CoStar Group (CSGP) 10-K risk factor changes: FY2020 vs FY2019

Our success and revenues depend on attracting and retaining subscribers to our information, analytics and online [removed: marketplaces.][added: marketplace services.]

Our subscription-based [removed: information, analytics and online marketplaces] [added: services] generate the largest portion of our revenues.

[removed: In addition, in order to increase our revenue,] [added: Our revenue may not grow, or could decrease, if] we [removed: must continue to] [added: cannot] attract new customers, continue to keep our cancellation rate low and continue to sell new services to our existing customers.

We may not be able to continue to grow our customer base, keep the cancellation rate [removed: for customers and services] low or sell new services to existing customers as a result of several factors, [removed: including] [added: including,] without limitation: economic pressures; the business failure of [removed: a] current [removed: client or] clients; [removed: a decision] [added: customer decisions] that [removed: customers have no] [added: they do not] need [removed: for] our [removed: services; a decision] [added: services or] to use alternative services; customers’ and potential customers’ [removed: pricing and] budgetary constraints; consolidation in the real estate and/or financial services industries; data quality; technical problems; [removed: or] competitive [removed: pressures.][added: pressures; or devaluation of the local currencies of international customers relative to the U.S. dollar which impairs the purchasing power of such customers.]

We compete against many other [removed: commercial] real estate information, analytics, and marketing service providers for [removed: business, including competitors that offer their services through rapidly changing methods of delivering real estate information.][added: business.]

*We may not be able to successfully [added: develop and] introduce new or upgraded information, analytics and online marketplace services [added: that are attractive to our users and advertisers] or [added: successfully] combine or shift focus from [added: current] services with less demand, which could decrease our revenues and our profitability*.

Our future business and financial success will depend on our ability to continue to anticipate the needs of customers and potential customers, and to successfully introduce new and upgraded services into the [removed: marketplace.][added: marketplace, including services that make our marketplaces useful for users and attractive to advertisers.]

In addition, [removed: successfully] launching and selling a new or upgraded service puts additional strain on our sales and marketing resources.

If we are unsuccessful in obtaining greater market share or in obtaining widespread adoption of new or upgraded services, we may not be able to offset the expenses associated with the [added: development,] launch and marketing of the new or upgraded service, which could have a material adverse effect on our financial results.

If the marketing campaign does not continue to increase brand awareness, site traffic and/or revenues, [removed: it] [added: the cost of the campaign] could have an adverse effect on our financial results.

*A downturn or consolidation in the [removed: commercial] real estate industry may decrease customer demand for our services*.

The [removed: commercial] real estate market may be adversely impacted by many different factors, including lower than expected job growth or job losses resulting in reduced real estate demand; rising interest rates and slowing transaction volumes [added: due to the impact of the COVID-19 pandemic or otherwise] that negatively impact investment returns; excessive speculative new construction in localized markets resulting in increased vacancy rates and diminished [added: rent growth; and unanticipated disasters and other adverse events such as slowing of the growth in the working age population resulting in reduced demand for all types of real estate.]

A [removed: reversal of improvements] [added: downturn] in the [removed: commercial] real estate [removed: industry’s] [added: market, including as a result of a decline in] leasing activity and absorption rates [removed: or a downturn in the commercial real estate market] may affect our ability to generate revenues and may lead to more cancellations by our current or future customers, either of which could cause our revenues or our revenue growth rate to decline and reduce our profitability.

A depressed [removed: commercial] real estate market has a negative impact on our core customer base, which could decrease demand for our information, analytics and online marketplaces.

[removed: Consolidation, or other cost-cutting measures by our customers, may lead to cancellations of our information, analytics and online marketplace services by our customers, reduce the] number of our existing clients, reduce the size of our target market or increase our clients’ bargaining power, all of which could cause our revenues to decline and reduce our profitability.

*If we are unable to hire qualified persons for, or retain and continue to develop, our sales force, or if our sales force is unproductive, our revenues could be adversely affected.* In order to support revenues and [removed: future] revenue growth, we need to continue to develop, train and retain our sales force.

If we are unable to hire qualified sales personnel and develop and retain [removed: the members of] our sales force, including sales force management, or if our sales force is unproductive, our revenues or growth rate could decline and our expenses could increase.

*We may not be able to compete successfully against existing or future competitors in attracting advertisers, which could harm our business, results of operations and financial condition.* We [removed: compete] [added: may not be able] to [removed: attract advertisers.][added: compete successfully against existing or future competitors in attracting advertisers, which could harm our business, results of operations and financial condition.]

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

To compete successfully for [removed: advertisers against future and existing competitors,] [added: advertisers,] we must continue to invest resources in developing our advertising platform and proving the effectiveness and relevance of our advertising services.

*We may be unable to increase awareness of our brands, including CoStar, LoopNet, Apartments.com, [removed: BizBuySell and] [added: BizBuySell,] LandsofAmerica, [added: STR, Ten-X and Homesnap,] which could adversely affect our business.* We rely heavily on our brands, which we believe are key assets of our company.

[added: We expect] to [added: continue to invest in sales and marketing in 2021 as we seek to] grow the numbers of subscribers to, and advertisers on, our marketplaces.

*Our internal and external investments may place downward pressure on our operating margins.* [removed: We] [added: To increase our revenue growth, we] continue to invest in our business, including internal investments in product development to expand the breadth and depth of services we provide to our customers and external investments in sales and marketing to generate brand awareness.

Furthermore, our investments may not [removed: have their intended effect or] produce the expected results.

If we are unable to successfully execute our investment [removed: strategy or if we fail to adequately anticipate and address potential problems,] [added: strategy,] we may experience decreases in our revenues and operating margins.

[removed: If Internet search engines do not prominently feature our websites on the search engine results page, traffic to our websites would decrease and our business could be adversely affected.*] Google, Bing, DuckDuckGo and other Internet search engines drive traffic to our websites, including CoStar.com, the Apartments.com network of rental websites, the LoopNet.com network of commercial real estate websites, [added: Ten-X.com,] the BizBuySell.com network of business for-sale websites and the Land.com network of land for-sale websites.

If we experience a material reduction in the number of users directed to our websites through Internet search [removed: engines,] [added: engines or otherwise fail to maintain or increase traffic to] our [removed: business, results of operations] [added: marketplaces, our ability to acquire additional subscribers or advertisers] and [removed: financial condition] [added: deliver leads to and retain existing subscribers and advertisers] could be adversely affected.

Our existing [removed: competitors,] or future competitors, may have greater name recognition, larger customer bases, better technology or data, lower prices, easier access to data, greater user traffic or greater financial, technical or marketing resources than we [removed: have.][added: have to provide services that users might view as superior to our offerings.]

*If [added: Internet search engines do not prominently feature our websites on the search engine results page, traffic to our websites would decrease and, if] we are unable to maintain or increase traffic to our marketplaces, our business and operating results could be adversely affected.* Our ability to generate revenues from our marketplace [removed: businesses] [added: business] depends, in part, on our ability to attract users to our websites.

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

[removed: Any of our future or existing competitors] [added: Competitors] may introduce different solutions that attract users away from our services or provide solutions similar to [removed: our own] [added: ours] that have the advantage of better branding or marketing resources.

[removed: | • |] [added: -] Increasing the number of unique visitors to, and users of, our websites and mobile applications; [removed: |]

[removed: | • |] [added: -] The quantity and quality of the leads that we provide to our advertisers; [removed: |]

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

[removed: | • |] [added: -] Keeping pace with changes in technology and with our competitors; and [removed: |]

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

[removed: In addition, as] [added: As] existing subscriptions for advertising expire, we may not be successful in renewing these subscriptions or securing new subscriptions.

Our [added: acquisition] strategy [removed: to acquire complementary companies or assets] depends on our ability to identify, and the availability of, suitable acquisition candidates.

For example, we may be unable to [removed: close the RentPath acquisition when or as expected and we may be unable to] fully integrate [removed: STR] [added: STR, Ten-X and Homesnap] with CoStar when and as expected.

[removed: These costs] [added: Costs in connection with acquisitions and integrations may be higher than expected and] could adversely affect our financial condition, results of operation or prospects of the combined business.

Risks related to our business

We compete to attract advertisers.

*Our business and results of operations have been and will be, and our financial condition may be, impacted by the COVID-19 pandemic and such impact could be materially adverse and continue for an unknown period of time.* The global spread of COVID-19 has created significant economic volatility, uncertainty and disruption around the world.

The extent to which COVID-19 will further impact our business, operations and financial results, including the duration and magnitude of such impact, is uncertain and will depend on numerous rapidly evolving factors that we cannot accurately predict including, among others:

- the length and severity of the pandemic;

- the availability of vaccines to our employees and clients;

- the negative impact on global and regional economies, credit markets and economic activity;

- governmental, business and individual actions taken in response to the pandemic and the impact of those actions on global economic activity;

- the impact of business disruptions and reductions in employment levels and the level of consumer confidence in the economy on our clients and the resulting impact on their demand for our services and solutions;

- business consolidations or failures among businesses that we serve;

- our clients’ ability to pay for our services and solutions and our ability to collect payment for services provided;

- our ability to market, develop, provide, and train clients on the use of our services and solutions, including as a result of our employees or our clients’ employees working remotely, worker absenteeism or decreased productivity, quarantines, social distancing or other travel or health-related restrictions;

- the pace and extent of economic recovery following the COVID-19 pandemic, including recovery in the real estate industry in particular;

- increased costs of additional safety procedures and increased technology-related expenses to provide for business continuity; and

- increased cyber security risk, data accessibility concerns and susceptibility to communication disruptions because our employees and employees of our clients are working remotely.

As a result of COVID-19 and its impact on global economic conditions, including the real estate industry, towards the end of the first quarter and in the first two months of the second quarter of 2020, we saw an increase in customer requests for cancellations or suspensions, a reduction in new customer sales, failures to pay and delays in payments of amounts owed to us.

We may see additional requests as current economic conditions cause customers to reduce expenses and prolong the decision-making time before purchasing third party services, which may lead to fewer of our services being purchased or service cancellations.

The extent and duration of any future continued weakening of the economy is unknown, and there can be no assurance that any of the governmental or private sector initiatives designed to strengthen the economy will be successful or available to us and our customers and, if successful, when the benefits will be seen.

We expect that cancellations or suspensions, reductions of services and failures to pay amounts due to us may increase at any time while the economic impact of the pandemic and the response to the pandemic impacts our customer base.

We compete against many other real estate information and marketing service providers for business.

If cancellations, reductions of services and failures to pay increase and we are unable to offset the resulting decrease in revenue by increasing sales to new or existing customers, our revenues will decline and our profitability will be adversely affected.

As a business, we have experienced and may continue to experience challenges, including increased costs, as we have and continue to pivot our employees’ work locations and hours as deemed necessary to respond to COVID-19 to protect the health and well-being of our employees, customers and community.

Any actual or perceived failure to comply with government orders, rules, laws or regulations as a result of changes in our operations in response to COVID-19 could subject us to investigations, claims, fines and other penalties, which in turn could adversely affect our business.

COVID-19, and the disruption in global economic conditions stemming from the pandemic, could also precipitate or aggravate the other risk factors discussed in this Report, which could materially adversely affect our business, financial condition and results of operations.

Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks.

For additional discussion of the impacts of the COVID-19 pandemic, which could be materially adverse to our operations and financial results, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of the COVID-19 Pandemic" in Item 7 of Part II of this Annual Report on Form 10-K.

Consolidation, or other cost-cutting measures by our customers, may lead to cancellations of our information, analytics and online marketplace services by our customers, reduce the

As a result, our business, results of operations and financial condition could be adversely affected.

For example, the FTC recently withheld approval for our proposed acquisition of RentPath, the purchase agreement was subsequently terminated, and we incurred a termination fee of $52 million.

We are also likely to incur severance costs and other integration costs post-acquisition.

For example, we incurred a termination fee of $52 million in connection with termination of the RentPath purchase agreement.

Significant break-up fees incurred in the future may adversely affect our results of operation and financial condition.

As a result of our acquisitions, we had approximately $2.7 billion of goodwill and intangibles as of December 31, 2020.

Future acquisitions may increase this amount.

Following the end of the Brexit transition on December 31, 2020, the EU and U.K. agreed, as part of a wider trade deal, a further transitional period at least another four months, extendable to six months, during which personal data may flow freely from the European Economic Area (the “EEA”) to the U.K..

During that period, the European Commission is considering whether to make an “adequacy decision” in favor of the U.K., finding that the U.K. offers protection of personal data equivalent to the EEA, which will allow data to continue to flow freely between the EEA and the U.K. On February 19, 2021, the European Commission published draft adequacy decisions.

If no final adequacy decision is made in favor of the U.K. before the end of the further transitional period, because transfers of personal data between an EEA country and the U.K. will be transfers to a “third country”, we may be required to put in place additional mechanisms in place to enable transfers of data from EEA countries to the U.K. to ensure compliance with the GDPR.

The interpretation and application of many privacy and data protection laws are uncertain.

For example, In December 2020, we became aware that one of our vendors providing IT infrastructure management software, SolarWinds Corporation, had been compromised by cyberattacks.

As of December 22, 2020, we had implemented the fully patched versions of the SolarWinds software and we took additional measures to block Internet connectivity to and from all SolarWinds' Orion servers.

Cautionary Statement Concerning Forward-Looking Statements

We have made forward-looking statements in this Report and make forward-looking statements in our press releases and conference calls that are subject to risks and uncertainties.

Forward-looking statements include information that is not purely historic fact and include, without limitation, statements concerning our financial outlook for 2020 and beyond, our possible or assumed future results of operations generally, and other statements and information regarding assumptions about our revenues, 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, 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, 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 timing of acquisition closings, the anticipated benefits of cross-selling efforts, product development and release, 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 $750 million credit facility available to us under the amended and restated credit agreement dated October 19, 2017 (the “2017 Credit Agreement”), expectations regarding our compliance with financial and restrictive covenants in the 2017 Credit Agreement, financing plans, geographic expansion, development of new products and services, capital structure, contractual obligations, 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.

Sections of this Report which contain forward-looking statements include “Business,” “Risk Factors,” “Properties,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Controls and Procedures” and the Financial Statements and related Notes.

Our forward-looking statements are also identified by words such as “hope,” “anticipate,” “may,” “believe,” “expect,” “intend,” “will,” “should,” “plan,” “estimate,” “predict,” “continue” and “potential” or the negative of these terms or other comparable terminology.

You should understand that these forward-looking statements are estimates reflecting our judgment, beliefs and expectations, not guarantees of future performance.

They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

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 , including the impacts of “Brexit” and uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmark; our ability to identify, acquire and integrate acquisition candidates; our ability to realize the expected benefits, cost savings or other synergies from acquisitions, including STR and OCP, 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; business disruption relating to acquisitions may be greater than expected; our ability to transition acquired service platforms to our model in a timely manner or at all; changes and developments in business plans; theft of any personally identifiable information we, or the businesses that we acquire, 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 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; 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; 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, including any actual or perceived failure to comply with U.S. or international laws, rules or regulations; and successful adoption of and training on our services.

Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date of this Report.

All subsequent written and oral forward-looking statements attributable to

us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

We do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect new information or events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

Risk Factors

However, we may be unable to attract new clients, and our existing clients may decide not to add, not to renew or to cancel subscription services.

If we are unable to develop new or upgraded services or decide to combine, shift focus from, or phase out a service, then our customers may choose a competitive service over ours and our revenues may decline and our profitability may be reduced.

If we incur significant costs in developing new or upgraded services or combining and coordinating existing services, if we are not successful in marketing and selling these new services or upgrades, or if our customers fail to accept these new or combined and coordinating services, then there could be a material adverse effect on our results of operations due to a decrease of our revenues and a reduction of our profitability.

*If we do not invest in product development and provide services that are attractive to our marketplace users and to our advertisers, our business could be adversely affected.* Our success depends on our continued improvements to provide services that make our marketplaces useful for users and attractive to our advertisers.

If we are unable to provide services that users want, then users may become dissatisfied and use competitors’ websites.

If we are unable to continue offering innovative services, we may be unable to attract additional users and advertisers or retain our current users and advertisers, which could harm our business, results of operations and financial condition.

rent growth; and unanticipated disasters and other adverse events such as slowing of the growth in the working age population resulting in reduced demand for all types of real estate.

*Negative general economic conditions could increase our expenses and reduce our revenues*.

Our business and the commercial real estate industry are particularly affected by negative trends in the general economy.

The success of our business depends on a number of factors relating to general global, national, regional and local economic conditions, including perceived and actual economic conditions, recessions, inflation, deflation, exchange rates, interest rates, taxation policies, availability of credit, employment levels, wage and salary levels, and uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmark.

Negative general economic conditions could adversely affect our business by reducing our revenues and profitability.

If we experience greater cancellations or reductions of services and failures to timely pay, and we do not acquire new clients or sell new services to our existing clients, our revenues may decline and our financial position would be adversely affected.

Adverse national and global economic events, as well as any significant terrorist attack, are likely to have a dampening effect on the economy in general, which could negatively affect our financial performance and our stock price.

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

Market disruptions may also contribute to extreme price and volume fluctuations in the stock market that may affect our stock price for reasons unrelated to our operating performance.

In addition, a significant increase in inflation could increase our expenses more rapidly than expected, the effect of which may not be offset by corresponding increases in revenue.

Conversely, deflation resulting in a decline of prices could reduce our revenues.

In the current economic environment, it is difficult to predict whether we will experience significant inflation or deflation in the near future.

A significant increase in either could have an adverse effect on our results of operations.

See the risk factor below titled “The economic effects of “Brexit” may affect relationships with existing and future customers and could have an adverse impact on our business and operating results” for further discussion of risks related to Brexit*.*

We expect to increase our investments in sales and marketing in 2020 as we seek

Our investment strategy is intended to increase our revenue growth in the future.

In addition, our external investments, such as capitalized commissions, may lose value and we may incur impairment charges with respect to such investments.

Such impairment charges may negatively impact our profitability.

*We rely on Internet search engines to drive traffic to our websites.

If we are unable to retain customers or obtain new customers, our revenues could decline.

If we fail to maintain or increase traffic to our marketplaces, our ability to acquire additional subscribers or advertisers and deliver leads to and retain existing subscribers and advertisers could be adversely affected.

CoStar Suite is sold as a platform of service offerings consisting of CoStar Property®, CoStar COMPS®, CoStar Market Analytics, CoStar Tenant®, CoStar Lease Comps and CoStar Public Record through our [added: online and] mobile applications.

Our integrated suite of online service offerings includes information about space available [removed: for-lease,] [added: for lease,] comparable sales information, information about properties [removed: for-sale,] [added: for sale,] tenant information, Internet marketing services, analytical capabilities, information for clients' websites, information about industry professionals and their business relationships, and industry news.

Our [added: commercial real estate] sales force is [added: currently] responsible for selling multiple product lines, including CoStar Suite and LoopNet.

We provide real estate and lease management [added: technology] solutions, including lease [removed: administration] [added: administration, lease accounting] and abstraction services, through our CoStar Real Estate Manager® service offerings, as well as portfolio and debt analysis, management and reporting capabilities through our CoStar Investment Analysis and CoStar Risk Analytics® service offerings.

We expect that the [removed: acquisition of STR and the] combination of STR's and CoStar's offerings will allow us to create valuable new and improved tools for industry participants.

See Note [removed: 4] [added: 13] to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further [removed: discussion of the acquisition of STR.][added: discussion.]

Apartments.comTM is part of our network of apartment marketing sites, which primarily includes ApartmentFinder®, ForRent.com®, ApartmentHomeLiving.comTM, Apartamentos.comTM, Westside [removed: Rentals] [added: Rentals,] and Off Campus Partners, LLC ("OCP").

Our [removed: apartment marketing] network of subscription-based [added: advertising] services [removed: offers renters a searchable database of apartment listings and] provides [removed: professional] property management companies and landlords with [removed: an] [added: a comprehensive] advertising [removed: destination.][added: destination for their available rental units and offers renters a platform for searching for available rentals.]

See [removed: Note 4] [added: Notes 11 and 15] to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further [removed: discussion of these acquisitions.][added: discussion.]

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

As a result, the [added: LoopNet revenue] growth rate increased in the fourth quarter of [removed: 2019, and LoopNet is expected to continue to grow in the subsequent periods.][added: 2019.]

[removed: See Note 4] [added: For further discussion of our recent equity and Senior Notes offerings and our 2020 Credit Agreement, see “—Overview—Development, Investments and Expansion” and Notes 11 and 15] to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further [removed: discussion of the acquisition of Realla.][added: discussion.]

[removed: Our BizBuySell.com network, which includes BizQuest® and FindaFranchise,] [added: The BizBuySell network] provides online marketplaces for businesses [added: for-sale and our Land.com network of sites provide online marketplaces for rural lands] for-sale.

For the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] our annualized net new bookings of subscription-based services on all contracts were approximately [removed: $210] [added: $184] million, [removed: $169] [added: $210] million and [removed: $148] [added: $169] 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.

For the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] our contract renewal rate for existing CoStar subscription-based services on annual contracts was approximately [removed: 90%,] [added: 89%,] 90% and [removed: 91%] [added: 90%] respectively, and, therefore, our cancellation rate for those services was approximately [removed: 10%,] [added: 11%,] 10%, and [removed: 9%,] [added: 10%,] respectively.

We are committed to supporting, improving and enhancing our information, analytics and online marketplace solutions, including expanding and improving our offerings for [added: our client base and site users, including] property owners, property [removed: managers] [added: managers, buyers, commercial tenants] and [added: residential] renters.

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

Our key priorities for [removed: 2020] [added: 2021 currently] include:

[removed: | • | Continue to invest in the LoopNet marketplace by] [added: We are] enhancing the content on [removed: the site] [added: LoopNet.com] (including high-quality imagery), seeking targeted advertisements, providing premium listing services (such as LoopNet [removed: Signature] [added: Diamond, Platinum, and Gold] Ads) that increase a property listing’s exposure, and adding more content for premium listings to better meet the needs of a broader cross section of the commercial real estate industry. [removed: Additionally, we initiated training and incentive programs for our sales team to increase sales of LoopNet Signature Ads, with a focus on property owners. |]

[removed: | • | Integrating recently completed acquisitions, including STR, with CoStar’s business operations.] We plan to [removed: consolidate STR data and services with CoStar Suite to create an integrated platform. We plan to] drive international expansion, in part, through STR's global operations and to apply STR's benchmarking expertise to other commercial real estate segments [removed: served by CoStar. |][added: we serve.]

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

EBITDA is our net income before interest [added: (expense) income] and other [removed: income (expense),] [added: (expense) income,] 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, acquisition- and integration-related [removed: costs for pending and completed acquisitions,] [added: costs,] restructuring costs and settlements and impairments incurred outside our ordinary course of business.

Non-GAAP net income is determined by adjusting our net income for stock-based compensation expense, acquisition- and integration-related [removed: costs for pending and completed acquisitions,] [added: costs,] restructuring costs, settlement and impairment costs incurred outside our ordinary course of business and loss on debt extinguishment, as well as amortization of acquired intangible assets and other related costs, and then subtracting an assumed provision for income taxes.

We [removed: 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 to EBITDA, adjusted EBITDA and non-GAAP net income is net income.

[removed: In calculating] EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP [removed: net income and non-]

[removed: GAAP] [added: In calculating EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP] net income [added: and non-GAAP net income] per diluted share, we exclude from net income the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business.

[removed: EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP] net income and non-GAAP net income per diluted share are not measurements of financial performance under GAAP and should not be considered as a measure of liquidity, as an alternative to net income or as an indicator of any other measure of performance derived in accordance with GAAP.

We believe that these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide additional information to investors that is useful to understand the factors and trends affecting our [removed: business.][added: business without the impact of certain acquisition-related items.]

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

Adjusted EBITDA, adjusted EBITDA margin, 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, acquisition- and integration-related [removed: costs for pending and completed acquisitions,] [added: costs,] restructuring costs; settlement and impairment costs incurred outside our ordinary course of business.

We believe the disclosure of non-GAAP measures can help investors meaningfully evaluate and compare our performance from quarter to quarter and from year to [removed: year.][added: year without the impact of these items.]

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 [removed: interest,] [added: interest (expense)] income [added: and other (expense) income, income] taxes, stock-based compensation expenses, acquisition- and integration-related [removed: costs for pending and completed acquisitions,] [added: 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.

[removed: | • |] [added: -] Amortization of acquired intangible assets in cost of revenues may be useful for investors to consider because it represents the diminishing value of any acquired trade names and other intangible assets and the use of our acquired technology, which is one of the sources of information for our database of commercial real estate information. [removed: We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |]

[removed: | • |] [added: -] Amortization of acquired intangible assets in operating expenses may be useful for investors to consider because it represents the estimated attrition of our acquired customer base. [removed: We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |]

[removed: | • |] [added: -] Depreciation and other amortization may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. [removed: We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |]

[removed: | • |] [added: -] The amount of interest [added: (expense) income] and other [added: (expense)] income [removed: and expense] we generate and incur may be useful for investors to consider and may result in current cash inflows and outflows. [removed: However, we do not consider the amount of interest and other income and expense to be a representative component of the day-to-day operating performance of our business. |]

[removed: | • |] [added: -] Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds [removed: otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business. |]

[removed: | • |] [added: -] The amount of loss on our debt extinguishment may be useful for investors to consider because it generally represents losses from the early extinguishment of debt. [removed: 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. |]

[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. |]

Starting in late 2019, we shifted the focus of our sales force to sales of LoopNet Diamond, Platinum and Gold Ads.

As a result of this shift, as well as the continued impact of COVID-19 on our current and potential customer base, we saw a decline in CoStar Suite revenue growth rates in 2020 compared to 2019 growth rates and expect similar growth rates throughout 2021.

STR sells the majority of its services on a subscription basis, but also receives one-time or ad hoc transaction fee revenues.

The growth rates of information services increased in 2020 compared to 2019 primarily due to the STR acquisition.

The hospitality industry has been severely impacted by COVID-19, as a result, revenue for STR declined in the second quarter of 2020 and increased moderately during the remainder of the year.

We anticipate STR revenue and overall information services growth rates to moderate during 2021.

During 2020, multifamily revenue growth rates generally continued to increase relative to 2019 revenue growth rates as tenants, property owners and landlords continued to transact in our digital environment.

On June 24, 2020, we acquired Ten-X, an online auction platform for commercial real estate.

On

December 22, 2020, we acquired Homesnap, an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship.

Our BizBuySell network, which includes BizQuest® and FindaFranchise, and our Land.com network of sites, which includes LandsofAmerica, LandAndFarm and LandWatch®, are also included in our commercial property and land service revenue.

As part of our rebuild and launch of the LoopNet Diamond, Platinum and Gold Ads products during the fourth quarter of 2019, we shifted the focus of our commercial real estate sales force to LoopNet Ads.

Growth was flat during the first half of 2020 as LoopNet.com sales volumes declined and cancellations increased as a result of COVID-19 and its impact on the commercial real estate industry.

During the second half of 2020, we saw an increase in sales and expect LoopNet revenue growth rates to continue at those levels in 2021.

Overall, revenues in commercial property and land increased during 2020 compared to 2019 primarily due to revenue from our newly acquired online auction platform, Ten-X and, to a lesser extent, revenue growth from LoopNet.com.

Overall, we expect an increase in the commercial property and land growth rates in 2021 compared to 2020 primarily due to the Homesnap acquisition and continued impact of the Ten-X acquisition.

Impact of the COVID-19 Pandemic

A novel strain of coronavirus known as "COVID-19" was first identified in Wuhan, China in December 2019, and was subsequently declared a pandemic by the World Health Organization on March 11, 2020.

COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas.

The full impact of the COVID-19 pandemic is unknown and is evolving as the pandemic continues.

The COVID-19 pandemic did not materially affect our consolidated financial statements for the year ended December 31, 2020.

We are closely and continually monitoring the impact of the COVID-19 pandemic on our business, employees, customers, and communities.

To protect the health and safety of our employees and to help stop the spread of the disease, we shifted to a digital, remote workplace in mid-March 2020.

As of that time, nearly all of our employees began to work from home and continue to do so as of the date of this filing.

We have temporarily shifted certain employees’ job responsibilities so they can work from home and modified our in-person research and sales processes so that they can be conducted safely and in compliance with social distancing guidelines to protect our employees, our customers and our communities.

We believe our employees are operating at near normal levels of productivity in this digital environment.

We continue to monitor events related to the pandemic, as well as the guidelines and mandates provided by governmental and health authorities.

We plan to continue adapting our business operations when and as deemed appropriate to comply with these guidelines and mandates and to respond to changing circumstances.

In connection with the shift to work from home, we incurred and may continue to incur expenses to help employees perform their jobs effectively and securely.

In preparation for an eventual return to work in the office, we have also incurred and expect to continue to incur expenses to help protect the health and safety of our employees and visitors.

In response to the COVID-19 pandemic, we have taken steps to manage our costs, including minimizing hiring to essential positions, restricting business travel and canceling in-person marketing events.

We expect to continue to minimize travel and restrict in-person marketing events during the first half of 2021.

Overall, the increased direct spend related to the COVID-19 pandemic, including office reconfiguration, has not been material to date and has had minimal impact on our financial position and operating results as these expenses have been generally offset by the cost savings described above.

As the situation evolves, we may implement additional cost reductions.

Current general economic conditions in the U.S. and the world as a result of the COVID-19 pandemic are negatively affecting business operations for our clients and are expected to result in business consolidations and, in certain circumstances, failures.

In general, customers are seeking to reduce expenses as a result of current economic conditions.

The extent and duration of any future continued weakening of the global economy is unknown.

There can be no assurance that any of the governmental or private sector initiatives designed to strengthen the U.S. and other economies will ultimately be successful or available to us and our customers, and, if successful, when the benefits will be available or seen.

Because of the rapidly evolving nature of the COVID-19 pandemic and responses to it by, and the impact on, global economies, our revenue or earnings forecasts may not prove to be accurate.

Any expected changes in financial results discussed in this report, including any expected impact of COVID-19, are based on our current observations and experience and involve estimates and assumptions.

During 2020, we plan to shift the focus of our sales force to sales of LoopNet Signature Ads.

As a result, we anticipate CoStar Suite revenue growth will moderate during the year.

Sales of CoStar Real Estate Manager represent a significant portion of our information services revenue.

CoStar Real Estate Manager's revenue growth rates increased significantly in 2018 as new clients adopted, and existing clients expanded their use of, CoStar Real Estate Manager to manage compliance with new lease accounting and reporting requirements which became effective for public companies for financial reporting periods beginning after December 15, 2018.

As a result, we expect the growth rate for CoStar Real Estate Manager to normalize as the initial surge of the demand has eased.

On February 21, 2018, we completed the acquisition of ForRent, a division of Dominion Enterprises, including the ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com apartment marketing sites.

On November 8, 2018, we acquired Cozy Services, Ltd. ("Cozy"), a provider of online rental solutions that provides a broad spectrum of services to both landlords and tenants, including property listings, rent estimates, rental applications, tenant screening, online rent payments and expense tracking.

On June 12, 2019, we acquired OCP, a provider of student housing marketplace content and technology to U.S. universities.

We expect the multifamily annual revenue growth rate to remain consistent with 2019 as we have fully integrated our ForRent and Cozy acquisitions into our service offerings.

We continue to work on integrating the OCP acquisition and the

services they offer into our Apartments.com network.

As part of our rebuild and launch of the LoopNet Signature Ads product, we rolled out new packages in the fourth quarter of 2019.

In addition, on October 12, 2018, we acquired all of the issued share capital of Realla Ltd. ("Realla"), the operator of a commercial property listings and data management platform in the U.K., including a free-to-list search engine for commercial property listings.

Our Land.com network of sites, which provides online marketplaces for rural lands for-sale, includes LandsofAmerica, LandAndFarm and LandWatch®.

| | |

| --- | --- |

| • | Continue to develop, improve and market our recently launched Apartments.com service offerings that focus on the digital rental experience and enable renters to apply for-leases, and for landlords to run tenant credit and background checks and make rent payments, all online through a single platform. We plan to aggressively market our multifamily listing services in an effort to provide more value to advertisers and, in turn, to attract advertisers. As such, we plan to increase our investment in Apartments.com marketing in 2020 by approximately $100 million, which may reduce our margins and profitability while we invest in future growth. The increased investment is focused on search engine marketing and enhanced brand awareness. We also plan to continue to invest in our multifamily business by increasing the size of our sales force with a focus on increasing sales to midsize and smaller apartment communities. |

| • | Obtaining necessary bankruptcy court and regulatory approvals to close the pending acquisition of RentPath and integrating RentPath with the Apartments.com network post-closing. On February 11, 2020, a wholly owned subsidiary of the Company entered into an agreement to acquire for $588 million in cash all of the equity interests of RentPath Holdings, Inc., as reorganized following an internal restructuring pursuant to and under the joint chapter 11 plan of reorganization of RentPath and certain of its subsidiaries. Closing of the acquisition is subject to customary closing conditions, including the expiration or termination of any applicable waiting period under applicable antitrust laws and approval by the bankruptcy court. See Note 19 to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further discussion. |

| • | Continue to invest in CoStar Suite, including capabilities that allow us to broaden the reach of CoStar Suite in Europe by offering multiple languages and currencies on the platform. We plan to enhance CoStar Suite by making additional investments in analytical capabilities focused on owners and lenders of commercial real estate. In addition, we plan to invest in integrating the technology and infrastructure from other existing service offerings into the CoStar Suite platform, including CoStar Real Estate Manager, in order to leverage data and technology across our platforms and provide customers with additional functionality. |

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

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

| Interest and other income | (30,017 | | ) | | (13,281 | | ) | | (4,044 | | ) |

| Interest and other expense | 2,615 | | | | 2,830 | | | | 9,014 | | |

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

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

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

| Interest and other income | 30,017 | | | | 2 | | | 13,281 | | | | 1 | | | 4,044 | | | | — | |

| Interest and other expense | (2,615 | | ) | | — | | | (2,830 | | ) | | — | | | (9,014 | | ) | | (1 | ) |

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

| CoStar Suite (1) | $617,798 | | | | 44 | % | | $545,195 | | | | 46 | % | | $ | 463,185 | | | 48 | % |

| __________________________ | | | | | | | | | | | | | | | | | | | | |

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

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

| Multifamily | 490,631 | | | | 405,795 | | | | 84,836 | | | | 21 | |

| Total revenues | 1,399,719 | | | | 1,191,832 | | | | 207,887 | | | | 17 | |

| Gross profit | 1,110,480 | | | | 921,899 | | | | 188,581 | | | | 20 | |

| Interest and other income | 30,017 | | | | 13,281 | | | | 16,736 | | | | NM | |

| Interest and other expense | (2,615 | | ) | | (2,830 | | ) | | (215 | | ) | | (8 | ) |

| Income before income taxes | 390,949 | | | | 284,015 | | | | 106,934 | | | | 38 | |

| __________________________ | | | | | | | | | | | | | | |

For the [removed: year] [added: years] ended December 31, [removed: 2019] [added: 2020] and December 31, [removed: 2018,] [added: 2019,] revenues denominated in foreign currencies were approximately [removed: 4%] [added: 5%] and [removed: 3%,] [added: 4%,] respectively, of total revenue.

For the [removed: year] [added: years] ended December 31, [removed: 2019] [added: 2020] and December 31, [removed: 2018,] [added: 2019,] our revenues would have decreased by approximately [removed: $6] [added: $8] million and [removed: $3] [added: $6] million if the U.S. dollar exchange rate used strengthened by 10%.

For the [removed: year] [added: years] ended December 31, [removed: 2019] [added: 2020] and December 31, [removed: 2018,] [added: 2019,] our revenues would have increased by approximately [removed: $6] [added: $8] million and [removed: $3] [added: $6] million if the U.S. dollar exchange rate used weakened by 10%.

As of December 31, [removed: 2019,] [added: 2020,] accumulated other comprehensive loss included a loss from foreign currency translation adjustments of approximately [removed: $8] [added: $0.9] million.

We do not believe we have material exposure to market risks associated with changes in interest rates related to cash equivalent securities held as of December 31, [removed: 2019.][added: 2020.]

See [removed: Notes 5 and 6 to] [added: Note 11 of] the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K [removed: for further discussion.][added: regarding our 2020 Credit Agreement.]

We had approximately [removed: $2.3] [added: $2.7] billion of goodwill and intangible assets as of December 31, [removed: 2019.][added: 2020.]

As of December 31, [removed: 2019,] [added: 2020,] 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, 2020, we had $3.8 billion of cash, cash equivalents and restricted cash.

We currently diversify our cash and cash equivalents holdings amongst multiple financial institutions.

We are subject to interest rate market risk in connection with our new revolving credit facility.

On July 1, 2020, we entered into the 2020 Credit Agreement, which provides for variable rate borrowings of up to $750 million.

On July 1, 2020, we issued $1.0 billion aggregate principal amount of 2.800% Senior Notes due July 15, 2030.

Changes in interest rates would not have a material impact to our current interest and debt financing expense, as all our borrowings except for our credit facility are fixed rate, and our credit facility is currently undrawn as of December 31, 2020.

As of December 31, 2019, we had $1.1 billion of cash and cash equivalents.

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

These securities are primarily securities supported by guarantees from the FFELP of the U.S. Department of Education.

As of December 31, 2019, $11 million of our investments in ARS failed to settle at auction.

As a result, we may not be able to sell these investments at par value until a future auction on these investments is successful.

In the event we need to immediately liquidate these investments, we may have to locate a buyer outside the auction process, who may be unwilling to purchase the investments at par, resulting in a loss.

If the issuers are unable to successfully close future auctions and/or their credit ratings deteriorate, we may be required to adjust the carrying value of these investments as a temporary impairment and recognize a greater unrealized loss in accumulated other comprehensive loss or as an other-than-temporary impairment charge to earnings.

Based on our ability to access our cash and cash equivalents, and our expected operating cash flows, we do not anticipate having to sell these securities below par value in order to operate our business in the foreseeable future.

| | |

| --- | --- |

See [removed: Note 4] [added: Notes 5 and 9] to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further discussion of [removed: this] [added: the Homesnap] acquisition.

Our strategy is to provide [added: real estate] industry professionals and consumers [removed: of commercial real estate and apartments] with critical knowledge to explore and complete transactions by offering the most comprehensive, timely and standardized information on [removed: commercial] real estate and [removed: apartments and] the right tools to be able to effectively utilize that information.

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

Our standardized platform includes the most comprehensive proprietary database [added: of commercial real estate information] 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 marketplace services; a large team of analysts and economists; and a large, diverse base of clients.

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

We deliver our comprehensive commercial real estate information content to our U.S. and [removed: certain] [added: European] customers [removed: in Europe] primarily via an integrated suite of online service offerings that includes information about space available for-lease, comparable sales [removed: information, information about properties for-sale, tenant information, Internet marketing services, analytical capabilities, information for clients’ websites, information about industry professionals and their business relationships, data integration and industry news.]

We also operate complementary online marketplaces for commercial real estate listings and apartment [removed: rentals.][added: rentals, as well as a commercial real estate auction platform.]

Revenues; net income [removed: (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 Notes 3 and 14 to our consolidated financial statements.

[removed: We have five flagship] [added: Our primary] brands [removed: -] [added: include] CoStar*®*, LoopNet*®*, Apartments.comTM, [removed: BizBuySell*®* and] [added: STR*®*, Ten-X*®*, BizBuySell*®,*] LandsofAmericaTM, [added: and HomeSnap®,] which are accessible via the Internet and through our mobile applications.

CoStar Suite*®* is sold as a platform of service offerings consisting of CoStar Property Professional®, CoStar [added: COMPS Professional® and CoStar Tenant®, and is our largest service offering in our North America and International operating segments.]

Our LoopNet [removed: subscription-based,] online marketplace enables commercial property owners, landlords, and brokers to [removed: list] [added: advertise] properties for-sale or for-lease and to submit detailed information about property listings.

Commercial real estate agents, [removed: buyers] [added: buyers, investors,] and tenants use LoopNet extensively to search for available property listings that meet their criteria.

Apartments.comTM is [removed: part of] [added: the flagship brand in] our network of apartment marketing sites, which also includes ApartmentFinder.comTM, ForRent.com®, ApartmentHomeLiving.comTM, WestsideRentals.com*®*, AFTER55.com®, CorporateHousing.comTM, ForRentUniversity.com®, Apartamentos.comTM, which is our apartment-listing site offered exclusively in Spanish, and OffCampusPartners.com, which [removed: we acquired on June 12, 2019, and which] provides student housing marketplace content and powers off campus housing sites for many universities across the U.S. Our apartment marketing network of subscription-based services offers renters a searchable database of apartment listings and provides property owners, professional property management companies and landlords with an advertising destination.

We also offer complementary services to the [removed: apartment] [added: rental] industry, including the ability for renters to apply for rentals online, and for landlords to receive applications, screen tenants, and process rental payments and lease renewals.

We [added: also] provide other services that complement those offered through our [removed: five flagship] [added: primary] brands.

These include real estate and lease management solutions, lease [removed: administration] [added: administration, lease accounting] and abstraction services, through our CoStar Real Estate Manager service offerings; market research, consulting and analysis, portfolio and debt analysis, and management and reporting [removed: capabilities, through our CoStar Investment Analysis and CoStar Risk Analytics service offerings; and benchmarking and analytics for the hospitality industry through our STR service offerings.]

See [removed: Note 4] [added: Notes 5 and 9] to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further discussion of these acquisitions.

We are committed to supporting, improving and enhancing our information, analytics and online marketplace solutions, including expanding and improving our offerings for property owners, property [removed: managers] [added: managers, brokers, agents, buyers, commercial tenants] and [added: residential] renters.

We plan to drive international expansion, in part, through STR's global operations and to apply STR's benchmarking expertise to other commercial real estate segments [removed: served by CoStar.][added: we serve.]

The market for [removed: commercial] real estate information and analysis is vast based on the variety, volume and value of transactions related to [removed: commercial] real estate.

Members of the [removed: commercial] real estate and related business community require daily access to current data such as space availability, properties for-sale, rental units available, rental rates, vacancy rates, tenant movements, sales comparables, supply, new construction, absorption rates and other important market developments to carry out their businesses effectively.

Market research (including historical and forecast conditions) and applied analytics are instrumental to the success of [removed: commercial real estate] industry participants.

There is a strong need for an efficient marketplace, where [removed: commercial] real estate professionals can exchange information, evaluate opportunities using standardized data and interpretive analyses, and interact with each other on a continuous basis.

A large number of parties involved in [removed: the] commercial [added: and residential] real estate and [added: the] related business community make use of the services we provide in order to obtain information they need to conduct their businesses, including:

| • | [added: | |] Sales and leasing brokers | [added: | |] • | [added: | |] Government agencies | [added: | |]

| • | [added: | |] Property owners | [added: | |] • | [added: | |] Mortgage-backed security issuers | [added: | |]

| • | [added: | |] Property managers | [added: | |] • | [added: | |] Appraisers | [added: | |]

| • | [added: | |] Design and construction professionals | [added: | |] • | [added: | |] Pension fund managers | [added: | |]

| • | [added: | |] Real estate developers | [added: | |] • | [added: | |] Reporters | [added: | |]

| • | [added: | |] Real estate investment trust managers | [added: | |] • | [added: | |] Tenant vendors | [added: | |]

| • | [added: | |] Investment and commercial bankers | [added: | |] • | [added: | |] Building services vendors | [added: | |]

| • | [added: | |] Mortgage bankers | [added: | |] • | [added: | |] Communications providers | [added: | |]

| • | [added: | |] Mortgage brokers | [added: | |] • | [added: | |] Insurance companies’ managers | [added: | |]

| • | [added: | |] Retailers | [added: | |] • | [added: | |] Institutional advisors | [added: | |]

| • | [added: | |] Hospitality owners | [added: | |] • | [added: | |] Investors and asset managers | [added: | |]

This highly complex database is comprised of hundreds of data fields, tracking such categories as location, site and zoning information, building characteristics, space and unit availability, tax assessments, ownership, sales and lease comparables, space requirements, number of retail stores, number of listings, mortgage and deed information, for-sale and for-lease listings, income and expense histories, [added: tenant names, lease expirations, contact information, historical trends, demographic information and retail sales per square foot.]

As part of [removed: their update] [added: the] process, researchers [added: use to update records in our database, researchers] develop cooperative relationships with industry professionals that allow them to gather useful information.

Because of the importance commercial real estate professionals place on our data and our prominent position in the industry, many of these professionals routinely take the initiative and proactively report available space and transactions through our [removed: on-line] [added: online] tool, [added: which we refer to as our] Marketing Center, or directly to our researchers.

CoStar's field research effort includes physical inspection of properties in order to research new availabilities, find additional property inventory, new construction, collect tenant information, verify existing information, photograph properties and create high quality videos of interior spaces (including walk-through videos and 3D virtual tours), amenities and exterior [removed: features of properties.]

[removed: | • |] [added: -] Calling our information sources on recently updated properties to re-verify information; [removed: |]

With our recent acquisition of Homesnap, Inc., (“Homesnap”) we also offer an online mobile software platform for residential real estate agents and brokers.

On June 24, 2020, we acquired Ten-X Holding Company, Inc. and its subsidiaries ("Ten-X"), which operate an online auction platform for commercial real estate.

On October 26, 2020, we acquired Emporis GmbH, a Germany-based provider of international commercial real estate data and images, and on December 22, 2020, we acquired Homesnap.

information, information about properties for-sale, tenant information, Internet marketing services, analytical capabilities, information for clients’ websites, information about industry professionals and their business relationships, data integration and industry news.

LoopNet*®* is the flagship brand in our network of commercial real estate marketing sites, which also includes Cityfeet.com and Showcase.com.

LoopNet offers unique, subscription-based advertising solutions for different segments within the industry and delivers value across its constituent networks.

The LoopNet network leverages CoStar’s commercial real estate database to provide in-depth and accurate information across all commercial property types, including office, industrial, retail, restaurant, shopping center, multifamily, specialty, health care, hospitality, sports and entertainment, land, and residential income.

Investors and tenants are also able to consume industry news developed by our in-house editorial team.

We are consolidating STR data and services with CoStar Suite to create an integrated platform, which is expected to allow us to create valuable new and improved tools for industry participants.

We are also working on integrating the Ten-X platform into both LoopNet and CoStar, to expand the audience for Ten-X auctions to include our online commercial real estate users.

capabilities through our CoStar Investment Analysis and CoStar Risk Analytics service offerings; and benchmarking and analytics for the hospitality industry through our STR offerings.

Auction transaction fees from our newly acquired online auction platform, Ten-X, are generally charged upon the successful closure of an auction as a percentage of the winning buyer's offer price for the commercial real estate property sold.

Most recently, on June 24, 2020, we acquired Ten-X, which operates an online auction platform for commercial real estate; on October 26, 2020, we acquired Emporis GmbH, a Germany-based provider of international commercial real estate data and images, which we subsequently merged into another of our German subsidiaries; and on December 22, 2020, we acquired Homesnap, which operates an online mobile software platform for residential real estate agents and brokers.

We are consolidating STR hospitality data and benchmarking and analytics services with CoStar Suite to create an integrated platform.

We expect that the combination of STR's and CoStar's offerings will allow us to create valuable new and improved tools for commercial real estate industry participants.

We are working on integrating the Ten-X platform into both the LoopNet and CoStar service offerings, to expand the audience for Ten-X auctions to include our online commercial real estate users.

To increase exposure, we have upgraded LoopNet listings for properties to be auctioned on Ten-X and are allocating banner space on both our CoStar and LoopNet sites to Ten-X to cross-market our services.

We are beginning to incorporate recently acquired Emporis commercial real estate data and images into CoStar, and our Homesnap team is creating new and improved tools to help agents promote their residential listings, connect with buyers and sellers and streamline their daily workflow.

Starting in 2019 and continuing throughout 2020, we increased our investment in Apartments.com marketing.

We plan to continue to utilize a multi-channel marketing campaign and to work to determine the optimal level of marketing investment for our services for future periods.

To support our continued expansion and development, in 2020 we completed a public equity offering, a Senior Notes offering and the refinancing of our revolving credit facility.

For additional discussion of our public equity offering, Senior Notes offering and refinancing of our revolving credit facility, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations“—Overview—Development, Investments and Expansion" and Notes 11 and 15 to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K.

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

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

| • | | | Real estate agents | | | | | | | | |

Our researchers are responsible for maintaining the accuracy and reliability of our database information, training our clients to use the CoStar products and handling their customer service questions, creating a "one touch" approach to customer care.

features of properties.

*•CoStar Property®* provides a comprehensive inventory of office, industrial, retail, multifamily and student housing properties and land.

We also provide for-lease and for-sale listings, historical data, property analytics, building photographs, demographics, maps and floor plans.

Commercial real estate professionals use CoStar Property to identify available space for-lease, evaluate leasing and sale opportunities, value assets and position properties in the marketplace.

Our clients also use CoStar Property to analyze market conditions by calculating current vacancy rates, absorption rates or average rental rates, and forecasting future trends based on user selected variables.

CoStar Property provides subscribers with powerful map-based search & reporting capabilities.

*•CoStar COMPS®* is the industry’s most comprehensive database of comparable commercial real estate 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 Market Analytics covers all major real estate sectors including office, industrial, retail, multifamily and student housing, and provides quantitatively driven and economist curated forecasts of supply, demand, vacancy, and rent at the submarket level, and job growth and asset pricing at the market level.

*•CoStar Tenant*® is a detailed online business-to-business prospecting and analytical tool providing commercial real estate professionals with the most comprehensive commercial real estate-related tenant information available in our North American markets.

CoStar Tenant profiles tenants occupying space in commercial buildings and provides updates on lease expirations - one of the service’s key features - as well as occupancy levels, growth rates and numerous other facts.

Delivering this information via the Internet allows users to target prospective clients quickly through a searchable database that identifies only those tenants meeting certain criteria.

In addition, CoStar Lease Comps

provides subscribers the ability to analyze this combined lease dataset from an aggregate analytic perspective and generate various reports.

CoStar Lease Analysis can be used to produce an understandable cash flow analysis as well as key metrics about any proposed or existing lease.

COMPS Professional® and CoStar Tenant®, and is our largest service offering in our North America and International operating segments.

Most recently, on June 12, 2019, we acquired Off Campus Partners, LLC (“OCP”), a provider of student housing marketplace content and technology to U.S. universities, and on October 22, 2019, we acquired STR, a global provider of benchmarking and analytics for the hospitality industry.

On February 11, 2020, we agreed to acquire, for $588 million in cash, all the equity interests of RentPath, as reorganized following an internal restructuring pursuant to and under the joint chapter 11 plan of reorganization of RentPath and certain of its subsidiaries.

Closing of the acquisition is subject to customary closing conditions, including the expiration or termination of any applicable waiting period under applicable antitrust laws and approval by the bankruptcy court.

RentPath is a provider of digital marketing solutions for rental properties through a network of Internet listing websites, including Rent.com, ApartmentsGuide.com, Rentals.com and LiveLovely.com.

See Note 19 to the accompanying Notes to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K for further discussion of this acquisition.

On November 18, 2018, we acquired Cozy Services, Ltd. (“Cozy”), a leading provider of online rental solutions offering a broad spectrum of services to both landlords and tenants.

We continue to integrate Cozy's online rental and payments technology into the Apartments.com platform, creating an integrated online rental solution.

The new platform allows renters to apply for-leases online, for landlords to run tenant credit and background checks and make and process online payments.

In 2019, we completed the integration of Realla Ltd. (“Realla”), the operator of a commercial property listings and data management platform that we acquired in October 2018, with our CoStar UK operations.

A single point of data entry now allows our clients to display their commercial real estate listings through the CoStar Suite service offering and to make them visible to prospective tenants and investors through Realla’s marketing portal.

Over time, we plan to integrate STR data and services with CoStar Suite to create new products and services for our customers.

We plan to significantly increase our investment in Apartments.com marketing in 2020, including search engine marketing and TV and digital video advertising.

| | | | |

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

tenant names, lease expirations, contact information, historical trends, demographic information and retail sales per square foot.

Our researchers are responsible for maintaining the accuracy and reliability of our database information.

| | |

| --- | --- |

| *•* | *CoStar Property® and for-sale* provide a comprehensive inventory of office, industrial, retail, multifamily and student housing properties and land. We also provide for-lease and for-sale listings, historical data, property analytics, building photographs, demographics, maps and floor plans. Commercial real estate professionals use CoStar Property to identify available space for-lease, evaluate leasing and sale opportunities, value assets and position properties in the marketplace. Our clients also use CoStar Property to analyze market conditions by calculating current vacancy rates, absorption rates or average rental rates, and forecasting future trends based on user selected variables. CoStar Property provides subscribers with powerful map-based search & reporting capabilities. |

| *•* | *CoStar Tenant*® is a detailed online business-to-business prospecting and analytical tool providing commercial real estate professionals with the most comprehensive commercial real estate-related tenant information available in our North American markets. CoStar Tenant profiles tenants occupying space in commercial buildings and provides updates on lease expirations - one of the service’s key features - as well as occupancy levels, growth rates and numerous other facts. Delivering this information via the Internet allows users to target prospective clients quickly through a searchable database that identifies only those tenants meeting certain criteria. |

*CoStar Risk Analytics®* is a commercial real estate risk management tool.

It allows users to calculate probability of default, loss given default, expected loss and unexpected loss at various confidence levels for a loan or a portfolio.

It provides direct comparisons of credit risk and refinance risk across time, market, property type and loan structure for all macroeconomic forecast (including federal stress testing / comprehensive capital analysis and review) scenarios.

CoStar Risk Analytics COMPASS is used by lenders, issuers, servicers, ratings agencies and regulators to estimate required loss reserves, economic capital and regulatory capital, target lending opportunities, set pricing strategy, objectively compare/price loans, more effectively allocate capital, manage refinance risk and conduct stress testing.

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

such as occupancy, average daily rate (ADR) and revenue per available room (RevPAR).

The sales force is responsible for selling to new prospects, training new and existing clients, providing ongoing customer support, renewing contracts and identifying cross-selling opportunities.

We use incentives, including discounts to encourage existing clients to buy additional products and services.

This deepens our customer relationships and offers more value.

Our CoStar and LoopNet databases have been integrated 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 our Marketing Center tool and to update their listings in CoStar and LoopNet simultaneously.

To familiarize clients with the integration and benefits of the tool, we provided video tutorials and hosted numerous webinars, in addition to web-based marketing and direct marketing efforts.

In 2019, over one hundred thousand commercial real estate professionals and other users successfully made millions of updates to their listings using our Marketing Center.

In 2019, we increased our investment in Apartments.com marketing, and we plan to further increase that investment in 2020.

In 2019, we enhanced our news offerings.

We expanded our coverage of real estate investment trusts, and working with the analyst team, added quarterly video updates on national and local markets.

We bolstered our coverage of the hospitality industry by adding relevant news from Hotel News Now, a unit of newly acquired STR.

We launched a new weekly column on economic policy that proved so popular we made it available as a separate email newsletter to subscribers.

We continued to build on our newsletter franchise, giving subscribers the ability to select the coverage they wished to receive in daily emails.

Currently, and from time to time, we are involved in litigation incidental to the conduct of our [removed: business.][added: business, including, among others, the legal actions discussed under “Contingencies” in Note 13 “Commitments and Contingencies” to our Financial Statements.]

While our management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our business, financial position, future results of operations or liquidity, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in aggregate, have a material adverse effect on our business, financial position, future results of operations or liquidity.

We are not currently a party to any lawsuit or proceeding that, in the opinion of our management based on consultations with legal counsel, is likely to have a material adverse effect on our financial position or results of operations.

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[removed: FORM 10-K][added: FORM 10-K]

| ☒ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2019][added: 2020]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

Commission file [removed: number 0-24531][added: number 0-24531]

[removed: ][added: ]

| Delaware | | [added: | | | |] 52-2091509 | [added: | |]

| *(State or other jurisdiction of* *incorporation or organization)* | | [added: | | | |] *(I.R.S. Employer* *Identification No.)* | [added: | |]

| 1331 L Street, NW | | | [added: | | | | | |]

| Washington, | [added: | |] DC | [added: | |] 20005 | [added: | |]

[removed: (202) 346-6500][added: (202) 346-6500]

| Title of each class | [added: | |] Trading Symbol | [added: | |] Name of each exchange on which registered | [added: | |]

| Common Stock ($0.01 par value) | [added: | |] CSGP | [added: | |] Nasdaq Global Select Market | [added: | |]

| Large accelerated filer | [added: | |] x | [added: | |] Accelerated filer | [added: | |] o | [added: | |]

| Non-accelerated filer | [added: | |] o | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| | | [added: | | | |] Emerging growth company | [added: | |] ☐ | [added: | |]

As of June [removed: 28, 2019,] [added: 30, 2020] the aggregate market value of the common stock (based upon the closing price of the stock on the Nasdaq Global Select Market) of the registrant held by non-affiliates was approximately [removed: $20] [added: $24.6] billion.

As of February [removed: 21, 2020, 36,644,734] [added: 19, 2021, 39,410,441] shares of common stock were 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: 2019,] [added: 2020,] are incorporated by reference into Part III of this Report.

| PART I | | | [added: | | | | | |]

| Item 1. | [removed: [Business](#s6B1A6B21040653E095EE4183327303AA)] | [removed: [4](#s6B1A6B21040653E095EE4183327303AA)] | [added: [Business](#i8ff0b374c9a74ea5b124a69f1182bece_16) | | | [5](#i8ff0b374c9a74ea5b124a69f1182bece_16) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#s38718F093EB65573A110A5EA2EA967D4)] [added: Factors](#i8ff0b374c9a74ea5b124a69f1182bece_19)] | [removed: [16](#s38718F093EB65573A110A5EA2EA967D4)] | [added: | [19](#i8ff0b374c9a74ea5b124a69f1182bece_19) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s63700EFB7D20581CBACA10BF9351FCA5)] [added: Comments](#i8ff0b374c9a74ea5b124a69f1182bece_22)] | [removed: [29](#s63700EFB7D20581CBACA10BF9351FCA5)] | [added: | [30](#i8ff0b374c9a74ea5b124a69f1182bece_22) | | |]

| Item 2. | [removed: [Properties](#s43E2BB3AF67855CCB42E5E1B1A96D4A1)] | [removed: [29](#s43E2BB3AF67855CCB42E5E1B1A96D4A1)] | [added: [Properties](#i8ff0b374c9a74ea5b124a69f1182bece_25) | | | [30](#i8ff0b374c9a74ea5b124a69f1182bece_25) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s9B90511B35F5516B824DC26DD48FF7A6)] [added: Proceedings](#i8ff0b374c9a74ea5b124a69f1182bece_28)] | [removed: [29](#s9B90511B35F5516B824DC26DD48FF7A6)] | [added: | [30](#i8ff0b374c9a74ea5b124a69f1182bece_28) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#s7CFB31C98DF25FB7B9CC70EBA85D52F9)] [added: Disclosures](#i8ff0b374c9a74ea5b124a69f1182bece_31)] | [removed: [29](#s7CFB31C98DF25FB7B9CC70EBA85D52F9)] | [added: | [30](#i8ff0b374c9a74ea5b124a69f1182bece_31) | | |]

| PART II | | | [added: | | | | | |]

| Item 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sF198075D0CE356E8849F9E352784AB81)] [added: Securities](#i8ff0b374c9a74ea5b124a69f1182bece_37)] | [removed: [30](#sF198075D0CE356E8849F9E352784AB81)] | [added: | [31](#i8ff0b374c9a74ea5b124a69f1182bece_37) | | |]

| Item 6. | [added: | |] [Selected Financial [removed: Data](#sBC234F8624F25C5FA9BBC3EB3B9F6FA3)] [added: Data](#i8ff0b374c9a74ea5b124a69f1182bece_40)] | [removed: [32](#sBC234F8624F25C5FA9BBC3EB3B9F6FA3)] | [added: | [33](#i8ff0b374c9a74ea5b124a69f1182bece_40) | | |]

| Item 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s48DF13CBED44500289F2401DA7948978)] [added: Operations](#i8ff0b374c9a74ea5b124a69f1182bece_43)] | [removed: [33](#s48DF13CBED44500289F2401DA7948978)] | [added: | [34](#i8ff0b374c9a74ea5b124a69f1182bece_43) | | |]

| Item 7A. | [added: | |] [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s3814A67B3A0B5BD189F8ACFF1339C8AA)] [added: Risk](#i8ff0b374c9a74ea5b124a69f1182bece_88)] | [removed: [46](#s3814A67B3A0B5BD189F8ACFF1339C8AA)] | [added: | [50](#i8ff0b374c9a74ea5b124a69f1182bece_88) | | |]

| Item 8. | [added: | |] [Financial Statements and Supplementary [removed: Data](#sB7CFE3C5134D50B0BC9A4B5E9F7B4356)] [added: Data](#i8ff0b374c9a74ea5b124a69f1182bece_91)] | [removed: [47](#sB7CFE3C5134D50B0BC9A4B5E9F7B4356)] | [added: | [51](#i8ff0b374c9a74ea5b124a69f1182bece_91) | | |]

| Item 9. | [added: | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sDDF631C9D356574A957BFD40FE274AB5)] [added: Disclosure](#i8ff0b374c9a74ea5b124a69f1182bece_94)] | [removed: [47](#sDDF631C9D356574A957BFD40FE274AB5)] | [added: | [51](#i8ff0b374c9a74ea5b124a69f1182bece_94) | | |]

| Item 9A. | [added: | |] [Controls and [removed: Procedures](#s9F8897A672F653EE806E5C9FAE6BD027)] [added: Procedures](#i8ff0b374c9a74ea5b124a69f1182bece_97)] | [removed: [47](#s9F8897A672F653EE806E5C9FAE6BD027)] | [added: | [51](#i8ff0b374c9a74ea5b124a69f1182bece_97) | | |]

| Item 9B. | [added: | |] [Other [removed: Information](#s7BBD7C39D6E35EE58F57FBA3DC1FB0C3)] [added: Information](#i8ff0b374c9a74ea5b124a69f1182bece_100)] | [removed: [48](#s7BBD7C39D6E35EE58F57FBA3DC1FB0C3)] | [added: | [52](#i8ff0b374c9a74ea5b124a69f1182bece_100) | | |]

| PART III | | | [added: | | | | | |]

| Item 10. | [added: | |] [Directors, Executive Officers and Corporate [removed: Governance](#sF3B3DDFE807350059209FDF10C18AAF2)] [added: Governance](#i8ff0b374c9a74ea5b124a69f1182bece_106)] | [removed: [48](#sF3B3DDFE807350059209FDF10C18AAF2)] | [added: | [52](#i8ff0b374c9a74ea5b124a69f1182bece_106) | | |]

| Item 11. | [added: | |] [Executive [removed: Compensation](#s923E911A9E995D658FDC283F4AA764BB)] [added: Compensation](#i8ff0b374c9a74ea5b124a69f1182bece_109)] | [removed: [48](#s923E911A9E995D658FDC283F4AA764BB)] | [added: | [52](#i8ff0b374c9a74ea5b124a69f1182bece_109) | | |]

| Item 12. | [added: | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s1CB5050EB4605135A8C1B7609CFF4431)] [added: Matters](#i8ff0b374c9a74ea5b124a69f1182bece_112)] | [removed: [48](#s1CB5050EB4605135A8C1B7609CFF4431)] | [added: | [52](#i8ff0b374c9a74ea5b124a69f1182bece_112) | | |]

| Item 13. | [added: | |] [Certain Relationships and Related Transactions, and Director [removed: Independence](#s8DFA68A856D5547D9D430E27D1700F29)] [added: Independence](#i8ff0b374c9a74ea5b124a69f1182bece_115)] | [removed: [48](#s8DFA68A856D5547D9D430E27D1700F29)] | [added: | [52](#i8ff0b374c9a74ea5b124a69f1182bece_115) | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of

the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.

7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| | | | [Signatures](#i8ff0b374c9a74ea5b124a69f1182bece_133) | | | [58](#i8ff0b374c9a74ea5b124a69f1182bece_133) | | |

Cautionary Statement Concerning Forward-Looking Statements

We have made forward-looking statements in this Report and make forward-looking statements in our other reports filed with the SEC, press releases and conference calls that are subject to risks and uncertainties.

Forward-looking statements include information that is not purely historic fact and include, without limitation, statements concerning our financial outlook for 2021 and beyond, our possible or assumed future results of operations generally, and other statements and information regarding assumptions or expectations about our revenues, revenue growth rates, gross margin percentage, net income, net income per share, fully diluted net income per share, EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-generally accepted accounting principles (“GAAP”) net income, non-GAAP net income per share, weighted-average outstanding shares, cash flow from operating activities, operating costs, capital and other expenditures, the current and future impacts of COVID-19 on our operations, our actions in response to the COVID-19 pandemic, key priorities for 2021, trends in customer behavior, legal proceedings and claims, legal costs, effective tax rate, pending acquisitions, the anticipated benefits of completed or proposed acquisitions, the anticipated timing of acquisition closings and integrations, the anticipated benefits of cross-selling efforts, product development and release, geographic and product expansion, planned service enhancements, planned sales and marketing activities and investments, the impact or results of sales and marketing initiatives, product integrations, elimination and de-emphasizing of services, net new sales, contract renewal rates, use of proceeds from equity and debt offerings, the use of proceeds of any draws under our $750 million credit facility (the “2020 Credit Agreement”), expectations regarding our compliance with financial and restrictive covenants in the 2020 Credit Agreement, employee relations, management’s plans, goals and objectives for future operations, deferral of tax payments, sources and adequacy of liquidity, and growth and markets for our stock.

Sections of this Report which contain forward-looking statements include “Business,” “Risk Factors,” “Properties,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Controls and Procedures” and the Financial Statements and related Notes.

Our forward-looking statements are also identified by words such as “hope,” “anticipate,” “may,” “believe,” “expect,” “intend,” “will,” “should,” “plan,” “estimate,” “predict,” “continue” and “potential” or the negative of these terms or other comparable terminology.

You should understand that these forward-looking statements are estimates reflecting our judgment, beliefs and expectations, not guarantees of future performance.

They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

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: the effects of and uncertainty surrounding the COVID-19 pandemic, including the length and severity of the economic downturn associated with the COVID-19 pandemic, including disruption of the international and national economy and credit markets; actions taken by governments, businesses and individuals in response to the COVID-19 pandemic such as office and other workplace closures, worker absenteeism or decreased productivity, quarantines, mass-transit disruptions or other travel or health-related restrictions; how quickly economies, including the real estate industry in particular, recover after the COVID-19 pandemic subsides; real estate market conditions; general economic conditions, both domestic and international, including the impacts of “Brexit” and uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmarks; our ability to identify, acquire and integrate additional acquisition candidates; our ability to realize the expected benefits, cost savings or other synergies from acquisitions, including STR, Ten-X and Homesnap, 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; the risk that expected investments in acquired businesses, or the timing of any such investments, may change or may not produce the expected results; our ability to transition acquired service platforms to our model in a timely manner or at all; changes and developments in business plans or operations; theft of any personally identifiable information we, or the businesses that we acquire, maintain, store or process; any actual or perceived failure to comply with privacy or data protection laws, regulations or standards; any disruption of our systems, including due to any cyberattack or other similar event; 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 real estate industry; customer retention; our ability to attract new clients and to sell additional services to existing clients; our ability to develop, 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; our ability to increase traffic on our network of sites; the success of our marketing campaigns in generating brand awareness and site traffic; our ability to protect and defend our intellectual property, including against unauthorized or unlicensed use of our services; 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; 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, including retention of employees of acquired businesses; technical

problems with our services; managerial execution; changes in relationships with real estate agents, brokers, owners, property managers and other strategic partners; legal and regulatory issues, including any actual or perceived failure to comply with United States (“U.S.”).

or international laws, rules or regulations; successful adoption of and training on our services; and the availability of capital.

Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date of this Report.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

We do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect new information or events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

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(877) 739-0486

*(Registrant’s facsimile number, including area code)*

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| | [Signatures](#s1A0390F591B25736ABDE103A8B9D6335) | [53](#s1A0390F591B25736ABDE103A8B9D6335) |

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Our headquarters is located at 1331 L Street, NW, in downtown Washington, DC, where we occupy approximately [removed: 159,331] [added: 169,093] square feet of office space, with a lease that expires May 31, 2025 (with two 5-year renewal options).

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Our common stock is traded on the Nasdaq Global Select Market under the symbol “CSGP.” As of January 31, [removed: 2020,] [added: 2021,] there were [removed: 1,527] [added: 1,751] holders of record of our common stock.

*Recent Issues of Unregistered Securities.* We did not issue any unregistered securities during the [removed: years] [added: year] ended December 31, [removed: 2018 and 2019 other than as disclosed in our Current Report on Form 8-K filed with the SEC on February 21, 2018.][added: 2020.]

*Issuer Purchases of Equity Securities.* 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: 2019:][added: 2020:]

| Month, [removed: 2019] [added: 2020] | | [added: | | | |] Total Number of Shares Purchased | | | [added: | | | | | |] Average Price Paid per Share | | [added: | | | |] Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | [added: | | | |] Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | [added: | |]

(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 [removed: Company's 2007 Stock Incentive Plan, as amended (the "2007 Plan"), and the] Company’s 2016 Stock Incentive Plan, as amended, which shares were purchased by the Company based on their fair market value on the trading day immediately preceding the vesting date.

[removed: | • |] [added: -] An equal investment in the Standards & Poor's Stock 500 (“S&P 500”) Index; and [removed: |]

[removed: | • |] [added: -] An equal investment in the S&P 500 Internet Services & Infrastructure Index. [removed: |]

The comparison covers the period beginning December 31, [removed: 2014,] [added: 2015,] and ending on December 31, [removed: 2019,] [added: 2020,] and assumes the reinvestment of any dividends.

[removed: ][added: ]

| Company / Index | | [removed: 12/31/14] | | | | 12/31/15 | | | | [added: | |] 12/31/16 | | | | [added: | |] 12/31/17 | | | | [added: | |] 12/31/18 | | | | [added: | |] 12/31/19 | | | [added: | | | 12/31/20 | | |]

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

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

| October 1 through 31 | | | | | | 1,724 | | | | | | | | | $ | 848.63 | | | | | — | | | | | | — | | |

| November 1 through 30 | | | | | | 2,097 | | | | | | | | | 835.61 | | | | | | — | | | | | | — | | |

| December 1 through 31 | | | | | | 967 | | | | | | | | | 879.64 | | | | | | — | | | | | | — | | |

| Total | | | | | | 4,788 | | | (1) | | | | | | $ | 849.19 | | | | | — | | | | | | — | | |

| __________________________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

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

| CoStar Group, Inc. | | | | | | $ | 100 | | | | | $ | 91.19 | | | | | $ | 143.67 | | | | | $ | 163.21 | | | | | $ | 289.47 | | | | | $ | 447.18 | |

| S&P 500 Index | | | | | | 100 | | | | | | 111.96 | | | | | | 136.40 | | | | | | 130.42 | | | | | | 171.49 | | | | | | 203.04 | | |

| S&P 500 Internet Services & Infrastructure Index | | | | | | 100 | | | | | | 105.18 | | | | | | 148.04 | | | | | | 135.52 | | | | | | 182.22 | | | | | | 211.53 | | |

| __________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | |

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

| October 1 through 31 | | 1,609 | | | $594.50 | | — | | — |

| November 1 through 30 | | 1,221 | | | 568.88 | | — | | — |

| December 1 through 31 | | 1,481 | | | 596.27 | | — | | — |

| Total | | 4,311 | (1) | | $587.85 | | — | | — |

| __________________________ | | | | | | | | | |

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| --- | --- |

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

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

| CoStar Group, Inc. | | $ | 100.00 | | | $ | 112.56 | | | $ | 102.65 | | | $ | 161.71 | | | $ | 183.71 | | | $ | 325.82 | |

| S&P 500 Index | | 100.00 | | | | 101.38 | | | | 113.51 | | | | 138.29 | | | | 132.23 | | | | 173.86 | | |

| S&P 500 Internet Services & Infrastructure Index (1) | | 100.00 | | | | 133.32 | | | | 140.22 | | | | 197.36 | | | | 180.67 | | | | 242.93 | | |

| __________________________ | | | | | | | | | | | | | | | | | | | | | | | | |

(1) As a result of revisions to the Global Industry Classification Standards, we now prepare the comparison above using the S&P 500 Internet Services & Infrastructure index.

This index replaced the discontinued Internet Software & Services index that we used previously; however, the S&P 500 Internet Services & Infrastructure index uses the historical information from the discontinued index.

Therefore, there is no change in the historical data presented under the index.

The following table provides selected consolidated financial data for the five years ended December 31, [removed: 2019.][added: 2020.]

The consolidated statements of operations data shown below for each of the three years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] and the consolidated balance sheet data as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] 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: 2016] [added: 2017] and [removed: 2015] [added: 2016] and the consolidated balance sheet data as of December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] shown below are derived from audited consolidated financial statements for those years that are not included in this report.

| | [added: | |] Year Ended December 31, | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| Consolidated Statements of Operations Data: | [removed: 2015] | | [added: 2016] | | [removed: 2016] | | | | 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

| Revenues | [removed: $] | [removed: 711,764] | [removed: | |] $ | 837,630 | | | [added: | |] $ | 965,230 | | | [added: | |] $ | 1,191,832 | | | [added: | |] $ | 1,399,719 | | [added: | | | $ | 1,659,019 | |]

| Cost of revenues | [removed: 188,885] | | [added: 173,814] | | [removed: 173,814] | | | | 220,403 | | | | [added: | |] 269,933 | | | | [added: | |] 289,239 | | | [added: | | | 308,968 | | |]

| Gross profit | [removed: 522,879] | | [added: 663,816] | | [removed: 663,816] | | | | 744,827 | | | | [added: | |] 921,899 | | | | [added: | |] 1,110,480 | | | [added: | | | 1,350,051 | | |]

| Operating expenses | [removed: 511,424] | | [added: 518,911] | | [removed: 518,911] | | | | 571,011 | | | | [added: | |] 648,335 | | | | [added: | |] 746,933 | | | [added: | | | 1,060,849 | | |]

| Income from operations | [removed: 11,455] | | [added: 144,905] | | [removed: 144,905] | | | | 173,816 | | | | [added: | |] 273,564 | | | | [added: | |] 363,547 | | | [added: | | | 289,202 | | |]

| Income before income taxes | [removed: 2,581] | | [added: 136,662] | | [removed: 136,662] | | | | 165,058 | | | | [added: | |] 284,015 | | | | [added: | |] 390,949 | | | [added: | | | 270,980 | | |]

| Income tax expense | [removed: 6,046] | | [added: 51,591] | | [removed: 51,591] | | | | 42,363 | | | | [added: | |] 45,681 | | | | [added: | |] 75,986 | | | [added: | | | 43,852 | | |]

| Net income [removed: (loss)] | [removed: $] | [removed: (3,465] | [removed: ) | |] $ | 85,071 | | | [added: | |] $ | 122,695 | | | [added: | |] $ | 238,334 | | | [added: | |] $ | 314,963 | | [added: | | | $ | 227,128 | |]

| Net income [removed: (loss)] per share — basic | [removed: $] | [removed: (0.11] | [removed: ) | |] $ | 2.64 | | | [added: | |] $ | 3.70 | | | [added: | |] $ | 6.61 | | | [added: | |] $ | 8.67 | | [added: | | | $ | 5.97 | |]

| Net income [removed: (loss)] per share — diluted | [removed: $] | [removed: (0.11] | [removed: ) | |] $ | 2.62 | | | [added: | |] $ | 3.66 | | | [added: | |] $ | 6.54 | | | [added: | |] $ | 8.60 | | [added: | | | $ | 5.93 | |]

| Weighted average shares outstanding — basic | [removed: 31,950] | | [added: 32,167] | | [removed: 32,167] | | | | 33,200 | | | | [added: | |] 36,058 | | | | [added: | |] 36,310 | | | [added: | | | 38,073 | | |]

| Weighted average shares outstanding — diluted | [removed: 31,950] | | [added: 32,436] | | [removed: 32,436] | | | | 33,559 | | | | [added: | |] 36,448 | | | | [added: | |] 36,630 | | | [added: | | | 38,326 | | |]

| | [added: | |] As of December 31, | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| Consolidated Balance Sheet Data: | [removed: 2015] | | [added: 2016] | | [removed: 2016] | | | | 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

| Cash, cash equivalents and long-term investments | [removed: $] | [removed: 437,325] | [removed: | |] $ | 577,175 | | | [added: | |] $ | 1,221,533 | | | [added: | |] $ | 1,110,486 | | | [added: | |] $ | 1,080,801 | | [added: | | | $ | 3,755,912 | |]

| Working capital | [removed: 337,452] | | [added: 472,545] | | [removed: 472,545] | | | | 1,141,269 | | | | [added: | |] 1,059,139 | | | | [added: | |] 992,109 | | | [added: | | | 3,557,662 | | |]

| Total assets | [removed: 2,079,571] | | [added: 2,185,063] | | [removed: 2,185,063] | | | | 2,873,441 | | | | [added: | |] 3,312,957 | | | | [added: | |] 3,853,986 | | | [added: | | | 6,915,420 | | |]

| Total long-term liabilities | [removed: 400,510] | | [added: 375,904] | | [removed: 375,904] | | | | 75,525 | | | | [added: | |] 136,856 | | | | [added: | |] 241,337 | | | [added: | | | 1,209,211 | | |]

| Stockholders’ equity | [removed: 1,543,780] | | [added: 1,654,213] | | [removed: 1,654,213] | | | | 2,651,250 | | | | [added: | |] 3,021,942 | | | | [added: | |] 3,405,593 | | | [added: | | | 5,375,359 | | |]

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

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

| Interest (expense) income | | | (9,244) | | | | | | (5,669) | | | | | | 10,539 | | | | | | 16,742 | | | | | | (17,395) | | |

| Other (expense) income | | | 1,001 | | | | | | (3,089) | | | | | | (88) | | | | | | 10,660 | | | | | | (827) | | |

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

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

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

| Interest and other income | 537 | | | | 1,773 | | | | 4,044 | | | | 13,281 | | | | 30,017 | | |

| Interest and other expense | (9,411 | | ) | | (10,016 | | ) | | (9,014 | | ) | | (2,830 | | ) | | (2,615 | | ) |

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

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Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level as of December 31, [removed: 2019.][added: 2020.]

[removed: During 2019, we continued] [added: We continue] to implement a financial system that is designed to improve the efficiency and effectiveness of our operational and financial accounting processes.

This implementation is expected to continue beyond [removed: 2020.][added: 2021.]

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: 2019 based on criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring]

Based on this assessment, management has concluded that the Company's internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

As permitted by the Securities and Exchange Commission, we have elected to exclude the internal controls of these acquisitions that have not been integrated into our existing processes and controls from our assessment of the effectiveness of internal control over financial reporting as of December 31, [removed: 2019.][added: 2020.]

The excluded aggregate financial position of [removed: OCP] [added: Homesnap] and [removed: STR] [added: Ten-X collectively] represented less than 1% of our total assets as of December 31, [removed: 2019,] [added: 2020,] and less than [removed: 1% and] 2% of our revenues and [removed: net income, respectively,] [added: total operating costs] for the year then ended.

We will include the internal controls of [removed: OCP] [added: Homesnap] and [removed: STR] [added: Ten-X] in our assessment of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2020.][added: 2021.]

2020 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”).

On December 22, 2020 and June 24, 2020, we completed the acquisitions of Homesnap and Ten-X, respectively.

Organizations of the Treadway Commission (“the COSO Framework”).

On June 12, 2019, we completed the acquisition of OCP and on October 22, 2019, we completed the acquisition of STR.

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The remaining information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2020] [added: 2021] annual meeting of stockholders under the captions “Nominees for the Board of Directors,” “Nominees’ Business Experience, Qualifications and Directorships,” [removed: “Information about our Executive] [added: “Executive] Officers and Key Employees,” [removed: and] “Board Meetings and [removed: Committees.”][added: Committees,” and "Delinquent Section 16(a) Reports."]

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The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2020] [added: 2021] annual meeting of stockholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation Tables and Discussion,” “Narratives to Summary Compensation Table and Grants of Plan-Based Awards Table,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report.”

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The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2020] [added: 2021] annual meeting of stockholders under the captions “Equity Compensation Plan Information” and “Stock Ownership Information.”

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The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2020] [added: 2021] annual meeting of stockholders under the captions “Certain Relationships and Related Transactions” and “Corporate Governance Matters.”

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The information required by this Item is incorporated by reference to our Proxy Statement for our [removed: 2020] [added: 2021] annual meeting of stockholders under the caption “Ratification of the Appointment of Independent Registered Public Accounting Firm.”

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The table below details the activity of the allowance for doubtful accounts and sales credits (1) for the years ended December 31, [removed: 2019, 2018,] [added: 2019] and [removed: 2017] [added: 2018] (in thousands):

| | | [added: | | | |] Balance [removed: at Beginning of] [added: at Beginning of] Year | | | | [added: | |] Charged [removed: to Expense] [added: to Expense] | | | | [added: | | | | | | | |] Reductions | | | | [added: | |] Balance [removed: at End] [added: at End] of Year | | |

| Year ended December 31, 2018 | | [added: | | | |] $ | 6,469 | | | [added: | |] $ | 6,542 | | | [added: | | | | | | | |] $ | 7,302 | | | [added: | |] $ | 5,709 | |

| Year ended December 31, [removed: 2019] [added: 2019(2)] | | [added: | | | |] $ | 5,709 | | | [added: | |] $ | 10,978 | | | [added: | | | | | | | |] $ | 11,590 | | | [added: | |] $ | 5,097 | |

[removed: | (1) | Additions] [added: (1)Additions] to the allowance for doubtful accounts are charged to bad debt expense. [removed: Additions to the allowance for sales credits are charged against revenues. |]

| Exhibit No. | | [added: | | | |] Description | [added: | |]

| [3.1](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000041/amended-restatedcertofincx.htm) | | [added: | | | |] 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). | [added: | |]

| [3.2](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000070/bylawsmajorityvotingamendm.htm) | | [added: | | | |] 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). | [added: | |]

| [4.1](http://www.sec.gov/Archives/edgar/data/1057352/000095012311056513/w82657a1exv4w1.htm) | | [added: | | | |] 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). | [added: | |]

| [removed: [4.2](https://www.sec.gov/Archives/edgar/data/1057352/000105735220000036/csgp-ex4220191231.htm)] [added: [4.2](http://www.sec.gov/ix?doc=/Archives/edgar/data/1057352/000105735220000036/csgp20191231-10k.htm)] | | [added: | | | |] Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 [removed: (filed herewith).] [added: (Incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K filed with the Commission on February 26, 2020).] | [added: | |]

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

| *[10.2](http://www.sec.gov/Archives/edgar/data/1057352/000105735218000066/csgp-3312018xex101.htm) | | [added: | | | |] First Amendment to the CoStar Group, Inc. 2016 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed April 25, 2018). | [added: | |]

| *[10.3](http://www.sec.gov/Archives/edgar/data/1057352/000105735212000101/ex101.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.4](http://www.sec.gov/Archives/edgar/data/1057352/000105735208000004/frenchsub_plan.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.5](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex103.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.6](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex104.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.7](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex105.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.8](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex106.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.9](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex107.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.10](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex108.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.11](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex109.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.12](http://www.sec.gov/Archives/edgar/data/1057352/000105735207000051/ex_99-1.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.13](http://www.sec.gov/Archives/edgar/data/1057352/000105735214000006/csgp-ex108_20131231.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.14](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/iso2007agrmt.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.15](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/iso2007agrmt_w-florance.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.16](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.17](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt_w-dir.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.18](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/nqso2007agrmt_w-florance.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.19](http://www.sec.gov/Archives/edgar/data/1057352/000105735208000004/rest_stockform-frenchsubform.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.20](http://www.sec.gov/Archives/edgar/data/1057352/000105735216000143/csgp-6302016xex102.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.21](http://www.sec.gov/Archives/edgar/data/1057352/000105735215000072/espp-amendedandrestatedtoi.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.22](http://www.sec.gov/Archives/edgar/data/1057352/000105735218000011/csgp-ex1021_20171207.htm) | | [added: | | | |] CoStar Group, Inc. Management Stock Purchase Plan (Incorporated by reference to Exhibit 10.21 to the Registrant’s Report on Form 10-K filed February 23, 2018). | [added: | |]

| *[10.23](http://www.sec.gov/Archives/edgar/data/1057352/000105735213000078/csgp-9302013xex101.htm) | | [added: | | | |] 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). | [added: | |]

| *[10.24](http://www.sec.gov/Archives/edgar/data/1057352/0001005150-98-000402.txt) | | [added: | | | |] 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). | [added: | |]

| *[10.25](http://www.sec.gov/Archives/edgar/data/1057352/000105735209000013/firstamd-florance_empagrmt.htm) | | [added: | | | |] 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). | [added: | |]

| [10.26](http://www.sec.gov/Archives/edgar/data/1057352/000095013304001856/w96989exv10w1.htm) | | [added: | | | |] 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). | [added: | |]

| [10.27](http://www.sec.gov/Archives/edgar/data/1057352/000105735211000072/lease.htm) | | [added: | | | |] 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). | [added: | |]

| [removed: [10.30](http://www.sec.gov/Archives/edgar/data/1057352/000105735219000089/wordcompiledspa.htm)] [added: [10.30](http://www.sec.gov/Archives/edgar/data/1057352/000114036120015295/ex10_1.htm)] | | [removed: Securities Purchase] [added: | | | | Second Amended and Restated Credit] Agreement, dated as of [removed: September 30, 2019,] [added: July 1, 2020, by and] among CoStar Group, Inc., [added: as borrower,] CoStar Realty Information, Inc., [removed: CoStar Portfolio Strategy, LLC, STR, Inc., STR Global, Ltd.,] [added: as co-borrower,] the [removed: seller parties thereto,] [added: lenders party thereto] and [removed: Randell Smith, in his capacity] [added: Bank of America, N.A.,] as [removed: Sellers’ Representative] [added: administrative agent] (Incorporated by reference to Exhibit 10.1 to the [removed: Registrant's] [added: Registrant’s] Current Report on Form 8-K filed with the Commission on [removed: October 2, 2019).] [added: July 1, 2020)] | [added: | |]

| [removed: [10.31](http://www.sec.gov/Archives/edgar/data/1057352/000105735220000021/a151075452616rushmore-.htm)] [added: [10.28](http://www.sec.gov/Archives/edgar/data/1057352/000105735220000021/a151075452616rushmore-.htm)] | | [added: | | | |] Asset Purchase Agreement, dated as of the Petition Date (on or about February 12, 2020), among CSGP Holdings, LLC, CoStar Group, Inc. (solely for the specified purposes), RentPath Holdings, Inc. and the other Sellers named therein (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 13, 2020). | [added: | |]

| [removed: [21.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735220000036/csgp-ex21120191231.htm)] [added: [21.1](https://www.sec.gov/Archives/edgar/data/1057352/000105735221000032/csgp-ex21120201231.htm)] | | [added: | | | |] Subsidiaries of the Registrant (filed herewith). | [added: | |]

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

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| __________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

Additions to the allowance for sales credits are charged against revenues.

(2)On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, using the modified retrospective method.

The adoption resulted in a $0.5 million reduction to the December 31, 2019 allowance for credit losses.

See Note 4 for a description of changes in the allowance for credit losses for the year ended December 31, 2020.

| | | | | | | | | |

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| [4.3](http://www.sec.gov/Archives/edgar/data/1057352/000114036120015295/ex4_1.htm) | | | | | | Indenture, dated as of July 1, 2020, by and among CoStar Group, Inc., as issuer, the guarantors named therein and Wilmington Trust, National Association, as trustee, relating to the 2.800% Senior Notes due 2030, including the form of 2.800% Senior Notes due 2030 (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 1, 2020). | | |

| | | | | | | | | |

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

| Exhibit No. | | | | | | Description | | |

| | | | | | | | | |

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

| Exhibit No. | | | | | | Description | | |

| [10.29](http://www.sec.gov/Archives/edgar/data/1057352/000105735220000080/mergeragreement-projec.htm) | | | | | | Agreement and Plan of Merger, dated as of May 13, 2020, by and among Ten-X Holding Company, Inc., CoStar Realty Information, Inc., Crescendo Sub, Inc., and Thomas H. Lee Equity Fund VII, L.P., solely in its capacity as representative thereunder (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 14, 2020) | | |

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

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

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

| __________________________ | | | | | | | | | | | | | | | | |

| | |

| --- | --- |

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

| | [added: | |] COSTAR GROUP, INC. | | [added: | | | |]

| | [added: | |] By: | [added: | |] /s/ Andrew C. Florance | [added: | |]

| February [removed: 26, 2020] [added: 24, 2021] | | [added: | | | |] Andrew C. Florance | [added: | |]

| | | [added: | | | |] President and Chief Executive Officer | [added: | |]

| Signature | | [added: | | | |] Capacity | | [added: | | | |] Date | [added: | |]

| /s/ Michael R. Klein | | [added: | | | |] Chairman of the Board | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Michael R. Klein | | | | | [added: | | | | | | | | | |]

| /s/ Andrew C. Florance | | [added: | | | |] Chief Executive Officer and | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Andrew C. Florance | | [added: | | | |] President and a Director | | | [added: | | | | | |]

| | | [added: | | | |] (Principal Executive Officer) | | | [added: | | | | | |]

| /s/ Scott T. Wheeler | | [added: | | | |] Chief Financial Officer | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Scott T. Wheeler | | [added: | | | |] (Principal Financial and Accounting Officer) | | | [added: | | | | | |]

| /s/ Michael J. Glosserman | | [added: | | | |] Director | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Michael J. Glosserman | | | | | [added: | | | | | | | | | |]

| /s/ John W. Hill | | [added: | | | |] Director | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| John W. Hill | | | | | [added: | | | | | | | | | |]

| /s/ Laura Cox Kaplan | | [added: | | | |] Director | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Laura Cox Kaplan | | | | | [added: | | | | | | | | | |]

| /s/ Christopher J. Nassetta | | [added: | | | |] Director | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Christopher J. Nassetta | | | | | [added: | | | | | | | | | |]

| /s/ Louise S. Sams | | [added: | | | |] Director | | [added: | | | |] February [removed: 26, 2020] [added: 24, 2021] | [added: | |]

| Louise S. Sams | | | | | [added: | | | | | | | | | |]

| /s/ Robert W. Musslewhite | | [added: | | | |] Director | | [added: | | | |] February [removed: 21, 2020] [added: 24, 2021] | [added: | |]

| Robert W. Musslewhite | | | | | [added: | | | | | | | | | |]

| Reports of Independent Registered Public Accounting Firm | [removed: [F-2](#sA68DCD8460A7548C9866186A8CDC7DF8)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_139)[2](#i8ff0b374c9a74ea5b124a69f1182bece_139) | | |]

| Consolidated Statements of Operations | [removed: [F-6](#sDE2405A3DE1859FC96F70CD57FB18634)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_142)[6](#i8ff0b374c9a74ea5b124a69f1182bece_142) | | |]

| Consolidated Statements of Comprehensive Income | [removed: [F-7](#s8CFED27E4D8F53A6986730C1266116C1)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_145)[7](#i8ff0b374c9a74ea5b124a69f1182bece_145) | | |]

| Consolidated Balance Sheets | [removed: [F-8](#sDCDA60721AF2546585864E0FA7D7883D)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_148)[8](#i8ff0b374c9a74ea5b124a69f1182bece_148) | | |]

| Consolidated Statements of Changes in Stockholders’ Equity | [removed: [F-9](#s61F974B3CB295F418FEC086D8BFD6445)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_154)[9](#i8ff0b374c9a74ea5b124a69f1182bece_154) | | |]

| Consolidated Statements of Cash Flows | [removed: [F-10](#sC0981C528FC0513DA959F0F76A3D536D)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_157)[10](#i8ff0b374c9a74ea5b124a69f1182bece_157) | | |]

| Notes to Consolidated Financial Statements | [removed: [F-12](#s96D5A67E23FB51268122FE087E473083)] | [added: | [F-](#i8ff0b374c9a74ea5b124a69f1182bece_160)[11](#i8ff0b374c9a74ea5b124a69f1182bece_160) | | |]

We have audited the accompanying consolidated balance sheets of CoStar Group, Inc. (the Company) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the related consolidated statements of operations, comprehensive income, [removed: stockholders' equity] [added: change in stockholders’ equity,] and cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the [removed: “financial] [added: “consolidated financial] statements”).

In our opinion, the [added: consolidated] financial statements present fairly, in all material respects, the [removed: consolidated] financial position of the Company at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the [removed: consolidated] results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February [removed: 26, 2020] [added: 24, 2021] expressed an unqualified opinion thereon.

| | | [removed: Valuation] [added: | | | | *Valuation] of Acquired Intangible [removed: Assets] [added: Assets*] | [added: | |]

| *Description of the Matter* | | [added: | | | |] As described in Note [removed: 4] [added: 5] to the consolidated financial statements, during the year ended December 31, [removed: 2019,] [added: 2020,] the Company completed the acquisition of [removed: STR, Inc. and STR Global, Ltd. (together with STR,] [added: Ten-X Holding Company,] Inc. [removed: referred to as “STR”)] [added: ("Ten-X")] for [removed: $435] [added: $187.7] million in cash. The Company’s accounting for the acquisition included determining the fair value of the acquired intangible [removed: assets] [added: assets,] including customer relationships of [removed: $139] [added: $46] million. Auditing the accounting for the acquired intangible assets of [removed: STR] [added: Ten-X] involved complex auditor judgment due to the estimation required in management’s determination of the fair value. The estimation was significant primarily due to the sensitivity of the [removed: respective] fair [removed: values] [added: value] to the underlying assumptions, including [removed: discount rates, projected revenue growth rates,] customer attrition rates and projected [removed: profit margins. These significant assumptions are forward-looking] [added: revenue] and [added: expense growth rates. Prospective financial information used in determining the fair value of customer relationship intangible assets] could be affected by [removed: future] [added: changes in] economic and market conditions. | [added: | |]

| *How We Addressed the Matter in Our Audit* | | [added: | | | |] We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for accounting for acquired intangible assets. For example, we tested controls over management’s review of the valuation model and significant assumptions used in the valuation as well as controls over the completeness and accuracy of the data used in the model and assumptions. To test the fair value of these acquired intangible assets, our audit procedures included, among others, evaluating the Company's use of valuation methodologies, evaluating the significant assumptions, evaluating the prospective financial information and testing the completeness and accuracy of underlying data. We involved our valuation specialists to assist in testing certain significant assumptions used to value the acquired intangible assets. For example, we compared the significant assumptions to current industry and market trends, historical results of the acquired business and to other relevant factors. We also performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value resulting from changes in the assumptions. | [added: | |]

We have audited CoStar Group, Inc.’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in Internal [removed: Control-Integrated] [added: Control—Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, CoStar Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of [removed: Off Campus Partners, LLC, STR, Inc.] [added: Ten-X] and [removed: STR Global, Ltd.,] [added: Homesnap,] which are included in the [removed: 2019] [added: 2020] consolidated financial statements of CoStar Group, Inc., and collectively constituted less than 1% of total assets as of December 31, [removed: 2019] [added: 2020] and less than [removed: 1% and] 2% of total revenues and [removed: net income, respectively,] [added: total operating costs] for the year then ended.

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February 24, 2021

February 24, 2021

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

| Interest (expense) income | | | (17,395) | | | | | | 16,742 | | | | | | 10,539 | | |

| Other (expense) income | | | (827) | | | | | | 10,660 | | | | | | (88) | | |

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

| Unrealized gain on investments | | | | | | 189 | | | | | | — | | | | | | — | | |

| Reclassification adjustment for realized loss on investments included in net income | | | | | | 541 | | | | | | — | | | | | | — | | |

| Cash, cash equivalents and restricted cash | | | $ | 3,755,912 | | | | | $ | 1,070,731 | |

| Accounts receivable | | | 119,059 | | | | | | 96,788 | | |

| Less: Allowance for credit losses | | | (15,110) | | | | | | (4,548) | | |

| Accounts receivable, net | | | 103,949 | | | | | | 92,240 | | |

| Long-term debt, net | | | 986,715 | | | | | | — | | |

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

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

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

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 227,128 | | | | | | 227,128 | | |

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

| Stock issued for equity offerings, net of transaction costs | | | 2,634 | | | | | | 26 | | | | | | 1,689,945 | | | | | | — | | | | | | — | | | | | | 1,689,971 | | |

| Balance at December 31, 2020 | | | 39,414 | | | | | | $ | 394 | | | | | $ | 4,208,252 | | | | | $ | (889) | | | | | $ | 1,167,602 | | | | | $ | 5,375,359 | |

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

| Net income | | | $ | 227,128 | | | | | $ | 314,963 | | | | | $ | 238,334 | | | | |

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

| /s/ David J. Steinberg | | Director | | February 26, 2020 |

| David J. Steinberg | | | | |

COSTAR GROUP, INC.

| | |

| --- | --- |

Adoption of ASU No. 2014-09

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for recognizing revenue in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, *Revenue from Contracts with Customers* (Topic 606), and the related amendments.

February 26, 2020

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| Interest and other income | 30,017 | | | | 13,281 | | | | 4,044 | | |

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

(in thousands)

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| Accounts receivable, less allowance of $5,097 and $5,709 as of December 31, 2019 and December 31, 2018, respectively | 92,240 | | | | 89,192 | | |

| Deferred gain on the sale of building | — | | | | 2,523 | | |

| Deferred rent | — | | | | 4,153 | | |

| Deferred gain on the sale of building | — | | | | 13,669 | | |

| Deferred rent | — | | | | 31,944 | | |

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

| Net income | — | | | — | | | | — | | | | — | | | | 122,695 | | | | 122,695 | | |

| Stock issued for equity offering | 3,317 | | | 33 | | | | 833,878 | | | | — | | | | — | | | | 833,911 | | |

| Cumulative effect of adoption of new accounting standard, net of tax | — | | | — | | | | — | | | | — | | | | 12,057 | | | | 12,057 | | |

CONSOLIDATED STATEMENTS OF CASH FLOWS

| Amortization of debt issuance costs | 876 | | | | 876 | | | | 2,303 | | |

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

| Bad debt expense | 10,978 | | | | 6,542 | | | | 5,690 | | |

| Income tax receivable | — | | | | (1,927 | | ) | | (12,981 | | ) |

| Cash and cash equivalents at beginning of year | 1,100,416 | | | | 1,211,463 | | | | 567,223 | | |

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU") 2014-09, *Revenue from Contracts with Customers*, later codified as Accounting Standards Codification 606 ("*ASC 606*") using the modified retrospective method.

Operating results for periods subsequent to December 31, 2017 are presented under *ASC 606*, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting policies prior to adoption.

There were no material gains or losses from foreign currency exchange transactions for the years ended December 31, 2019, 2018, and 2017.