CoStar Group (CSGP) 10-K risk factor changes: FY2017 vs FY2016

Forward-looking statements include information that is not purely historic fact and include, without limitation, statements concerning our financial outlook for [removed: 2017] [added: 2018] and beyond, our possible or assumed future results of operations generally, and other statements and information regarding assumptions about our revenues, [added: , revenue growth rates, gross margin percentage, net income, net income per share, fully diluted net income per share,] EBITDA, adjusted EBITDA, non-generally accepted accounting principles (“GAAP”) net income, non-GAAP net income per share, [removed: 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, [added: legal proceedings and claims, legal costs,] effective tax rate, equity compensation charges, future taxable income, pending acquisitions, the anticipated benefits of completed or proposed acquisitions, the anticipated [added: timing of acquisition closings, the anticipated] benefits of cross-selling efforts, product development and release, [added: planned product enhancements,] sales and marketing campaigns, product integrations, elimination and de-emphasizing of services, contract renewal rate, the timing of future payments of principal under our [removed: $400.0] [added: $750] million [removed: term loan] [added: credit] facility available to us under [removed: a] [added: the amended and restated] credit agreement dated [removed: April 1, 2014] [added: October 19, 2017] (the [removed: “2014] [added: “2017] Credit Agreement”), expectations regarding our compliance with financial and restrictive covenants in the [removed: 2014] [added: 2017] Credit Agreement, financing plans, geographic expansion, capital structure, contractual obligations, [removed: 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 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 [removed: the acquisitions of Thomas Daily, Westside Rentals and the assets of Belbex,] [added: ForRent,] 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: the businesses of CoStar, Apartments.com and ForRent may not be combined successfully or in a timely and cost-efficient manner; business disruption relating to the ForRent acquisition may be greater than expected;] our ability to transition [removed: the Westside Rentals] [added: acquired] service [removed: platform] [added: platforms] to our [removed: model;] [added: model in a timely manner or at all; changes and developments in business plans; theft of any personally identifiable information we maintain or process; any actual or perceived failure to comply with privacy or data protection laws, regulations or standards;] 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 [removed: integrate the backend systems of CoStar and LoopNet and subsequently create operating efficiencies and provide improved data to our customers; our ability to] successfully 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 and cross-sell new products or upgraded services in U.S. and foreign markets; our ability to attract consumers to our online marketplaces; [added: our ability to increase traffic on our network of sites;] 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 sectors and geographies; our ability to control costs; [removed: litigation;] [added: our ability to establish our research operations headquarters in Richmond, Virginia as a technology innovation hub; litigation litigation or government investigations in which we become involved;] 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.

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

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

[removed: Although we continue to assess the timing and best strategy to implement this shift and plan to seek] [added: We are working] to convert customers to higher value, more profitable annual subscription information services, which should increase revenues and earnings over time, [added: however] 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 revenues and earnings.

Awareness and differentiation of our brands are important for attracting and expanding the number of users of, and subscribers to, our online marketplaces, such as LoopNet, the Apartments.com network of rental websites, CoStar Showcase, [removed: LandandFarm.com] and [removed: LandsofAmerica.com.][added: the Land.com network of rural lands for sale.]

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

If we are not able to successfully [added: identify,] finance and/or integrate acquisitions, our business operations and financial position 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 products or services; [added: managing the integration of acquired infrastructure and controls;] 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.

Further, certain acquisitions may be subject to regulatory approval, which can be time consuming and costly to [removed: obtain,] [added: obtain or may be denied,] and [added: if obtained,] the terms of such regulatory approvals may impose limitations on our ongoing operations or require us to divest assets or lines of business.

If our data, including the data we obtain from third [removed: parties,] [added: parties] or [added: directly from brokers through the Listing Manager feature on CoStar, or] analysis is not current, accurate, comprehensive or reliable, we could experience reduced demand for our services or legal claims by our customers, which could result in lower revenues and higher expenses.

[removed: Litigation] [added: Third party claims, litigation] or government investigations [added: to which we are subject or] in which we become involved may significantly increase our expenses and adversely affect our stock price.

Currently and from time to time, we are a party to various [removed: lawsuits.][added: third party claims, lawsuits, or government investigations.]

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

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 [added: the] verification of landlords.

[removed: These privacy- and data protection-related laws] [added: Laws] and regulations [added: related to privacy and data protection] are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations.

Compliance with [removed: these] [added: any of the foregoing] laws and regulations can be costly and can delay or impede the development of new products.

[removed: In light of the ECJ’s decision, we] [added: We] have 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.

We continue to review our business practices and the evolving regulations and may find it necessary or desirable to make further changes to our personal data handling or engage in additional efforts to cause our transfer and receipt of EEA residents’ personal data to be legitimized under applicable [removed: European] law.

[removed: We] [added: As a result of the adoption of GDPR, we] may find it necessary to establish systems to maintain EU-origin data in the European Economic Area, [added: or EEA,] which may involve substantial expense and distraction from other aspects of our business.

Despite our efforts, we may be unsuccessful in establishing legitimate means of transferring certain data from the EEA, [removed: including due to ongoing legislative activity,] which may vary the current data protection landscape.

Because the interpretation and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features [removed: of our products.]

Our policies concerning the collection, use and disclosure of personally identifiable [removed: of] information are described on our websites.

Concern of prospective customers regarding our use of the personal information collected on our websites [added: or collected when performing our services] could keep prospective customers from subscribing to our services.

As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: $1] [added: $1.3] billion of goodwill, including $1 billion in our North America operating segment and [removed: $27] [added: $30] million in our International operating segment.

Our international operations and expansion subject us to additional business risks, including: currency exchange rate fluctuations; adapting to the differing business practices and laws in foreign countries; [added: including differing laws regarding privacy and data protection;] difficulties in managing foreign operations; limited protection for intellectual property rights in some countries; difficulty in collecting accounts receivable and longer collection periods; costs of enforcing contractual obligations; impact of recessions in economies outside the U.S.; and potentially adverse tax consequences.

Further, significant foreign exchange fluctuations resulting in a decline in the [removed: respective,] [added: respective] local currency may decrease the value of our foreign assets, as well as decrease our revenues and earnings from our foreign subsidiaries, which would reduce our profitability and adversely affect our financial position.

[removed: 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 [added: U.S.] dollar, our reported international sales and earnings could be reduced because foreign currencies may translate into fewer U.S. dollars.

[removed: The announcement of Brexit and] [added: Resulting asset price volatility that could follow] 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 particular, there may be significant changes in U.S. laws and regulations by the [removed: new] [added: current] U.S. presidential administration that could affect a wide variety of industries and businesses, including our business.

The [removed: new] [added: current] U.S. presidential administration has called for substantial change to fiscal and tax policies, [removed: which may include comprehensive] [added: and recently adopted] tax [removed: reform.][added: reform legislation.]

We cannot predict the impact, if any of [removed: these] [added: potential future additional] changes to our business.

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

On [removed: April 1, 2014,] [added: October 19, 2017,] we entered into [added: an amended and restated credit agreement (the ‘‘2017 Credit Agreement’’), which amended and restated in its entirety] the [added: existing credit agreement dated April 1,] 2014 [added: (the "2014] Credit [removed: Agreement] [added: Agreement"),] by and among CoStar, 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.

The [removed: 2014] [added: 2017] Credit Agreement provides for a [removed: $400 million term loan facility and a $225] [added: $750] million revolving credit [removed: facility, each] [added: facility] with a term of five [removed: years.][added: years from a syndicate of financial institutions as lenders and issuing banks.]

The [removed: 2014] [added: 2017] Credit Agreement contains customary restrictive covenants imposing operating and financial restrictions on us, including restrictions that may limit our ability to engage in acts that we believe may be in our long-term best interests.

These covenants restrict our ability and the ability of our subsidiaries [removed: to] [added: to, among other things,] (i) incur additional indebtedness, (ii) create, incur, assume or permit to exist any liens, (iii) enter into mergers, consolidations or similar transactions, (iv) make investments and acquisitions, (v) make certain dispositions of assets, (vi) make dividends, distributions and prepayments of certain indebtedness, and (vii) enter into certain transactions with affiliates.

The operating restrictions and financial covenants in the [removed: 2014] [added: 2017] Credit Agreement and any future financing agreements may limit our ability to finance future operations or capital needs, to engage in other business activities or to respond to changes in market conditions.

We are required to make periodic principal and interest payments pursuant to the terms of the [removed: 2014] [added: 2017] Credit Agreement.

Therefore, our revenues and earnings may ultimately decline as a result of the LoopNet conversion to a pure marketing site.

External factors, such as compliance with laws and regulations, and shifting market preferences, may also impact the successful integration of an acquired business.

An acquired business could strain our system of internal controls and diminish its effectiveness.

For example, in 2016, the EU formally adopted the General Data Protection Regulation, or GDPR, which will apply in all EU member states effective May 25, 2018 and will replace the current EU Data Protection Directive effective on that date.

The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules.

The GDPR will increase our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new EU data protection rules.

Any failure to comply with the rules arising from the EU Data Protection Directive, the GDPR, and related national laws of EU member states, could lead to government enforcement actions and significant penalties against us, and could adversely affect our business, financial condition, cash flows and results of operations.

of our products.

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.” On March 29, 2017, the United Kingdom provided its official notice to the European Council that it intends to leave the European Union, commencing a period of up to two years for the U.K. and the other E.U. member states to negotiate the terms of the withdrawal.

Uncertainty over the terms of the U.K.’s withdrawal from the E.U. could cause political and economic uncertainty in the U.K. and the rest of Europe, which could harm our business and financial results.

In particular, Brexit could result in significant volatility in global equity markets, currency exchange rates and other asset prices, including those related to real property.

The impact to us from Brexit will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations.

Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K for additional discussion of the impact of tax reform on the business.

In December 2017, the United States enacted The Tax Cuts and Jobs Act (the "Tax Act"), and various provisions of the new law may adversely affect us.

Certain aspects of Tax Reform are unclear and may not be clarified for some time.

As required by Securities and Exchange Commission Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, we have provided a provisional estimate on the effect of the Tax Act in our consolidated financial statements.

However, we may be required to change our provisional estimates as a result of new accounting guidance, regulatory guidance, judicial interpretations or our continued analysis of the application of the law, which could materially affect our tax obligations and effective tax rate.

In addition, if federal, state or foreign tax authorities change applicable tax laws or issue new guidance, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.

auction rate securities because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities.

In addition, CoStar is required to provide the FTC with advance written notification of certain acquisitions for which notification would not otherwise be required under the Hart-Scott-Rodino Premerger Notification Act.

This provision of the consent order requiring CoStar to provide the FTC with advance written notification of certain acquisitions could prevent us from closing certain acquisitions or add significant time and cost to these potential acquisitions, ultimately making an acquisition prohibitive or preventing CoStar from realizing anticipated benefits of an acquisition.

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

The U.S.-EU Safe Harbor Framework, which established means for legitimizing the transfer of personal data by U.S. companies from the European Economic Area, or EEA, to the U.S., recently was invalidated by a decision of the European Court of Justice, or the ECJ.

The number of LoopNet's registered members is higher than the number of actual members.

The number of registered members in LoopNet's network is higher than the number of actual members because some members have multiple registrations or others may have registered under fictitious names.

Given the challenges inherent in identifying these accounts, we do not have a reliable system to accurately identify the number of actual members, and thus we rely on the number of registered members as a measure of the size of the LoopNet marketplace.

If the number of LoopNet's actual members does not continue to grow and those members do not convert to premium members, then the LoopNet marketplace business may not grow as fast as we expect, which could harm our operating and financial 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.

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.

We used the proceeds of the term loan facility and $150 million of the initial borrowing under the revolving credit facility to refinance the term loan facility and revolving credit facility established under a credit agreement dated February 16, 2012 (the “2012 Credit Agreement”), including related fees and expenses, and pay a portion of the consideration and transaction costs related to the Apartments.com acquisition.

It also requires CoStar to license its products to customers who have bought its competitors' products on a non-discriminatory basis.

In addition, CoStar is required to maintain its customary licensing practices with respect to the length of its contracts, to allow customers with multi-year contracts to cancel with one year's advance notice, and to agree to reduce the cost of any litigation with customers by offering to arbitrate certain disputes.

Further, the provisions of the consent order may result in unanticipated adverse effects on the combined company and, therefore, reduce our ability to realize the anticipated benefits of the merger.

For example, the terms of the consent order that require us to continue to sell our products separately may prohibit us from combining or eliminating certain business lines, products or services that we believe would result in a long-term positive impact on our revenues and earnings.

For example, in 2006, we adopted authoritative guidance for stock compensation, which required us to expense the value of granted stock options.

under the headings “Risk Factors - Cautionary Statement Concerning Forward-Looking Statements” and [removed: “-] [added: “] Risk Factors,” as well as those described from time to time in our filings with the Securities and Exchange Commission.

CoStar Group, Inc. (the “Company” or “CoStar”) is the number one provider of information, analytics and online marketplaces to the commercial real estate industry in the United States (“U.S.”) and the 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 leading online marketplaces for commercial real estate and apartment listings in the U.S. based on the 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 [added: and online marketplace] competitors.

We provide market research, consulting and analysis for commercial real estate investors and lenders via our CoStar Portfolio Strategy and CoStar [removed: Market Analytics] [added: Suite] 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.

[removed: Apartments.comTM] [added: Apartments.com] is part of our network of apartment marketing sites, which also includes ApartmentFinder.comTM, [added: ForRent.com®,] ApartmentHomeLiving.comTM, WestsideRentals.com®, [added: AFTER55.com®, CorporateHousing.comTM, ForRentUniversity.com®] and Apartamentos.comTM, our [removed: recently launched] apartment-listing site offered exclusively in Spanish.

Our apartment marketing network of subscription-based services offers renters a searchable database of [removed: apartment] [added: over one million] listings and provides professional property management companies and landlords with an advertising destination.

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

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

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

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

We expect to continue to invest in sales and marketing in [removed: 2017.][added: 2018.]

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

As of December 31, [removed: 2015] [added: 2017] and 2016, our annualized net [removed: new sales] [added: bookings] of subscription-based services on [removed: annual] [added: all] contracts were approximately [removed: $29] [added: $43] million and [removed: $27] [added: $29] million, respectively, calculated based on the annualized amount of change in our sales resulting from [added: all] new [removed: annual] subscription-based contracts or upsales on [added: all] existing [removed: annual] subscription-based contracts, less write downs and cancellations, for the period reported.

For each of the twelve months ended December 31, [removed: 2015] [added: 2017] and 2016, our contract renewal rate for existing CoStar subscription-based services on annual contracts was approximately [added: 91% and] 90%, [added: respectively,] and therefore our cancellation rate for those services was approximately [added: 9% and] 10%, [added: respectively,] for the same time periods.

[removed: Development] [added: Development, Investments] and Expansion

[removed: -] We [removed: are working to further integrate] [added: completed integrating] the backend systems of the LoopNet and CoStar [removed: databases, so that] [added: databases during] the [added: second half of 2017; the] two services [removed: will] [added: now] share a unified database of [removed: information in order to create] [added: information, creating] operating efficiencies and [removed: improve] [added: improving] the data available to our customers.

- We [removed: are also investing] [added: continue to invest] in our research operations to support continued growth of our information and analytics offerings.

We [removed: recently] established our research operations headquarters in Richmond, Virginia, [added: in December 2016,] which is [removed: expected to be] [added: developing into] 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 [removed: plan to expand the] [added: have expanded our] research team to continue [removed: our investment in research operations] to meet the growing content needs of our clients.

In addition, we expect [removed: continued investment] [added: to continue to invest] in our International research operations in Madrid, Spain and the [removed: U.K;][added: U.K.]

As [added: we have done] in the past, we expect to continue to identify new facilities and consolidate existing facilities to better accommodate the changing demands of our business [added: operations] and employees.

We prepare and publicly release quarterly unaudited financial statements prepared in accordance with [removed: GAAP.][added: generally accepted accounting principles ("GAAP").]

The non-GAAP financial measures that we may disclose include net income [removed: (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”).

EBITDA is our net income [removed: (loss)] before interest, [added: loss on debt extinguishment,] income taxes, depreciation and amortization.

Adjusted EBITDA is different from EBITDA because we further adjust EBITDA for stock-based compensation expense, [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs, restructuring costs and settlements and impairments incurred outside our ordinary course of business.

Non-GAAP net income and non-GAAP net income per diluted share are similarly adjusted for stock-based compensation expense, [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs, restructuring costs, settlement and impairment costs [added: and loss on debt extinguishment] incurred outside our ordinary course of business as well as amortization of acquired intangible assets and other related costs.

We view EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share as operating performance measures and as such we believe that the most directly comparable GAAP financial measure is net [removed: income (loss).][added: income.]

Investors and potential investors in our securities should not rely on EBITDA, adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share as a substitute for any GAAP financial measure, including net [removed: income (loss).][added: income.]

We have spent more than [removed: 29] [added: 30] years building our database of commercial real estate information and expanding our markets and services partially through acquisitions of complementary businesses.

Due to the expansion of our information, analytics and online marketplace services, which has included acquisitions, our net income [removed: (loss)] has included significant charges for amortization of acquired intangible assets, depreciation and other amortization, [removed: acquisition- and integration-related costs] [added: acquisition] and [added: integration related costs,] restructuring [removed: costs.][added: costs, and loss on debt extinguishment.]

Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share exclude these charges and provide meaningful information about the operating performance of our business, apart from charges for amortization of acquired intangible assets, depreciation and other amortization, [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs, restructuring [removed: costs and] [added: costs;] settlement and impairment costs incurred outside our ordinary course of business.

We also believe the non-GAAP measures we disclose are measures of our ongoing operating performance because the isolation of non-cash charges, such as amortization and depreciation, and other items, such as interest, income taxes, stock-based compensation expenses, [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs, restructuring [removed: costs] [added: costs; loss on debt extinguishment] and settlement and impairment costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our operating progress.

Set forth below are descriptions of [removed: the] financial items that have been excluded from [removed: our] net income [removed: (loss)] to calculate EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income [removed: (loss):][added: :]

Set forth below are descriptions of additional financial items that have been excluded from EBITDA to calculate adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net [removed: income (loss):][added: income:]

[removed: | • | Stock-based compensation expense may be useful for investors to consider because it represents a portion of the compensation of our employees and executives. Determining the fair value of the stock-based instruments involves a] high degree of judgment and estimation and the expenses recorded may bear little resemblance to the actual value realized upon the future exercise or termination of the related stock-based awards. [removed: Therefore, we believe it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business. |]

| • | The amount of [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs incurred may be useful for investors to consider because they generally represent professional service fees and direct expenses related to acquisitions. Because we do not acquire businesses on a predictable cycle we do not consider the amount of [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs to be a representative component of the day-to-day operating performance of our business. |

| • | The amount of [removed: material] settlement and impairment costs incurred outside of our ordinary course of business may be useful for investors to consider because they generally represent gains or losses from the settlement of litigation matters or impairments on acquired intangible assets. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |

The financial items that have been excluded from our net income [removed: (loss)] to calculate non-GAAP net income and non-GAAP net income per diluted share are amortization of acquired intangible assets and other related costs, stock-based compensation, [removed: acquisition-] [added: acquisition] and [removed: integration-related] [added: integration related] costs, restructuring [removed: costs] and [added: related costs,] settlement and impairment [removed: costs] [added: costs, and loss on debt extinguishment] incurred outside our ordinary course of business.

In [removed: 2014, 2015 and] [added: 2017,] 2016, [added: and 2015,] we assumed a 38% tax [removed: rate in order to approximate] [added: rate, which approximates] our [added: historical] long-term [removed: effective] [added: statutory] corporate tax [removed: rate.][added: rate, excluding the impact of discrete items.]

Non-GAAP net income per diluted share is a non-GAAP financial measure that represents non-GAAP net income divided by the number of diluted shares outstanding for the period used in the calculation of GAAP net income [removed: (loss)] per diluted share.

The following table shows our net income [removed: (loss)] reconciled to our EBITDA and our net cash flows from operating, investing and financing activities for the indicated periods (in thousands):

Our apartment marketing network draws on and leverages CoStar’s multifamily database, which contains detailed information on apartment properties.

We designed the Apartments.com, ApartmentFinder.com and Apartamentos.com websites to meet renter preferences and demands, creating qualified renter prospects for our advertisers.

We acquired the ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com sites when we completed the acquisition of ForRent, a division of Dominion Enterprises, on February 21, 2018.

Our network of apartment marketing sites provide 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 sites also offer innovative search tools such as the PolygonTM Search tool, which allows renters to specifically define the area in which they want to find an apartment.

The Screening ProsTM is an

online apartment leasing platform that includes tenant screening services, rental applications and payments processing and lease renewals.

On February 21 2018, we completed the acquisition of ForRent, a division of Dominion Enterprises, for a purchase price of approximately $385 million, payable approximately $350 million in cash and approximately $35 million in shares of CoStar Group common stock, subject to a customary working capital adjustment and other post-closing adjustments.

Approximately $11 million of the cash consideration was placed in escrow to be used for potential employee stay bonuses.

Now that we have completed the ForRent acquisition, we plan to develop and cross-sell the services offered by ForRent.

We 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.

Our net bookings is a quantitative measurement that is typically closely correlated with our subscription revenue results.

Net bookings is considered a key indicator of future subscription revenue growth and is also used as a metric of salesforce productivity by management and investors.

To generate brand awareness and site traffic for our listing sites, we utilize a variety of marketing campaigns, including television and radio advertising, online/digital advertising, social media and out-of-home ads, and Search Engine Marketing.

Our key priorities for 2018 and recent developments include:

- We are migrating all of our commercial real estate information capabilities to our flagship CoStar Suite product and winding down the legacy LoopNet Information products.

This process began in the fall of 2017 with the integration of the CoStar and Loopnet databases.

In addition, we are transitioning the LoopNet marketplace to a pure pay-to-list marketing site for commercial real estate.

We also introduced new enhancements on the CoStar homepage, including a Listing Manager feature that we believe will increase the quantity and quality of the listing information available by enabling brokers and other industry participants to load information directly into the integrated system.

This in turn is expected to reduce the time and costs associated with researching and maintaining our comprehensive database of commercial real estate information.

- On February 21, 2018, we completed the acquisition of ForRent, a division of Dominion Enterprises, ForRent’s primary service is digital advertising through a network of four multifamily websites - which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com.

We plan to integrate, develop and cross-sell the services offered by ForRent.

ForRent.com is expected to remain a distinct, complementary brand to Apartments.com, giving property managers and owners more exposure for their listings.

- We plan to continue developing new, and improve existing, product and service offerings to the apartments industry.

In particular, we expect to implement the ability for renters to apply for leases online, for landlords to run tenant credit and background checks and, eventually, for landlords and tenants to generate leases and process payments online.

In support of our continued expansion and development, in October 2017, we completed a public equity offering of 3,317,308 shares of common stock for $260.00 per share.

Net proceeds from the public equity offering were approximately $834 million, after deducting approximately $29 million of underwriting discounts and fees.

We expect to use the net proceeds from the public equity offering to fund all or a portion of the costs of any strategic acquisitions we determine to pursue in the future, to finance the growth of our business and for working capital and other general corporate purposes.

General corporate purposes may include additions to working capital, capital expenditures, repayment of debt, investments in the Company’s subsidiaries, possible acquisitions and the repurchase, redemption or retirement of securities, including the Company’s common stock.

On October 19, 2017, the Company entered into an amended and restated credit agreement (the ‘‘2017 Credit Agreement’’), which amended and restated in its entirety the existing 2014 Credit Agreement.

The 2017 Credit Agreement provides for a $750

million revolving credit facility with a term of five years from a syndicate of financial institutions as lenders and issuing banks.

The Company also paid off the remaining balance of $310 million and interest on its existing $400 million term loan under the 2014 Credit Agreement on October 19, 2017 from existing cash balances.

The Company had no outstanding long-term debt at December 31, 2017 as it had not drawn any amounts under its 2017 Credit Agreement.

The restructured credit facility, along with the proceeds from the October equity offering and cash generated by the Company’s business are expected to support the Company’s continued growth and give the Company flexibility to act on strategic acquisition opportunities that may arise.

| • | The amount of loss on our debt extinguishment may be useful for investors to consider and may result in current cash outflows. However, we do not consider the amount of the loss on debt extinguishment to be a representative component of the day-to-day operating performance of our business. |

| • | Stock-based compensation expense may be useful for investors to consider because it represents a portion of the compensation of our employees and executives. Determining the fair value of the stock-based instruments involves a |

Therefore, we believe it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business.

| • | The amount of loss on our debt extinguishment may be useful for investors to consider because they generally represent gains or losses from the early extinguishment of debt. However, we do not consider the amount of the loss on debt extinguishment to be a representative component of the day-to-day operating performance of our business. |

| Loss on debt extinguishment | 3,788 | | | | — | | | | — | | |

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.

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 also hope to increase the quantity and quality of the listing information available by enabling select brokers and other industry participants to load information directly into the integrated system, simultaneously reducing the time and costs associated with researching and maintaining our comprehensive database of commercial real estate information.

We continue to assess the 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 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 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.

| Operating activities | $ | 143,909 | | | $ | 131,245 | | | $ | 195,944 | |

| Financing activities | $ | 733,513 | | | $ | (20,504 | ) | | $ | (25,865 | ) |

The 2017 revenue growth rates from our CoStar Suite and commercial property and land services are expected to be consistent with historical rates.

The revenue growth rate from information services is expected to decline in 2017 resulting from the elimination or phase out of the LoopNet information services as we begin to convert LoopNet information customers to higher value, more profitable annual subscription information services.

Multifamily revenue is expected to continue to increase in 2017, although at lower growth rates than in 2016 given the timing impact of the Apartment Finder acquisition.

Gross Margin.

The gross margin percentage is expected to decrease slightly in 2017 as a result of our continued investment in research operations.

We expect to continue to incur legal costs related to a legal matter which began in 2016 that is expected to continue throughout 2017.

This increase in International EBITDA was primarily due to an increase in revenues.

International EBITDA is expected to decrease in 2017 primarily due to investments in our International research operations in Madrid, Spain and the U.K. North America EBITDA includes an allocation of approximately $396,000 and $1 million for the years ended 2016 and 2015, respectively.

This allocation represents costs incurred for International employees involved in development activities of our North America operating segment.

International EBITDA includes a corporate allocation of approximately $321,000 and $256,000 for the years ended December 31, 2016 and 2015, respectively.

This corporate allocation represents costs incurred for North America employees involved in management and expansion activities of our International operating segment.

See the “Non-GAAP Financial Measures” section included in this Annual Report on Form 10-K for further details on the non-GAAP financial measures.

| | 2015 | | | | 2014 | | | | Increase (Decrease) ($) | | | | Increase (Decrease) (%) | |

| CoStar Suite | $ | 360,440 | | | $ | 322,696 | | | $ | 37,744 | | | 12 | % |

| Information services | 75,790 | | | | 72,525 | | | | 3,265 | | | | 5 | |

| Multifamily | 160,630 | | | | 76,785 | | | | 83,845 | | | | 109 | |

| Commercial property and land | 114,904 | | | | 103,930 | | | | 10,974 | | | | 11 | |

| Total revenues | 711,764 | | | | 575,936 | | | | 135,828 | | | | 24 | |

| Cost of revenues | 188,885 | | | | 156,979 | | | | 31,906 | | | | 20 | |

| Gross margin | 522,879 | | | | 418,957 | | | | 103,922 | | | | 25 | |

| Selling and marketing | 302,226 | | | | 150,305 | | | | 151,921 | | | | 101 | |

| Software development | 65,760 | | | | 55,426 | | | | 10,334 | | | | 19 | |

| General and administrative | 115,507 | | | | 103,916 | | | | 11,591 | | | | 11 | |

| Customer base amortization | 27,931 | | | | 28,432 | | | | (501 | | ) | | (2 | ) |

| Total operating expenses | 511,424 | | | | 338,079 | | | | 173,345 | | | | 51 | |

| Income tax expense, net | 6,046 | | | | 26,044 | | | | (19,998 | | ) | | (77 | ) |

For the year ended December 31, [removed: 2016,] [added: 2017,] revenues denominated in foreign currencies was approximately [removed: 4%] [added: 3%] of total revenue.

For the year ended December 31, [removed: 2016,] [added: 2017,] our revenues would have decreased by approximately $3 million if the U.S. dollar exchange rate used strengthened by 10%.

For the year ended December 31, [removed: 2016,] [added: 2017,] our revenues would have increased by approximately $3 million if the U.S. dollar exchange rate used weakened by 10%.

We may seek to enter [added: into] hedging transactions in the future to reduce our exposure to exchange rate fluctuations, but we may be unable to enter into hedging transactions successfully, on acceptable terms or at all.

As of December 31, [removed: 2016,] [added: 2017,] accumulated other comprehensive loss included a loss from foreign currency translation adjustments of approximately [removed: $12] [added: $8] 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: 2016.][added: 2017.]

Included within our [added: short-term and] long-term investments are investments in mostly AAA-rated student loan ARS.

As of December 31, [removed: 2016,] [added: 2017,] $11 million of our investments in ARS failed to settle at auction.

Based on an assessment of fair value of these investments in ARS as of December 31, [removed: 2016,] [added: 2017,] we determined that there was a decline in the fair value of our ARS investments of approximately [removed: $848,000,] [added: $730,000,] which was deemed to be a temporary impairment and recorded as an unrealized loss in accumulated other comprehensive loss in stockholders’ equity.

See Notes [removed: 4] [added: 3] and [removed: 5] [added: 4] to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion.

We had approximately [removed: $1] [added: $1.5] billion in intangible assets as of December 31, [removed: 2016.][added: 2017.]

As of December 31, [removed: 2016,] [added: 2017,] 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.

As of December 31, 2017, we had $1 billion of cash and cash equivalents and short-term investments.

In addition, we have assets and liabilities denominated in foreign currencies.

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

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

As of December 31, 2016, we had $567 million of cash and cash equivalents.

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

If there is an increase or decrease in interest rates, there will be a corresponding increase or decrease in the amount of interest expense on our long-term debt.

Based on our outstanding borrowings as of December 31, 2016, an increase in the interest rate by 25 basis points would result in an increase of approximately $900,000 in interest expense 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.

Based on our ability to access our cash and cash equivalents, and our expected operating cash flows, we do not believe that increases or decreases in interest rates will impact our ability to operate our business in the foreseeable future.

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 leading online marketplaces for commercial real estate and apartment listings in the U.S. based on the 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 [added: and online marketplace] competitors.

Information about CoStar’s revenues from, and long-lived assets and total assets located in, foreign countries is included in Notes 2 and [removed: 12] [added: 11] of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Revenues; net income (loss) before interest and other income (expense), income taxes, depreciation and amortization (“EBITDA”); and total assets and liabilities for each of our segments are set forth in Note [removed: 12] [added: 11] to our consolidated financial statements.

Apartments.comTM is part of our network of apartment marketing sites, which also includes ApartmentFinder.comTM, [added: ForRent.com®,] ApartmentHomeLiving.comTM, WestsideRentals.com®, [added: AFTER55.com®, CorporateHousing.comTM, ForRentUniversity.com®] and Apartamentos.comTM, our [removed: recently launched] apartment-listing site offered exclusively in Spanish.

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

[removed: The] [added: Our network of apartment marketing] sites provide 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.

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

We provide market research, consulting and analysis for commercial real estate investors and lenders via our CoStar Portfolio Strategy and CoStar [removed: Market Analytics] [added: Suite] 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 [removed: marketplaces;] [added: marketplace services;] a large team of analysts and economists; and a large, diverse base of clients.

Our database has been developed and enhanced for more than [removed: 29] [added: 30] years by a research department that makes thousands of daily database updates.

In addition to our internal efforts to grow the database, we have obtained and assimilated approximately [removed: 100] [added: 106] proprietary databases.

[removed: On] [added: Our more recent acquisitions include the] June 1, [removed: 2015, to further support our expansion into the multifamily vertical, we acquired] [added: 2015 acquisition of] Network Communications, Inc. (“NCI”), including its Apartment Finder business (collectively referred to as “Apartment [removed: Finder”).][added: Finder”), to further support our expansion into the multifamily vertical.]

[removed: Most recently, on] [added: 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 [removed: addition,] [added: 2017,] we [removed: recently] launched Apartamentos.com, an apartment-listing site offered exclusively in Spanish [added: and] 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.

We expect technology enhancements to drive continued revenue growth in [removed: 2017 and the foreseeable future.][added: 2018.]

[removed: In 2016, we began working to further integrate] [added: We completed integrating] the backend systems of the LoopNet and CoStar [removed: databases, so that] [added: databases during] the [added: second half of 2017; the] two services [removed: will] [added: now] share a unified database of [removed: information in order to create] [added: information, creating] operating efficiencies and [removed: improve] [added: improving] the data available to our customers.

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

[removed: When we implement this shift, we will seek to convert] [added: We are currently focused on converting] LoopNet information customers to higher value, more profitable annual subscription information services, which should increase revenues and earnings over time.

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

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

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

[removed: We recently established our] [added: In connection with the opening of the Richmond] research [removed: operations headquarters in Richmond, Virginia, and plan to expand] [added: headquarters, we expanded] our research team [removed: and] [added: to] continue [removed: investing in research operations] to meet the growing content needs of our clients.

[added: In addition, we expect to continue to invest in our International research operations in Madrid, Spain and the U.K.] While we believe investments we make in our business create a platform for growth, those investments may reduce our profitability and adversely affect our financial position.

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

By combining our extensive database, researchers [removed: and outside contractors,] [added: ,] our experienced team of analysts and economists, technological expertise and broad customer base, we believe that we have created such a platform.

CoStar has spent more than [removed: 29] [added: 30] years building and acquiring a database of commercial real estate information, which includes information on leasing, sales, comparable sales, tenants, and demand statistics, as well as digital images.

In [removed: 2016,] [added: 2017,] our full time researchers and contractors conducted millions of interviews of brokers, owners, tenants, apartment community owners and property managers.

We [removed: expect the Richmond] [added: established our] research [added: operations] headquarters [removed: will be] [added: in Richmond, Virginia, which is developing into] a technology innovation hub, powering the software development necessary to support the content within our information, analytics and marketing services.

CoStar has an extensive field research effort that includes physical inspection of properties in order to research new [removed: markets,] [added: availabilities,] find additional property inventory, photograph [removed: properties] [added: properties, collect tenant information,] and verify existing information.

In [removed: 2016,] [added: 2017,] our field researchers drove millions of miles and conducted hundreds of thousands of on-site building inspections.

CoStar's field research effort also includes creating high quality videos of interior spaces (including walk-through videos and 3D virtual [removed: apartment tours of apartment communities),] [added: tours),] amenities and exterior features of properties.

A significant majority of these vehicles are customized, energy efficient hybrid cars that are equipped with computers, [removed: proprietary] Global Positioning System tracking software, high resolution digital cameras and handheld laser instruments to help precisely measure buildings, geo-code them and position them on digital maps.

[removed: Certain] [added: Field] researchers [added: also] canvass properties, collecting tenant data suite by suite.

We also utilize a low-flying airplane [added: and a fleet of drones] to conduct aerial research of commercial real estate.

| • | providing training and retraining to our research professionals to ensure accurate [added: and standardized] data compilation; and |

Over time, we [added: have enhanced and] expect to continue to enhance our existing information, analytics and online marketplaces and [added: we have developed and expect to continue to] develop additional services that make use of our comprehensive database to meet the needs of our existing customers as well as potential new categories of customers.

Our principal information, analytics and online marketplace services as of January 31, [removed: 2017,] [added: 2018,] are described in the following paragraphs:

[removed: It is the industry’s most] comprehensive database of comparable sales transactions and is designed for professionals who need to research property comparables, identify market trends, expedite the appraisal process and support property valuations.

CoStar Go® CoStar Go is an iPad [added: and Android] application that integrates and provides subscribers of CoStar Suite mobile access to our comprehensive property, comparable sales and tenant information in our suite of online service offerings – consisting of CoStar Property Professional, CoStar COMPS Professional and CoStar Tenant.

[removed: -] LoopNet Premium Lister® LoopNet Premium Lister is designed for commercial real estate professionals and other customers who seek the broadest possible exposure for their listings, access to leads lists, and advanced marketing and searching tools.

We acquired the ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com sites when we completed the acquisition of ForRent, a division of Dominion Enterprises, on February 21, 2018.

The Screening ProsTM is our online apartment leasing platform that includes tenant screening services, rental applications and payments processing and lease renewals.

On May 10, 2017, we added LandWatch.com to our network of land-dedicated sites through our acquisition of LandWatch.

On July 18, 2017, we acquired The Screening Pros, LLC, an online apartment leasing platform that includes tenant screening services, rental applications and payments processing and lease renewals.

Most recently, on February 21, 2018, we completed the acquisition of ForRent, a division of Dominion Enterprises, ForRent’s primary service is digital advertising through a network of four multifamily websites - which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com.

We plan to integrate, develop and cross-sell the services offered by ForRent.

ForRent.com is expected to remain a distinct, complementary brand to Apartments.com, giving property managers and owners more exposure for their listings.

In 2017, we began to transition the LoopNet marketplace to a pure pay-to-list/free-to-search marketing site for commercial real estate, and to convert LoopNet information customers to higher value CoStar Suite information services.

We also introduced new enhancements on the CoStar homepage, including a Listing Manager feature that we believe will increase the quantity and quality of the listing information available by enabling brokers and other industry participants to load information directly into the integrated system.

In turn, we expect this feature will reduce the time and costs associated with researching and maintaining our comprehensive database of commercial real estate information.

However, we cannot predict with certainty the amount or timing of any reductions in revenues and earnings

In 2014, we began our Canadian research operations in Toronto; in 2015 we expanded into Calgary and Vancouver.

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

Our drone operators are FAA certified and trained to capture aerial photographs and videos of commercial real estate.

To supplement the measures we take to prevent misuse of our information, we recently added state of the art adaptive authentication technology to the login process of our CoStar Suite product.

CoStar Suite® is our platform of service offerings consisting of CoStar Property Professional®, CoStar COMPS Professional® and CoStar Tenant® and is accessible via the Internet or through our mobile application, CoStar Go®.

It is the industry’s most

LoopNet Power Listings LoopNet Power Listings is designed for commercial real estate professionals and other customers who seek the broadest possible exposure for their listings, access to leads lists, and advanced marketing and searching tools.

LoopNet Power Listings provides subscribers with full access to the industry’s top three commercial real estate marketplaces: LoopNet, Cityfeet and Showcase, as well as 200+ online newspaper websites including the Wall Street Journal.

LoopNet Power Listings is available for a quarterly or annual subscription.

ForRent.com® ForRent.com, part of our network of apartment marketing sites, provides digital advertising through a network of four multifamily websites - which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com

The Screening ProsTM The Screening Pros, part of our network of apartment marketing sites, provides an online apartment leasing platform that includes tenant screening services, rental applications and payments processing and lease renewals.

In addition, the sales

In January 2018, we launched a two-week, 30-city road show to showcase CoStar's technologies to customers and prospective users.

The presentations focused on how technological change is impacting the commercial real estate industry, including presentations on tools such as 3D cameras, infrared drones and augmented reality.

In 2017, we integrated the CoStar and LoopNet databases in order to enhance CoStar information services as information tools and LoopNet marketplace services as marketing tools.

This integration provides clients the ability to enter listings into a new Listing Manager, and to subsequently update their listings in CoStar and LoopNet simultaneously.

To generate awareness of the integration, we provided video tutorials and hosted numerous webinars, in addition to web-based marketing and direct marketing efforts.

In 2017, we expanded the Apartments.com network with the launch of Apartamentos.com and acquisition of WestsideRentals.com.

In February 2018, we further expanded the Apartments.com network with the acquisition of ForRent.com.

News has always been a valuable part of CoStar's core subscription offering.

CoStar's news teams report on the latest deals and developments across our markets, keeping subscribers informed and driving higher usage in our core product.

In 2018, we plan to add more options for subscribers to customize the specific topics and types of news they are most interested in.

To enhance this aspect of our subscription offering, we redesigned our homepage during the fourth quarter of 2017 to present an engaging and continuously updated interface.

This year, we are adding news talent, upgrading technology, and making our service more relevant for subscribers, by delivering specific news based on their individual preferences.

We believe the ability to customize and personalize news for the user's specific interests should make our news service even more relevant and valuable to subscribers.

In addition to encouraging more engagement through logins and time on site, we believe a more robust news operation will also provide more options and formats for advertising to the commercial real estate audience.

movements.

Now that we have completed the ForRent acquisition, we plan to develop and cross-sell the services offered by ForRent.

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.

We are the exclusive third party provider of listings in apartment communities with 50 units or more to 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.

This arrangement enables us to promote the apartment communities of our advertisers across 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.

Our more recent acquisitions include the April 1, 2014 purchase of certain assets and 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 owners, from Classified Ventures, LLC (“CV”).

We also hope to increase the quantity and quality of the listing information available by enabling select brokers and other industry participants to load information directly into the integrated system, simultaneously reducing the time and costs associated with researching and maintaining our comprehensive database of commercial real estate information.

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.

In the second quarter of 2015, we began offering services in Calgary and Vancouver.

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

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.

LoopNet® Basic and Premium Membership We offer two types of memberships on the LoopNet marketplace, basic and premium.

Basic membership is available free-of-charge to anyone who registers at our LoopNet website and enables members to experience some of the benefits of the LoopNet offering, with limited functionality.

As of January 31, 2017, LoopNet had approximately 10.8 million registered members, of which 82,000 were premium members.

In 2015, we launched the current Apartments.com and ApartmentFinder.com websites, each of which has a cleaner look, information about actual rental availabilities, rents and other fees, and better search functionality.

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.

For the fiscal year ended December 31, [removed: 2016][added: 2017]

[removed: ][added: ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and "emerging growth company"] in Rule 12b-2 of the Securities Exchange Act of 1934.

Based on the closing price of the common stock on June 30, [removed: 2016] [added: 2017] 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: 2016] [added: 2017] was approximately [removed: $7] [added: $8] billion.

As of February [removed: 17, 2017,] [added: 16, 2018,] there were [removed: 32,599,696] [added: 36,094,701] 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: 2016,] [added: 2017,] are incorporated by reference into Part III of this Report.

| Item 1. | [removed: [Business](#s96B6221D7EB5150251FF16C89EABCA13)] [added: [Business](#s4679A082B626CAF84E75DA91EDF98844)] | [removed: [4](#s96B6221D7EB5150251FF16C89EABCA13)] [added: [4](#s4679A082B626CAF84E75DA91EDF98844)] |

| Item 1A. | [Risk [removed: Factors](#s4E03E5E86E317B1485D316C89EDDE98F)] [added: Factors](#sEFF0F040A2376EAE9180DA91EE0A21FB)] | [removed: [17](#s4E03E5E86E317B1485D316C89EDDE98F)] [added: [21](#sEFF0F040A2376EAE9180DA91EE0A21FB)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s9FB2A7C928B10BCBB23E16C89EFF0AFD)] [added: Comments](#s7441FE53A2628CB0A69ADA91EE3A4D9C)] | [removed: [30](#s9FB2A7C928B10BCBB23E16C89EFF0AFD)] [added: [37](#s7441FE53A2628CB0A69ADA91EE3A4D9C)] |

| Item 2. | [removed: [Properties](#s2D5DAC6946C39A3A8BB816C89F5735E9)] [added: [Properties](#s08297852908F5F05440CDA91EE5D5EC1)] | [removed: [30](#s2D5DAC6946C39A3A8BB816C89F5735E9)] [added: [37](#s08297852908F5F05440CDA91EE5D5EC1)] |

| Item 3. | [Legal [removed: Proceedings](#sFB66F3E35C4EE5B8A9FE16C89F5A226D)] [added: Proceedings](#s3549F6521E3CD7563423DA91EE8D9260)] | [removed: [30](#sFB66F3E35C4EE5B8A9FE16C89F5A226D)] [added: [37](#s3549F6521E3CD7563423DA91EE8D9260)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sCCBB03D2B791E676D3E116C89F8521B2)] [added: Disclosures](#s7B8D9EA78F90BE419F5DDA91EEAFDAE5)] | [removed: [30](#sCCBB03D2B791E676D3E116C89F8521B2)] [added: [37](#s7B8D9EA78F90BE419F5DDA91EEAFDAE5)] |

| Item 5. | [Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s64F4386B38AA60CC4EF216C8873E6C60)] [added: Securities](#s95D4E781C5A372BC7F0CDA91CD123043)] | [removed: [31](#s64F4386B38AA60CC4EF216C8873E6C60)] [added: [38](#s95D4E781C5A372BC7F0CDA91CD123043)] |

| Item 6. | [Selected Consolidated Financial and Operating [removed: Data](#s732EEC7E39CAEC974EEC16C885D0B417)] [added: Data](#s9ED0F2180969FB83C3E3DA91C9F4FAE8)] | [removed: [33](#s732EEC7E39CAEC974EEC16C885D0B417)] [added: [40](#s9ED0F2180969FB83C3E3DA91C9F4FAE8)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sA71AB63D6852B317698A16C8A02B59FE)] [added: Operations](#s50410BB55A77810A2BD8DA91EF56791B)] | [removed: [34](#sA71AB63D6852B317698A16C8A02B59FE)] [added: [41](#s50410BB55A77810A2BD8DA91EF56791B)] |

| Item 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s3E937C25AE60E5F39C1E16C87FC3EE6B)] [added: Risk](#sA573A159607743DE2D2EDA91BF92C4F7)] | [removed: [51](#s3E937C25AE60E5F39C1E16C87FC3EE6B)] [added: [63](#sA573A159607743DE2D2EDA91BF92C4F7)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s71F70495F798FA633D0516C8A34347FB)] [added: Data](#s4FA4C120511DE06F6CCEDA91F2767460)] | [removed: [52](#s71F70495F798FA633D0516C8A34347FB)] [added: [64](#s4FA4C120511DE06F6CCEDA91F2767460)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s54ECBA622A0CE8AD092F16C8A36DD03F)] [added: Disclosure](#sF231F318012242782211DA91F29742A8)] | [removed: [52](#s54ECBA622A0CE8AD092F16C8A36DD03F)] [added: [64](#sF231F318012242782211DA91F29742A8)] |

| Item 9A. | [Controls and [removed: Procedures](#sD21623A27E5B52D6F84216C8A38D22EC)] [added: Procedures](#s1D814694329498580FD7DA91F2C82CA3)] | [removed: [52](#sD21623A27E5B52D6F84216C8A38D22EC)] [added: [64](#s1D814694329498580FD7DA91F2C82CA3)] |

| Item 9B. | [Other [removed: Information](#s45789669C09496EB29C916C8A3C1BA9A)] [added: Information](#s0F61F668D81D982A1937DA91F2EAFC8A)] | [removed: [53](#s45789669C09496EB29C916C8A3C1BA9A)] [added: [66](#s0F61F668D81D982A1937DA91F2EAFC8A)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s5FE62CA484CD45DE612216C8A4338275)] [added: Governance](#s1145326798690ED7EBBDDA91F33EDFBA)] | [removed: [53](#s5FE62CA484CD45DE612216C8A4338275)] [added: [66](#s1145326798690ED7EBBDDA91F33EDFBA)] |

| Item 11. | [Executive [removed: Compensation](#s39A5C13D5B41448E83D616C8A436556D)] [added: Compensation](#s5097DB9B2ADA41D812BFDA91F370DE8C)] | [removed: [53](#s39A5C13D5B41448E83D616C8A436556D)] [added: [66](#s5097DB9B2ADA41D812BFDA91F370DE8C)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s3389847528B0BBE4AE1316C8A467F700)] [added: Matters](#s48AB60E8A77C37E84D0CDA91F3909EA4)] | [removed: [53](#s3389847528B0BBE4AE1316C8A467F700)] [added: [66](#s48AB60E8A77C37E84D0CDA91F3909EA4)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s739003311CFDFA7BB88316C8A487D3E6)] [added: Independence](#sF8D3AC352F34246298E5DA91F3C3773F)] | [removed: [53](#s739003311CFDFA7BB88316C8A487D3E6)] [added: [66](#sF8D3AC352F34246298E5DA91F3C3773F)] |

| Item 14. | [Principal Accountant Fees and [removed: Services](#s484DFBD7A3CD33F7060316C8A4DA08E6)] [added: Services](#sA358757E5D300BDCD596DA91F3E57EE7)] | [removed: [53](#s484DFBD7A3CD33F7060316C8A4DA08E6)] [added: [66](#sA358757E5D300BDCD596DA91F3E57EE7)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#sA973291A47DFB01D5E4B16C87E0D2AC1)] [added: Schedules](#s3D3C520759DB589FED4CDA91BF932388)] | [removed: [54](#sA973291A47DFB01D5E4B16C87E0D2AC1)] [added: [67](#s3D3C520759DB589FED4CDA91BF932388)] |

| | [Index to Consolidated Financial [removed: Statements](#s434B4A8C5C1BCF8B963E16C8A58139EB)] [added: Statements](#s2DF8EA744F4A084B15DFDA91F4BC75BC)] | [removed: [F-1](#s434B4A8C5C1BCF8B963E16C8A58139EB)] [added: [F-1](#s2DF8EA744F4A084B15DFDA91F4BC75BC)] |

10-K 1 csgp20171231-10k.htm 2017 10-K

| | Emerging growth company ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| | [Signatures](#sA14B7A09E689AA26A0E5DA91F469D377) | [70](#sA14B7A09E689AA26A0E5DA91F469D377) |

| Item 16. | [Form 10-K Summary](#saa518851f0f64b3eb7f5265019845bdb) | [70](#saa518851f0f64b3eb7f5265019845bdb) |

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

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

| | [Index to Exhibits](#sC17F36B441BFEAB4191A16C8A55FC16B) | [57](#sC17F36B441BFEAB4191A16C8A55FC16B) |

Our [removed: headquarters] [added: principal facility in the U.K.] is located [removed: at 1331 L Street, NW,] in [removed: downtown Washington, DC,] [added: London,] where we occupy approximately [removed: 149,500] [added: 15,900] square feet of office space.

This facility is used [removed: primarily] by our International operating segment.

In addition to our downtown Washington, DC leased facility and our [removed: London, England] [added: London] facility, we established our research operations headquarters in Richmond, Virginia in [removed: the fourth quarter of] 2016, in which we occupy [removed: 99,075] [added: 132,987] square feet of office space.

In addition to the Richmond research facility, we also operate our research functions out of leased spaces in San Diego, California; Columbia, Maryland; [added: Atlanta, Georgia;] and Glasgow, Scotland.

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

Our headquarters is located at 1331 L Street, NW, in downtown Washington, DC, where we occupy approximately 157,480 square feet, of which 7,980 square feet is a sublease expiring January 31, 2019, and the remaining 149,500 square feet is a lease that expires May 31, 2025 (with two 5-year renewal options).

Our lease for this facility has a term ending August 31, 2025.

Our lease for our headquarters expires May 31, 2025 (with two 5-year renewal options).

Our principal facility in the U.K. is located in London, England, where we occupy approximately 7,000 square feet of office space.

Our lease for this facility has a maximum term ending July 8, 2023, with early termination available at our option on July 9, 2018, with advance notice.

| Year Ended December 31, [removed: 2015] [added: 2017] | | | | | | | |

As of February 1, [removed: 2017,] [added: 2018,] there were [removed: 1,280] [added: 1,342] holders of record of our common stock.

The [removed: 2014] [added: 2017] Credit Agreement includes covenants that, subject to certain exceptions, restrict our ability and the ability of our subsidiaries to pay dividends or distributions.

We did not issue any unregistered securities during the years ended December 31, [removed: 2015] [added: 2016] and [removed: 2016.][added: 2017.]

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: 2016:][added: 2017:]

| Month, [removed: 2016] [added: 2017] | | 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 |

(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 [removed: 2007] [added: 2016] Stock Incentive Plan, as amended, which shares were purchased by the Company based on their fair market value on the [removed: vesting date or the] [added: trading day] immediately preceding [removed: business day.][added: the vesting date.]

The comparison covers the period beginning December 31, [removed: 2011,] [added: 2012,] and ending on December 31, [removed: 2016,] [added: 2017,] and assumes the reinvestment of any dividends.

[removed: ][added: ]

| Company / Index | | [removed: 12/31/11 | | | |] 12/31/12 | | | | 12/31/13 | | | | 12/31/14 | | | | 12/31/15 | | | | 12/31/16 | | | [added: | 12/31/17 | | |]

| First Quarter | $ | 211.37 | | | $ | 186.15 | |

| Second Quarter | $ | 266.93 | | | $ | 204.52 | |

| Third Quarter | $ | 287.02 | | | $ | 263.60 | |

| Fourth Quarter | $ | 310.19 | | | $ | 271.63 | |

| October 1 through 31 | | 388 | | | $269.67 | | — | | — |

| December 1 through 31 | | 1,645 | | | 297.27 | | — | | — |

| Total | | 2,033 | (1) | | $292.00 | | — | | — |

| CoStar Group, Inc. | | $ | 100.00 | | | $ | 206.53 | | | $ | 205.47 | | | $ | 231.27 | | | $ | 210.91 | | | $ | 332.27 | |

| S&P 500 Index | | 100.00 | | | | 132.39 | | | | 150.51 | | | | 152.59 | | | | 170.84 | | | | 208.14 | | |

| S&P 500 Internet Software & Services Index | | 100.00 | | | | 148.79 | | | | 158.60 | | | | 211.44 | | | | 222.39 | | | | 313.02 | | |

| First Quarter | $ | 200.62 | | | $ | 169.95 | |

| Second Quarter | $ | 214.20 | | | $ | 193.36 | |

| Third Quarter | $ | 218.43 | | | $ | 164.53 | |

| Fourth Quarter | $ | 210.42 | | | $ | 170.07 | |

| October 1 through 31 | | 399 | | | $216.06 | | — | | — |

| 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 | | |

The following table provides selected consolidated financial and other operating data for the five years ended December 31, [removed: 2016.][added: 2017.]

The consolidated statements of operations data shown below for each of the three years ended December 31, [removed: 2014, 2015, and] [added: 2017,] 2016 and [added: 2015 and] the consolidated balance sheet data as of December 31, [removed: 2015] [added: 2017] and 2016 are derived from audited consolidated financial statements that are included in this report.

The consolidated statements of operations data for each of the years ended [removed: December 31, 2012] [added: 2014] and 2013 and the consolidated balance sheet data as of December 31, [removed: 2012, 2013, and] [added: 2015,] 2014 [added: and 2013] shown below are derived from audited consolidated financial statements for those years that are not included in this report.

| Consolidated Statements of Operations Data: | [removed: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | [added: | 2017 | | |]

| Revenues | $ | [removed: 349,936] [added: 440,943] | | | $ | [removed: 440,943] [added: 575,936] | | | $ | [removed: 575,936] [added: 711,764] | | | $ | [removed: 711,764] [added: 837,630] | | | $ | [removed: 837,630] [added: 965,230] | |

| Cost of revenues | [removed: 114,866 | | | |] 129,185 | | | | 156,979 | | | | 188,885 | | | | 173,814 | | | [added: | 220,403 | | |]

| Gross [removed: margin | 235,070 | | |] [added: profit] | 311,758 | | | | 418,957 | | | | 522,879 | | | | 663,816 | | | [added: | 744,827 | | |]

| Operating expenses | [removed: 207,630 | | | |] 257,604 | | | | 338,079 | | | | 511,424 | | | | 518,911 | | | [added: | 571,011 | | |]

| Income from operations | [removed: 27,440 | | | |] 54,154 | | | | 80,878 | | | | 11,455 | | | | 144,905 | | | [added: | 173,816 | | |]

| Interest and other income | [removed: 526 | | | |] 326 | | | | 516 | | | | 537 | | | | 1,773 | | | [added: | 4,044 | | |]

| Interest and other expense | [removed: (4,832] [added: (6,943] | | ) | | [removed: (6,943] [added: (10,481] | | ) | | [removed: (10,481] [added: (9,411] | | ) | | [removed: (9,411] [added: (10,016] | | ) | | [removed: (10,016] [added: (9,014] | | ) |

| Income before income taxes | [removed: 23,134 | | | |] 47,537 | | | | 70,913 | | | | 2,581 | | | | 136,662 | | | [added: | 165,058 | | |]

| Income tax [removed: expense, net | 13,219 | | |] [added: expense] | 17,803 | | | | 26,044 | | | | 6,046 | | | | 51,591 | | | [added: | 42,363 | | |]

| Net income (loss) | $ | [removed: 9,915 | | | $ |] 29,734 | | | $ | 44,869 | | | $ | (3,465 | ) | | $ | 85,071 | | [added: | $ | 122,695 | |]

| Net income (loss) per share — basic | $ | [removed: 0.37 | | | $ |] 1.07 | | | $ | 1.48 | | | $ | (0.11 | ) | | $ | 2.64 | | [added: | $ | 3.70 | |]

| Net income (loss) per share — diluted | $ | [removed: 0.37 | | | $ |] 1.05 | | | $ | 1.46 | | | $ | (0.11 | ) | | $ | 2.62 | | [added: | $ | 3.66 | |]

| Weighted average shares outstanding — basic | [removed: 26,533 | | | |] 27,670 | | | | 30,215 | | | | 31,950 | | | | 32,167 | | | [added: | 33,200 | | |]

| Weighted average shares outstanding — diluted | [removed: 26,949 | | | |] 28,212 | | | | 30,641 | | | | 31,950 | | | | 32,436 | | | [added: | 33,559 | | |]

| Consolidated Balance Sheet Data: | [removed: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | [added: | 2017 | | |]

| Cash, cash equivalents and long-term investments | $ | [removed: 177,726] [added: 277,943] | | | $ | [removed: 277,943] [added: 544,163] | | | $ | [removed: 544,163] [added: 437,325] | | | $ | [removed: 437,325] [added: 577,175] | | | $ | [removed: 577,175] [added: 1,221,533] | |

| Working capital | [removed: 97,925 | | | |] 196,913 | | | | 480,521 | | | | 337,452 | | | | 472,545 | | | [added: | 1,141,269 | | |]

| Total assets | [removed: 1,155,583 | | | |] 1,250,440 | | | | 2,070,483 | | | | 2,079,571 | | | | 2,185,063 | | | [added: | 2,873,441 | | |]

| Total long-term liabilities | [removed: 230,536 | | | |] 213,674 | | | | 440,982 | | | | 400,510 | | | | 375,904 | | | [added: | 75,525 | | |]

| Stockholders’ equity | [removed: 826,343 | | | |] 927,862 | | | | 1,513,546 | | | | 1,543,780 | | | | 1,654,213 | | | [added: | 2,651,250 | | |]

| Loss on debt extinguishment | — | | | | — | | | | — | | | | — | | | | (3,788 | | ) |

As of December 31, [removed: 2016,] [added: 2017,] 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: 2016] [added: 2017] 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 has concluded that the Company's internal control over financial reporting was effective as of December 31, [removed: 2016.][added: 2017.]

[removed: There] [added: Other than the implementation of a new financial system noted previously, there] have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the fourth quarter of 2017, we commenced the implementation of a new financial system that is designed to improve the efficiency and effectiveness of the Company’s operational and financial accounting processes.

This implementation is expected to continue through 2019.

Consistent with any process change that we implement, the design of the internal controls has and will continue to be evaluated for effectiveness as part of our overall assessment of the effectiveness of our disclosure controls and procedures.

We expect that the implementation of this system will improve our internal controls over financial reporting.

On January 31, 2017, we completed the acquisition of Westside Rentals.

On May 10, 2017, we completed the acquisition of LandWatch.

On July 18, 2017, we completed the acquisition of The Screening Pros.

As permitted by the Securities and Exchange Commission, we have elected to exclude the accounts receivable and revenue of Westside Rentals, LandWatch, and The Screening Pros from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2017.

The excluded aggregate financial position of Westside Rentals, LandWatch, and The Screening Pros represented less than 1% of our total assets as of December 31, 2017, and less than 2% of our revenues for the year then ended.

We will include the internal controls of Westside Rentals, LandWatch, and The Screening Pros accounts receivable and revenue in our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018.

During the fourth quarter of 2017, we commenced the implementation of a new financial system that is designed to improve the efficiency and effectiveness of the Company’s operational and financial accounting processes.

This implementation is expected to continue through 2019.

Consistent with any process change that we implement, the design of the internal controls has and will continue to be evaluated for effectiveness as part of our overall assessment of the effectiveness of our disclosure controls and procedures.

The remaining information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

Years Ended December 31, [removed: 2014, 2015,] [added: 2017, 2016,] and [removed: 2016] [added: 2015] (in thousands):

(a)(3) The documents required to be filed as exhibits to this Report under Item 601 of Regulation S-K are listed [removed: in the Exhibit Index included elsewhere in this report, which list is incorporated herein by reference.][added: as follows:]

[removed: INDEX TO EXHIBITS][added: Exhibits]

| [removed: 3.1] [added: [3.1](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000041/amended-restatedcertofincx.htm)] | | Third Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 6, 2013). |

| [removed: 3.2] [added: [3.2](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000070/bylawsmajorityvotingamendm.htm)] | | Third Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 24, 2013). |

| [removed: 4.1] [added: [4.1](http://www.sec.gov/Archives/edgar/data/1057352/000095012311056513/w82657a1exv4w1.htm)] | | Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of the Registrant (Reg. No. 333-174214) filed with the Commission on June 3, 2011). |

| [removed: *10.1] [added: *[10.1](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000138/ex44-2016stockincentivepla.htm)] | | 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). |

| [removed: *10.2] [added: *[10.2](http://www.sec.gov/Archives/edgar/data/1057352/000105735212000101/ex101.htm)] | | CoStar Group, Inc. 2007 Stock Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 8, 2012). |

| [removed: *10.3] [added: *[10.3](http://www.sec.gov/Archives/edgar/data/1057352/000105735208000004/frenchsub_plan.htm)] | | CoStar Group, Inc. 2007 Stock Incentive Plan French Sub-Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s Report on Form 10-K filed February 29, 2008). |

| [removed: *10.4] [added: *[10.4](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex103.htm)] | | 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). |

| [removed: *10.5] [added: *[10.5](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex104.htm)] | | Form of CoStar Group, Inc. 2016 Plan Restricted Stock Grant Agreement for Service Awards between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| [removed: *10.6] [added: *[10.6](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex105.htm)] | | 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). |

| [removed: *10.7] [added: *[10.7](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex106.htm)] | | 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). |

| [removed: *10.8] [added: *[10.8](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex107.htm)] | | 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). |

| [removed: *10.9] [added: *[10.9](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex108.htm)] | | Form of CoStar Group, Inc. 2016 Plan Nonqualified Stock Option Grant Agreement between the Registrant and certain of its officers, directors and employees (Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| [removed: *10.10] [added: *[10.10](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex109.htm)] | | Form of CoStar Group, Inc. 2016 Plan Nonqualified Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| [removed: *10.11] [added: *[10.11](http://www.sec.gov/Archives/edgar/data/1057352/000105735207000051/ex_99-1.htm)] | | Form of 2007 Plan Restricted Stock Grant Agreement between the Registrant and certain of its officers, directors and employees (Incorporated by reference to Exhibit 99.1 to the Registrant’s Report on Form 8-K filed June 22, 2007). |

| [removed: *10.12] [added: *[10.12](http://www.sec.gov/Archives/edgar/data/1057352/000105735214000006/csgp-ex108_20131231.htm)] | | Form of 2007 Plan Restricted Stock Unit Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.8 to the Registrant's Report on Form 10-K filed February 20, 2014). |

| [removed: *10.13] [added: *[10.13](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/iso2007agrmt.htm)] | | Form of 2007 Plan Incentive Stock Option Grant Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.8 to the Registrant’s Report on Form 10-K filed February 24, 2009). |

| [removed: *10.14] [added: *[10.14](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/iso2007agrmt_w-florance.htm)] | | Form of 2007 Plan Incentive Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit 10.9 to the Registrant’s Report on Form 10-K filed February 24, 2009). |

| [removed: *10.15] [added: *[10.15](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt.htm)] | | Form of 2007 Plan Nonqualified Stock Option Grant Agreement between the Registrant and certain of its officers and employees (Incorporated by reference to Exhibit 10.10 to the Registrant’s Report on Form 10-K filed February 24, 2009). |

| [removed: *10.16] [added: *[10.16](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt_w-dir.htm)] | | Form of 2007 Plan Nonqualified Stock Option Grant Agreement between the Registrant and certain of its directors (Incorporated by reference to Exhibit 10.11 to the Registrant’s Report on Form 10-K filed February 24, 2009). |

| [removed: *10.17] [added: *[10.17](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt_w-florance.htm)] | | Form of 2007 Plan Nonqualified Stock Option Grant Agreement between the Registrant and Andrew C. Florance (Incorporated by reference to Exhibit 10.12 to the Registrant’s Report on Form 10-K filed February 24, 2009). |

| [removed: *10.18] [added: *[10.18](http://www.sec.gov/Archives/edgar/data/1057352/000105735208000004/rest_stockform-frenchsubform.htm)] | | Form of 2007 Plan French Sub-Plan Restricted Stock Agreement between the Registrant and certain of its employees (Incorporated by reference to Exhibit 10.10 to the Registrant’s Report on Form 10-K filed February 29, 2008). |

| [removed: *10.20] [added: *[10.19](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex102.htm)] | | CoStar Group, Inc. 2016 Cash Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed July 28, 2016). |

| [removed: *10.21] [added: *[10.20](http://www.sec.gov/Archives/edgar/data/1057352/000105735215000072/espp-amendedandrestatedtoi.htm)] | | 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: *10.22] [added: *[10.22](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000078/csgp-9302013xex101.htm)] | | Summary of Non-Employee Director Compensation (Incorporated by reference to Exhibit 10.1 to the Registrant's Report on Form 10-Q filed on October 24, 2013). |

| [removed: *10.23] [added: *[10.23](http://www.sec.gov/Archives/edgar/data/1057352/0001005150-98-000402.txt)] | | 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: *10.24] [added: *[10.24](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/firstamd-florance_empagrmt.htm)] | | 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 filed February 24, 2009). |

| [removed: 10.25] [added: [10.25](http://www.sec.gov/Archives/edgar/data/1057352/000095013304001856/w96989exv10w1.htm)] | | 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 filed on May 7, 2004). |

| [removed: 10.26] [added: [10.26](http://www.sec.gov/Archives/edgar/data/1057352/000105735211000072/lease.htm)] | | 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 filed on April 29, 2011). |

| [removed: 10.27] [added: [10.28](http://www.sec.gov/Archives/edgar/data/1057352/000105735217000071/form8-k10x25x17earningsrel.htm)] | | [removed: Credit] [added: Amendment and Restatement] Agreement, dated as of [removed: April 1, 2014,] [added: October 19, 2017,] by and among CoStar Group, Inc., [removed: as Borrower,] CoStar Realty Information, Inc., [removed: as Co-Borrower,] the Lenders [removed: from time to time] party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by [removed: reference] [added: referenced] to Exhibit 10.1 to [removed: CoStar’s] [added: the Registrant’s] Current Report on Form [removed: 8-K,] [added: 8-K] filed [removed: April 4, 2014).] [added: with the Commission on October 25, 2017).] |

| [removed: 23.1] [added: [23.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex231_20171231.htm)] | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith). |

| [removed: 31.1] [added: [31.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex311_20171231.htm)] | | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |

| [removed: 31.2] [added: [31.2](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex312_20171231.htm)] | | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |

| [removed: 32.1] [added: [32.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex321_20171231.htm)] | | Certification of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |

| [removed: 32.2] [added: [32.2](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex322_20171231.htm)] | | Certification of Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |

| 101 | | The following materials from CoStar Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 2016,] [added: 2017,] formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the years ended December 31, [removed: 2014, 2015] [added: 2017, 2016] and [removed: 2016,] [added: 2015,] respectively; (ii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, [removed: 2014, 2015] [added: 2017, 2016] and [removed: 2016,] [added: 2015,] respectively; (iii) Consolidated Balance Sheets at December 31, [removed: 2015] [added: 2017] and December 31, 2016, respectively; (iv) [removed: Consolidated] Statements of [added: Changes in] Stockholders’ Equity for the years ended December 31, [removed: 2014, 2015] [added: 2017, 2016] and [removed: 2016,] [added: 2015,] respectively; (v) Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2014, 2015] [added: 2017, 2016] and [removed: 2016,] [added: 2015,] 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). |

| Year ended December 31, 2017 | | $ | 6,344 | | | $ | 5,690 | | | $ | — | | | $ | 5,565 | | | $ | 6,469 | |

| *[10.21](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex1021_20171207.htm) | | CoStar Group, Inc. Management Stock Purchase Plan (filed herewith). |

| [10.27](http://www.sec.gov/Archives/edgar/data/1057352/000105735217000053/form8-k9x11x17tidewaterxspa.htm) | | Securities Purchase Agreement, dated as of September 11, 2017, among CoStar Realty Information, Inc., CoStar Group, Inc., LTM Company Dominion, LLC, Dominion Enterprises, and Landmark Media Enterprises, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 13, 2017). |

| Exhibit No. | | Description |

| [21.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex211_20171231.htm) | | Subsidiaries of the Registrant (filed herewith). |

| Year ended December 31, 2014 | | $ | 3,397 | | | $ | 4,822 | | | $ | 881 | | | $ | 4,285 | | | $ | 4,815 | |

| | |

| --- | --- |

SIGNATURES

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 23rd day of February 2017.

| | | |

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

| | COSTAR GROUP, INC. | |

| | By: | /s/ Andrew C. Florance |

| | | Andrew C. Florance |

| | | President and Chief Executive Officer |

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Andrew C.

Florance and Scott T.

Wheeler, and each of them individually, as their true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and to all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, herein by ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| | | | | |

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

| Signature | | Capacity | | Date |

| /s/ Michael R. Klein | | Chairman of the Board | | February 23, 2017 |

| Michael R. Klein | | | | |

| /s/ Andrew C. Florance | | Chief Executive Officer and | | February 23, 2017 |

| Andrew C. Florance | | President and a Director | | |

| | | (Principal Executive Officer) | | |

| /s/ Scott T. Wheeler | | Chief Financial Officer | | February 23, 2017 |

| Scott T. Wheeler | | (Principal Financial and Accounting Officer) | | |

| /s/ Michael J. Glosserman | | Director | | February 23, 2017 |

| Michael J. Glosserman | | | | |

| /s/ Warren H. Haber | | Director | | February 23, 2017 |

| Warren H. Haber | | | | |

| /s/ John W. Hill | | Director | | February 23, 2017 |

| John W. Hill | | | | |

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

| Laura Cox Kaplan | | | | |

| /s/ Christopher J. Nassetta | | Director | | February 17, 2017 |

| Christopher J. Nassetta | | | | |

| /s/ David J. Steinberg | | Director | | February 23, 2017 |

| David J. Steinberg | | | | |

| 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). |

INDEX TO EXHIBITS — (CONTINUED)

| *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). |

Not applicable.

SIGNATURES

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 22nd day of February 2018.

| | | |

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

| | | |

| | COSTAR GROUP, INC. | |

| | | |

| | By: | /s/ Andrew C. Florance |

| | | Andrew C. Florance |

| | | President and Chief Executive Officer |

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Andrew C.

Florance and Scott T.

Wheeler, and each of them individually, as their true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and to all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, herein by ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| | | | | |

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

| | | | | |

| Signature | | Capacity | | Date |

| | | | | |

| | | | | |

| /s/ Michael R. Klein | | Chairman of the Board | | February 22, 2018 |

| Michael R. Klein | | | | |

| | | | | |

| /s/ Andrew C. Florance | | Chief Executive Officer and | | February 22, 2018 |

| Andrew C. Florance | | President and a Director | | |

| | | (Principal Executive Officer) | | |

| | | | | |

| /s/ Scott T. Wheeler | | Chief Financial Officer | | February 22, 2018 |

| Scott T. Wheeler | | (Principal Financial and Accounting Officer) | | |

| | | | | |

| /s/ Michael J. Glosserman | | Director | | February 22, 2018 |

| Michael J. Glosserman | | | | |

| | | | | |

| /s/ Warren H. Haber | | Director | | February 22, 2018 |

| Warren H. Haber | | | | |

| | | | | |

| /s/ John W. Hill | | Director | | February 19, 2018 |

| John W. Hill | | | | |

| | | | | |