Form of 2007 Plan Nonqualified Stock Option Grant Agreement between the Registrant and certain of its [removed: officers and employees] [added: directors] (Incorporated by reference to Exhibit [removed: 10.10] [added: 10.11] to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2008).] [added: filed February 24, 2009).] |

| [removed: *10.12] [added: *10.9] | | Form of [removed: 2007] [added: CoStar Group, Inc. 2016] Plan Nonqualified Stock Option Grant Agreement between the Registrant and certain of its [added: officers,] directors [added: and employees] (Incorporated by reference to Exhibit [removed: 10.11] [added: 10.8] to the Registrant’s [added: Quarterly] Report on Form [removed: 10-K for the year ended December 31, 2008).] [added: 10-Q filed July 28, 2016).] |

| [removed: *10.13] [added: *10.10] | | Form of [removed: 2007] [added: CoStar Group, Inc. 2016] Plan Nonqualified Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit [removed: 10.12] [added: 10.9] to the Registrant’s [added: Quarterly] Report on Form [removed: 10-K for the year ended December 31, 2008).] [added: 10-Q filed July 28, 2016).] |

| [removed: *10.14] [added: *10.5] | | Form of [removed: 2007] [added: CoStar Group, Inc. 2016] Plan [removed: French Sub-Plan] Restricted Stock [added: Grant] Agreement [added: for Service Awards] between the Registrant and certain of its [added: officers and] employees (Incorporated by reference to Exhibit [removed: 10.10] [added: 10.4] to the Registrant’s [added: Quarterly] Report on Form [removed: 10-K for the year ended December 31, 2007).] [added: 10-Q filed July 28, 2016).] |

| [removed: *10.15] [added: *10.19] | | CoStar Group, Inc. 2011 Incentive Bonus Plan (Incorporated by referenced to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed June 8, 2011). |

| [removed: *10.16] [added: *10.21] | | CoStar Group, Inc. Amended and Restated Employee Stock Purchase Plan (Incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8 filed with the Commission on September 14, 2015). |

| [removed: *10.17] [added: *10.22] | | Summary of Non-Employee Director Compensation (Incorporated by reference to Exhibit 10.1 to the Registrant's Report on Form 10-Q [removed: for the quarter ended September 30,] [added: filed on October 24,] 2013). |

| [removed: *10.18] [added: *10.23] | | Employment Agreement for Andrew C. Florance (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1 of the Registrant (Reg. No. 333-47953) filed with the Commission on April 27, 1998). |

| [removed: *10.19] [added: *10.24] | | First Amendment to Andrew C. Florance Employment Agreement, effective January 1, 2009 (Incorporated by reference to Exhibit 10.16 to the Registrant’s Report on Form 10-K [removed: for the year ended December 31, 2008).] [added: filed February 24, 2009).] |

| [removed: 10.20] [added: 10.25] | | Form of Indemnification Agreement between the Registrant and each of its officers and directors (Incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 10-Q [removed: for the quarter ended March 31,] [added: filed on May 7,] 2004). |

| [removed: 10.21] [added: 10.26] | | Deed of Office Lease by and between GLL L-Street 1331, LLC and CoStar Realty Information, Inc., dated February 18, 2011, and made effective as of June 1, 2010 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Report on form 10-Q [removed: for the quarter ended March 31,] [added: filed on April 29,] 2011). |

| [removed: 10.23] [added: 10.27] | | Credit Agreement, dated as of April 1, 2014, by and among CoStar Group, Inc., as Borrower, CoStar Realty Information, Inc., as Co-Borrower, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.1 to CoStar’s Current Report on Form 8-K, filed April 4, 2014). |

| [removed: 10.24] [added: 10.28] | | Amendment No. 1 to the Credit Agreement by and among CoStar Group, Inc., as Borrower, CoStar Realty Information, Inc., as Co-Borrower, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to Exhibit 10.1 to CoStar’s Current Report on Form 8-K, filed June 5, 2015). |

| [removed: 10.25] [added: 10.29] | | Form of Voting Agreement, by and among CoStar Realty Information, Inc. and the funds and accounts managed by Beach Point Capital Management LP (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 29, 2015). |

| 101 | | The following materials from CoStar Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 2015,] [added: 2016,] formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated [removed: Statement] [added: Statements] of Operations for the years ended December 31, [removed: 2013, 2014] [added: 2014, 2015] and [removed: 2015,] [added: 2016,] respectively; (ii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, [removed: 2013, 2014] [added: 2014, 2015] and [removed: 2015,] [added: 2016,] respectively; (iii) Consolidated Balance Sheets at December 31, [removed: 2014] [added: 2015] and December 31, [removed: 2015,] [added: 2016,] respectively; (iv) Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2013, 2014] [added: 2014, 2015] and [removed: 2015,] [added: 2016,] respectively; (v) Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2013, 2014] [added: 2014, 2015] and [removed: 2015,] [added: 2016,] respectively; (vi) Notes to the Consolidated Financial Statements that have been detail tagged; and (vii) Schedule II – Valuation and Qualifying Accounts (submitted electronically with this report). |

| Reports of Independent Registered Public Accounting Firm | [removed: [F-2](#s7D57CD8D726B0CD3DCF6B8FFC9D4AAD9)] [added: [F-2](#s243D75299B3DF02DDBB016C8A5D91527)] |

| Consolidated Statements of Operations for the years ended December 31, [removed: 2013, 2014 and] [added: 2014,] 2015 [added: and 2016] | [removed: [F-4](#s4F7633ACA631AA2A31C4B8FFA8DC6C93)] [added: [F-4](#s10B6A047C2164FC4B20C16C87EF806E5)] |

| Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, [removed: 2013, 2014 and] [added: 2014,] 2015 [added: and 2016] | [removed: [F-5](#s27913BBE09E15FFB4AA2B8FFA90BCBA6)] [added: [F-5](#s20C0833EA63E4805705016C87E1D1F51)] |

| Consolidated Balance Sheets as of December 31, [removed: 2014 and] 2015 [added: and 2016] | [removed: [F-6](#s46A3D9FBAC2B4AFAF345B8FFA8CCECD6)] [added: [F-6](#sB357E6FC547E8C6B171E16C87F85ABBB)] |

| Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2013, 2014 and] [added: 2014,] 2015 [added: and 2016] | [removed: [F-7](#s3B84E9C083E53C816FEBB8FFA87ECA7F)] [added: [F-7](#s8C4D7DB44B061E11829316C87E1D46C8)] |

| Year ended December 31, 2016 | | $ | 7,478 | | | $ | 7,358 | | | $ | — | | | $ | 8,492 | | | $ | 6,344 | |

| /s/ Laura Cox Kaplan | | Director | | February 21, 2017 |

| Laura Cox Kaplan | | | | |

| *10.1 | | CoStar Group, Inc. 2016 Stock Incentive Plan (Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 of the Registrant (Reg. No. 333-212278) filed with the Commission on June 28, 2016). |

| *10.4 | | Form of CoStar Group, Inc. 2016 Plan Restricted Stock Grant Agreement between the Registrant and certain of its officers, directors and employees (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| *10.6 | | Form of CoStar Group, Inc. 2016 Plan Restricted Stock Unit Grant Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| *10.7 | | Form of CoStar Group, Inc. 2016 Plan Incentive Stock Option Grant Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| *10.8 | | Form of CoStar Group, Inc. 2016 Plan Incentive Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K; a copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.

February 23, 2017

February 23, 2017

| Customer base amortization | 28,432 | | | | 27,931 | | | | 22,731 | | |

| Reclassification adjustment for realized gains on investments included in net income | | — | | | | — | | | | (808 | | ) |

| Cash and cash equivalents | $ | 421,818 | | | $ | 567,223 | |

| Accrued expenses | 31,423 | | | | 31,092 | | |

| Income taxes payable | 46 | | | | 3,814 | | |

| Other comprehensive loss | — | | | — | | | | — | | | | (854 | | ) | | — | | | | (854 | | ) |

| Other comprehensive loss | — | | | — | | | | — | | | | (1,210 | | ) | | — | | | | (1,210 | | ) |

| Other comprehensive loss | — | | | — | | | | — | | | | (5,445 | | ) | | — | | | | (5,445 | | ) |

| Balance at December 31, 2016 | 32,606 | | | $ | 326 | | | $ | 1,471,127 | | | $ | (13,039 | ) | | $ | 195,799 | | | $ | 1,654,213 | |

| Net income (loss) | $ | 44,869 | | | $ | (3,465 | ) | | $ | 85,071 | |

| Depreciation and amortization | 70,372 | | | | 78,532 | | | | 70,165 | | |

| Realized gain on investments | — | | | | — | | | | (808 | | ) |

December 31, 2016

Revenue Recognition — (Continued)

The Company analyzes contracts with multiple elements under the accounting guidance for multiple-element arrangements.

The Company's multiple-element arrangements include information, analytics and/or online marketplace services that are generally provided to the customer over the same term.

When identifying multiple-element arrangements, the Company considers multiple purchases made by the same customer within a short time frame and assesses whether the purchases were negotiated together as one overall arrangement.

If a multiple-element arrangement is identified, then the arrangement consideration is allocated among the separate units of accounting based on their relative selling prices, which are estimated considering factors such as historical pricing, pricing strategy, market conditions and other factors.

The Company accounts for each deliverable in the transaction separately.

If the deliverables cannot be separated into multiple units of accounting, then the arrangement consideration is combined and recognition of revenue is determined for the combined unit of accounting.

Multiple-element transactions require judgment to determine the selling price or fair value of the different elements.

These judgments impact the amount of revenue recognized over the term of the contract, as well as the period in which they are recognized.

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.

| | 2015 | | | | 2016 | | |

The amount of realized gain from the redemption of available-for-sale securities reclassified out of accumulated other comprehensive loss to the consolidated statement of operations for the year ended December 31, 2016 was approximately $808,000.

See Note 10 for additional information regarding income taxes.

The carrying value of cash approximates fair value.

Historically, the Company has not experienced any losses due to such cash concentrations.

See Note 8 for further details on the reclassification of the acquired trade names recorded in connection with the LoopNet acquisition from an indefinite-lived intangible asset to a definite-lived intangible asset.

| Year ended December 31, 2013 | | $ | 2,935 | | | $ | 2,317 | | | $ | — | | | $ | 1,855 | | | $ | 3,397 | |

| | |

| --- | --- |

| 10.22 | | Asset Purchase Agreement, dated as of February 28, 2014, by and between Classified Ventures, LLC and CoStar Group, Inc. (Incorporated by reference to Exhibit 10.1 to CoStar’s Current Report on Form 8-K, filed March 3, 2014). |

COSTAR GROUP, INC.

February 25, 2016

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Network Communications, Inc. related to accounts receivable and revenues, which are included in 2015 consolidated financial statements of CoStar Group, Inc. and constituted 0.1% of total assets as of December 31, 2015 and 5.7% of revenues for the year then ended.

Our audit of internal control over financial reporting of CoStar Group, Inc. also did not include an evaluation of the internal control over financial reporting of Network Communications, Inc.

| Purchase amortization | 15,183 | | | | 28,432 | | | | 27,931 | | |

| Accrued expenses | 27,001 | | | | 31,469 | | |

| Deferred income taxes, net | 30,349 | | | | 4,585 | | |

| Balance at December 31, 2012 | 28,348 | | | $ | 283 | | | $ | 792,988 | | | $ | (6,518 | ) | | $ | 39,590 | | | $ | 826,343 | |

| Net decrease in unrealized loss on investments | — | | | — | | | | — | | | | 836 | | | | — | | | | 836 | | |

| Foreign currency translation adjustment | — | | | — | | | | — | | | | (1,466 | | ) | | — | | | | (1,466 | | ) |

| Net decrease in unrealized loss on investments | — | | | — | | | | — | | | | 256 | | | | — | | | | 256 | | |

| Depreciation | 12,495 | | | | 15,111 | | | | 19,967 | | |

| Amortization | 27,563 | | | | 55,261 | | | | 58,565 | | |

| Cash and cash equivalents at beginning of year | 156,027 | | | | 255,953 | | | | 527,012 | | |

Reclassifications

Certain previously reported amounts in the consolidated balance sheets as of December 31, 2014 and Note 12 have been reclassified to conform to the Company's current presentation as a result of the retrospective application of the authoritative guidance to simplify the presentation of debt issuance costs.

Additionally, certain previously reported amounts in Note 10 have been reclassified to conform to the Company's current presentation within the reconciliation of the Company’s provision for income taxes and the amount computed at the statutory federal income tax rate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

| Foreign currency translation adjustment | $ | (5,693 | ) | | $ | (7,159 | ) |

| Accumulated net unrealized loss on investments, net of tax | (691 | | ) | | (435 | | ) |

In 2012, the Company granted performance-based restricted common stock awards that vest upon the Company’s achievement of $90.0 million of cumulative net income before interest, income taxes, depreciation and amortization (“EBITDA”) over a period of four consecutive calendar quarters if such performance is achieved by March 31, 2017, subject to certain approvals under the CoStar Group, Inc. 2007 Stock Incentive Plan.

As of March 31, 2014, the Company had satisfied all performance conditions and the award recipients had satisfied all service conditions, and as a result, the restricted common stock granted under these awards vested.

The Company believes its credit risk is minimal.

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts.

The Company’s operating segments, North America and International, are the reporting units tested for potential impairment.

Assumptions about the discount rate are based on a weighted average cost of capital for comparable companies.

To determine whether it is necessary to perform the quantitative impairment test for indefinite-lived intangible assets, the Company may first assess qualitative factors to evaluate whether it is more likely than not that the fair value of the indefinite-lived intangible assets is less than the carrying amount.

If the Company concludes that it is more likely than not that the fair value of the indefinite-lived intangible assets is less than the carrying amount or if the Company elects not to assess qualitative factors, then the Company performs a quantitative impairment test.

The Company estimates the fair value of its existing indefinite-lived intangible assets using the relief from royalty method that includes significant assumptions and estimates including the Company's discount rate, revenue growth rate and royalty rate.

Assumptions about the revenue growth rate are based on the Company's forecasts, business plans and economic projections.

Assumptions about the royalty rate are based on royalty agreements for comparable companies with similar intangible assets.

Goodwill and Intangible Assets — (Continued)

The acquired trade name recorded in connection with the LoopNet acquisition has an indefinite estimated useful life and is not amortized, but is subject to annual impairment tests.

In August 2015, the FASB issued an accounting standards update that defers by one year the effective date of this new revenue recognition standard.

Early application prior to the original effective date is not permitted.

In April 2015, the FASB issued authoritative guidance to simplify the presentation of debt issuance costs.