Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements,” including statements about our beliefs and expectations. There are many risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. Potential factors that could cause actual results to differ materially from those discussed in any forward-looking statements include, but are not limited to, those stated under the heading “Cautionary Statement Concerning Forward-Looking Statements” at the end of this Item 2, “Risk Factors” in Item 1A of Part I of our 2023 Form 10-K and "Risk Factors" in Item 1A of Part II of this Report, as well as those described from time to time in our filings with the SEC.

All forward-looking statements are based on information available to us on the date of this filing, and we assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. The following discussion should be read in conjunction with our 2023 Form 10-K, our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other filings with the SEC and the condensed consolidated financial statements and related notes included in this Report.

Overview

CoStar Group, founded in 1987, is a leading provider of online real estate marketplaces, information, and analytics in the U.S. and U.K., based on the fact that we own and operate leading online marketplaces for commercial real estate and apartment listings in the U.S., based on the numbers of unique visitors and site visits per month; provide more information, analytics, and marketing services than any of our competitors; offer the most comprehensive commercial real estate database available; and have the largest commercial real estate research department in the industry. We have created and compiled a standardized platform of information, analytics, and online marketplace services where industry professionals and consumers of commercial real estate, including apartments, and the related business communities, can continuously interact and facilitate transactions by efficiently accessing and exchanging accurate and standardized real estate-related information. Our service offerings span all commercial property types, including office, retail, industrial, multifamily, land, mixed-use, and hospitality. We also offer online platforms that manage workflow and marketing for residential real estate agents and brokers and provide portals for homebuyers to view residential property listings.

Our services are typically distributed to our customers under subscription-based license agreements that typically renew automatically, a majority of which have a term of at least one year. Upon renewal, many of the subscription contract rates may change in accordance with contract provisions or as a result of contract renegotiations. To encourage customers to use our services regularly, we generally charge a fixed monthly amount for our subscription-based services rather than charging fees based on actual platform usage or number of paid clicks. Depending on the type of service, contract rates are generally based on the number of sites, number of users, organization size, the customer’s business focus, the customer's geographic location, the number of properties reported on or analyzed, the number and types of services to which a client subscribes, the number of properties a customer advertises and the prominence and placement of a customer's advertised properties in the search results. Our subscription customers generally pay contract fees on a monthly basis, but in some cases may pay us on a quarterly or annual basis. Our transaction-based services primarily consist of auction fees from our Ten-X online auction platform for commercial real estate, which are generally calculated as a percentage of the final sales price for the commercial real estate property sold and recognized as revenue upon the successful closure of an auction. Other transaction-based services are described by service offering below.

Services

Our portfolio of information and analytics services and online marketplaces is branded and marketed to our customers and marketplace end users under the primary brands of CoStar®, LoopNet®, Apartments.com®, Homes.com®, Ten-X®, BizBuySell®, Land.com®, and OnTheMarket®. Our services are accessible via the internet and through our mobile applications. Our services are primarily derived from a database of building-specific information and offer customers specialized tools for accessing, analyzing, and using our information. Over time, we have enhanced and expanded, and we expect to continue to enhance and expand, our existing information, analytics, and online marketplace services. We have developed and we expect to continue to develop additional services leveraging our database to meet the needs of our existing customers, as well as potential new categories of customers.

Our principal information, analytics, and online marketplace services are described in the following paragraphs by type of services:

CoStar

CoStar is our subscription-based integrated platform for commercial real estate intelligence, which includes information about office, industrial, retail, multifamily, hospitality, and student housing properties, properties for sale, comparable sales, tenants, space available for lease, industry professionals and their business relationships, industry news and market status and provides benchmarking for the hospitality industry, lease analytical capabilities, and risk management capabilities. CoStar's revenue growth rate for the nine months ended September 30, 2024 was consistent with the revenue growth rate for the nine months ended September 30, 2023. We expect CoStar's revenue growth rate for the year ending December 31, 2024 to be consistent with the revenue growth rate for the year ended December 31, 2023, due to converting legacy STR customers to our new CoStar-based benchmarking product offsetting lower inflation-based price adjustments.

Information Services

We provide real estate and lease management technology solutions, including lease 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 Risk Analytics service offerings. We also provide data and reports on an ad hoc basis to customers in the hospitality industry. We earn revenue on ad hoc transactions as reports or data are delivered to customers. We provide information services internationally, through our Business Immo, Belbex, and Thomas Daily businesses in France, Spain, and Germany, respectively. Information Services' revenues for the nine months ended September 30, 2024 decreased compared to the revenues for the nine months ended September 30, 2023 due to converting legacy STR customers to our new CoStar-based benchmarking product. We expect the Information Services revenues for the year ending December 31, 2024 to decrease compared to the revenues for the year ended December 31, 2023 due to converting legacy STR customers to our new CoStar-based benchmarking product.

Multifamily

Apartments.com is the flagship brand of our apartment marketing network of subscription-based advertising services and provides property management companies and landlords with a comprehensive advertising destination for their available rental units and offers renters a platform for searching for available rentals. This network also earns transaction-based revenue primarily from providing online tenant applications, including background and credit checks, and rental payment processing. Multifamily's revenue growth rate for the nine months ended September 30, 2024 moderated compared to the revenue growth rate for the nine months ended September 30, 2023 due to lower inflation-based price adjustments. We expect the Multifamily revenue growth rate for the year ending December 31, 2024 to moderate compared to the revenue growth rate for the year ended December 31, 2023 due to lower inflation-based price adjustments.

LoopNet

Our LoopNet network of commercial real estate websites offers subscription-based, online marketplace services that enable commercial property owners, landlords and real estate agents working on their behalf to advertise properties for sale or for lease and to submit detailed information about property listings. Commercial real estate agents, buyers, and tenants use the LoopNet network of online marketplace services to search for available property listings that meet their criteria. LoopNet's revenue growth rate for the nine months ended September 30, 2024 decelerated compared to the revenue growth rate for the nine months ended September 30, 2023 due to lower inflation-based price increases. We expect LoopNet's revenue growth rate for the year ended December 31, 2024 to decelerate compared to the revenue growth rate for the year ended December 31, 2023 due to lower inflation-based price increases.

Residential

The Homes.com Acquisition and the OnTheMarket Acquisition have enabled us to expand our offerings to the residential for sale market. Homes.com is a homes-for-sale listings site that combines our proprietary research with listing information to allow homebuyers an informative and collaborative experience finding homes for sale or lease. In February 2024, we began selling Homes.com memberships, which are subscription-based advertising services promoting an agent's profile and listings on our website. Homes.com also provides legacy products and services to residential real estate including subscription-based access to applications that manage residential real estate agent workflow and receives transaction-based revenue for marketing campaigns delivered on third-party platforms. OnTheMarket is a property portal in the U.K., which primarily offers subscriptions-based advertising services to agents. Residential's revenues for the nine months ended September 30, 2024 increased compared to the nine months ended September 30, 2023 due to the OnTheMarket Acquisition and the launch of our new Homes.com product, partially offset by lost revenue due to the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy. We expect Residential's revenues for the year ending December 31, 2024 to increase compared to the year ended December 31, 2023 due to the OnTheMarket Acquisition and the launch of our new Homes.com product, partially offset by lost revenue due to the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy.

Other Marketplaces

Our other marketplaces include Ten-X, an online auction platform for commercial real estate, our BizBuySell network of sites, and our Land.com Network. The BizBuySell network provides online marketplaces for businesses and franchises for sale, and our Land.com Network provides online marketplaces for rural lands for sale. Other Marketplaces' revenues for the nine months ended September 30, 2024 were consistent with the nine months ended September 30, 2023. We expect other marketplaces revenues for the year ending December 31, 2024 to be consistent with the year ended December 31, 2023.

Subscription-based Services

The majority of our revenue is generated from service offerings that are distributed to our customers under subscription-based agreements that typically renew automatically and have a term of at least one year. We recognize subscription revenues on a straight-line basis over the life of the contract.

For the three months ended September 30, 2024 and 2023, our annualized net new bookings of subscription-based services on all contracts were $44 million and $65 million, respectively. Net new bookings is calculated based on the annualized amount of change in our sales bookings resulting from new subscription-based contracts, changes to existing subscription-based contracts, and cancellations of subscription-based contracts for the period reported. Net new bookings is calculated on all subscription-based contracts without regard to contract term. Net new bookings is considered an operating metric that is an indicator of future subscription revenue growth and is also used as a metric of sales force productivity by us and investors. However, information regarding net new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. Revenues from our subscription-based contracts were approximately 96% and 95% of total revenues for the three months ended September 30, 2024 and 2023, respectively. The increase in the percentage of revenue from our subscription-based contracts was due to increased sales in our subscription products.

For the trailing 12 months ended September 30, 2024 and 2023, our contract renewal rates for existing company-wide subscription-based services for contracts with a term of at least one year were approximately 89% and 90%, respectively, and, therefore, our cancellation rates for those services for the same periods were approximately 11% and 10%, respectively. Contract renewal rates are calculated on all subscription-based contracts with a term of at least one year. Our contract renewal rate is a quantitative measurement that is typically closely correlated with our revenue results. As a result, we believe that the rate may be a reliable indicator of short-term and long-term performance absent extraordinary circumstances. Our trailing 12-month contract renewal rate may decline as a result of negative economic conditions, consolidations among our customers, reductions in customer spending or decreases in our customer base. Revenues from our subscription-based contracts with a term of at least one year were approximately 81% of total revenues for each of the trailing 12 months ended September 30, 2024 and 2023.

Development, Investments, and Expansion

We plan to continue to invest in our business and our services, evaluate strategic growth opportunities, and pursue our key priorities as described below. We are committed to supporting, improving, and enhancing our information, analytics, and online marketplace solutions, including expanding and improving our offerings for our client base and site users, including property owners, property managers, buyers, commercial tenants, and residential renters and buyers. We expect to continue our software development efforts to improve existing services, introduce new services, integrate and cross-sell services, integrate recently

completed acquisitions, and expand and develop supporting technologies for our research, sales, and marketing organizations. We may reevaluate our priorities as economic conditions continue to evolve.

Our key priorities for the remainder of 2024 currently include:

*•*Continuing to develop and invest in our residential marketplaces. For Homes.com, we are creating additional content for neighborhoods, parks, schools, and condos. In February 2024, we launched Homes.com memberships, which promote an agent's profile and listings on our website. We intend to create an expanded, dedicated sales force to supplement the efforts of our sales team already in place. We have launched a brand campaign plan to increase our residential marketing investment to raise brand awareness and drive users to our website.

For OnTheMarket, we are integrating OnTheMarket into the Company’s operations, including additional investment in marketing, content creation, and enhancing OnTheMarket’s website to improve performance and facilitate better search engine optimization.

Continuing to enhance our facilities. We are expanding our research and technology center in Richmond, Virginia. We broke ground on the expansion in November 2022 and expect construction to be substantially completed in the first half of 2026. The expansion includes construction of two new buildings spanning 750,000 square feet and will bring our campus footprint to over 1 million square feet when completed. We plan to increase our research, technology, operations, software development, marketing, and sales teams in this location.

In February 2024, we closed on the purchase of a building in Arlington, Virginia, and we plan to build out a space for our employees currently in our Washington DC headquarters. The lease on our current Washington, DC headquarters ends in 2025.

We expect our investment in these priorities will increase our research, selling and marketing, and facilities expenses, including potential impairments of assets associated with the acquired building, and increase the cash spent on capital expenditures. Each of the increased expenses will reduce our net income, and the increase in these expenses and the capital expenditures are expected to reduce our cash on hand for the year ending December 31, 2024 compared to the year ended December 31, 2023. We intend to continue to assess the need for additional investments in our business to develop and distribute new services and functionality within our current platform or expand the reach of, or otherwise improve, our current service offerings. Any future product development or expansion of services, combination and coordination of services or elimination of services or corporate expansion, development or restructuring efforts could reduce our profitability and increase our capital expenditures. Any new investments, changes to our service offerings or other unforeseen events could cause us to experience reduced revenues or generate losses and negative cash flow from operations in the future. Any development efforts must comply with our credit facility, which contains restrictive covenants that restrict our operations and use of our cash flow and may prevent us from taking certain actions that we believe could increase our profitability or otherwise enhance our business.

Impacts of Current Economic Conditions

The macroeconomic outlook has been complex and evolving. It is currently unclear how the commercial real estate industry will ultimately be impacted by the current economic conditions. A sustained period of elevated interest rates may reduce demand for all types of real estate. If the demand for office space or other real estate decreases significantly, there could be a downturn in the commercial real estate market that may materially adversely affect many of our customers. A depressed commercial real estate market would have a negative impact on our core customer base, which could impact our customers’ ability to subscribe and pay for our services and reduce demand for our services. Reduced demand and increased cancellations could cause our revenues or our revenue growth rates to decline and reduce our profitability.

Non-GAAP Financial Measures

We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. We also disclose and discuss certain non-GAAP financial measures in our public releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we may disclose include 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 income or expense, net, other income or expense, net, loss on debt extinguishment, income taxes, depreciation and amortization. We typically disclose EBITDA on a consolidated and an operating segment basis in our earnings releases, investor conference calls, and filings with the SEC. Adjusted EBITDA is different from EBITDA because we further adjust EBITDA for stock-based compensation expense, acquisition- and integration-related costs, restructuring costs, and settlements and impairments incurred outside our ordinary course of business. Adjusted EBITDA margin represents adjusted EBITDA divided by revenues for the

period. Non-GAAP net income is determined by adjusting our net income for stock-based compensation expense, acquisition- and integration-related 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. Non-GAAP net income per diluted share is a non-GAAP financial measure that represents non-GAAP net income divided by the number of diluted shares outstanding for the period used in the calculation of GAAP net income per diluted share.

We may disclose adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and non-GAAP net income per diluted share on a consolidated basis in our earnings releases, investor conference calls, and filings with the SEC. The non-GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors meaningfully evaluate and compare our results of operations to our previously reported results of operations or to those of other companies in our industry.

We view EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and non-GAAP net income per diluted share as operating performance measures. We believe that the most directly comparable GAAP financial measure to EBITDA, adjusted EBITDA, and non-GAAP net income is net income. We believe the most directly comparable GAAP financial measures to non-GAAP net income per diluted share and adjusted EBITDA margin are net income per diluted share and net income divided by revenues, respectively. In calculating EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, 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. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-GAAP financial measures as a result of these exclusions. 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. Investors and potential investors in our securities should not rely on EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and non-GAAP net income per diluted share as a substitute for any GAAP financial measure, including net income and net income per diluted share. In addition, we urge investors and potential investors in our securities to carefully review the GAAP financial information included as part of our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that are filed with the SEC, as well as our quarterly earnings releases, and compare the GAAP financial information with our EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and non-GAAP net income per diluted share.

EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and non-GAAP net income per diluted share may be used by management internally to measure our operating and management performance and may be used by investors as supplemental financial measures to evaluate the performance of our business. 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 business without the impact of certain acquisition-related items. We have spent more than 30 years building our database of commercial real estate information and expanding our markets and services partially through acquisitions of complementary businesses. Due to these acquisitions, our net income has included significant charges for amortization of acquired intangible assets, depreciation and other amortization, acquisition- and integration-related 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 costs, restructuring costs, and 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 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 interest income or expense, net, other income or expense, net, income taxes, stock-based compensation expenses, acquisition- and integration-related costs, restructuring 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. In addition, investors, securities analysts, and others have regularly relied on EBITDA and may rely on adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, or non-GAAP net income per diluted share to provide a financial measure by which to compare our operating performance against that of other companies in our industry.

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

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. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
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. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
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. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
The amount of interest income or expense, net and other income or expense, net we generate and incur may be useful for investors to consider and may result in current cash inflows and outflows. However, we do not consider the amount of interest income or expense, net and other income or expense, net, to be a representative component of the day-to-day operating performance of our business.
Income tax expense may be useful for investors to consider because it generally represents the taxes that may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds 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.
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. 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.

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

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. Therefore, we believe it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business.
The amount of acquisition- and integration-related costs incurred may be useful for investors to consider because such costs generally represent professional service fees and direct expenses related to acquisitions. Because we do not acquire businesses on a predictable cycle, we do not consider the amount of acquisition- and integration-related costs to be a representative component of the day-to-day operating performance of our business.
The amount of settlement and impairment costs incurred outside of our ordinary course of business may be useful for investors to consider because they generally represent gains or losses from the settlement of litigation matters, charges related to terminations of contracts or impairments of acquired intangible assets. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
The amount of restructuring costs incurred may be useful for investors to consider because they generally represent costs incurred in connection with a change in a contract or a change in the makeup of our properties or personnel. Because we do not carry out restructuring activities on a predictable cycle, we do not consider the amount of restructuring-related costs to be a representative component of the day-to-day operating performance of our business.

The financial items that have been excluded from our net income to calculate non-GAAP net income and non-GAAP net income per diluted share are amortization of acquired intangible assets and other related costs, stock-based compensation, acquisition- and integration-related costs, restructuring and related costs, and settlement and impairment costs incurred outside our ordinary course of business. These items are discussed above with respect to the calculation of adjusted EBITDA together with the material limitations associated with using this non-GAAP financial measure as compared to net income. In addition to these exclusions from net income, we subtract an assumed provision for income taxes to calculate non-GAAP net income. In

both 2024 and 2023, we assume a 26% tax rate, which approximates our historical long-term statutory corporate tax rate, excluding the impact of discrete items.

We compensate for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results and to provide additional information that is useful to investors to understand the factors and trends affecting our business.

See Note 13 of the Notes to Condensed Consolidated Financial Statements included in Part I of this Report for the reconciliation of our net income to our EBITDA.

Results of Operations

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

The following table compares our selected consolidated results of operations for the three months ended September 30, 2024 and 2023 (in millions, except percentages):


	Three Months Ended September 30,
	2024		2023		Increase (Decrease) ($)		Increase (Decrease) (%)
Revenues:
CoStar	$	256.9	$	233.4	$	23.5	10	%
Information Services	33.0		44.6		(11.6)		(26)
Multifamily	271.8		235.3		36.5		16
LoopNet	70.9		67.5		3.4		5
Residential	27.7		10.3		17.4		169
Other Marketplaces	32.3		33.6		(1.3)		(4)
Total revenues	692.6		624.7		67.9		11
Cost of revenues	140.6		123.7		16.9		14
Gross profit	552.0		501.0		51.0		10
Operating expenses:
Selling and marketing (excluding customer base amortization)	331.2		266.9		64.3		24
Software development	81.0		67.9		13.1		19
General and administrative	105.8		94.4		11.4		12
Customer base amortization	10.3		10.2		0.1		1
Total operating expenses	528.3		439.4		88.9		20
Income from operations	23.7		61.6		(37.9)		(62)
Interest income, net	55.6		58.4		(2.8)		(5)
Other (expense) income, net	(1.6)		0.5		(2.1)		NM
Income before income taxes	77.7		120.5		(42.8)		(36)
Income tax expense	24.7		29.9		(5.2)		(17)
Net income	$	53.0	$	90.6	$	(37.6)	(42)
__________________________
NM - Not meaningful

Revenues. Revenues increased $68 million, or 11%, to $693 million. The increase in our revenues primarily included:

an increase in Multifamily revenues of $37 million, or 16%, due to increases in pricing for existing customers and an increase in the number of properties listed on our network,
an increase in CoStar revenues of $24 million, or 10%, due to an increase the average price per subscriber and an increase in subscribers, as well as due to converting legacy STR customers to our new CoStar-based benchmarking product,
an increase in Residential revenues of $17 million, or 169%, due to the OnTheMarket Acquisition and the launch of the new Homes.com membership subscriptions, partially offset by the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy,
an increase in LoopNet revenues of $3 million, or 5%, due to an increase in the average price per listing and an increase in the number of paid listings, and
a decrease in Information Services revenues of $12 million, or 26%, attributable to converting legacy STR customers to our new CoStar-based benchmarking product, partially offset by an increase in revenue from CoStar Real Estate Manager.

Gross Profit and Cost of Revenues. Gross profit increased $51 million, or 10%, to $552 million, and the gross profit margin was consistent at 80%. Cost of revenues increased $17 million, or 14%, to $141 million and, as a percentage of revenues, was consistent at 20%. The increase in cost of revenues primarily included:

an increase in personnel costs of $13 million related to increases in salaries and benefits costs for our existing employees and rising headcount to support our residential research efforts and
an increase of $3 million for web hosting costs.

Selling and Marketing Expenses (excluding customer base amortization). Selling and marketing expenses increased $64 million, or 24%, to $331 million and, as a percentage of revenues, increased from 43% to 48%. The increase primarily included:

an increase in marketing expenses of $38 million for advertising our brands,
an increase in personnel costs of $18 million related to rising headcount in our sales force, recruiting costs, and commissions expense, and
an increase of $6 million in events and travel costs.

Software Development Expenses. Software development expenses increased $13 million, or 19%, to $81 million and, as a percentage of revenues, increased from 11% to 12%. The increase primarily included:

an increase in personnel costs of $10 million related to rising headcount and increases in salaries, stock-based compensation, and benefits costs for our existing employees and
an increase of $2 million in software and equipment costs.

General and Administrative Expenses. General and administrative expenses increased $11 million, or 12%, to $106 million and, as a percentage of revenues, was consistent at 15%. The increase primarily included:

an increase in professional services of $12 million primarily related to acquisition activities and costs to defend our intellectual property.

Customer Base Amortization Expense. Customer base amortization expense was consistent.

Interest Income, Net. Interest income, net decreased $3 million, or 5%, to $56 million. The decrease was primarily due to a decrease in our cash and cash equivalent balances.

Other (Expense) Income, Net. Other (expense) income, net was insignificant for the three months ended September 30, 2024 and 2023.

Income Tax Expense. Income tax expense decreased $5 million, or 17%, to $25 million and the effective tax rate was 32% of income before income taxes compared to 25% of income before income taxes for the three months ended September 30, 2023. The decrease in income tax expense was primarily attributable to lower U.S. income and larger U.K. losses with no tax benefit.

Business Segment Results for Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

We manage our business geographically in two operating segments, with our primary areas of measurement and decision-making being North America, which includes the U.S. and Canada, and International, which primarily includes Europe, Asia-Pacific, and Latin America. Management relies on an internal management reporting process that provides revenue and operating segment EBITDA. Management believes that operating segment EBITDA is an appropriate measure for evaluating the operational performance of our operating segments. EBITDA is used by management internally to measure our operating and management performance and to evaluate the performance of our business. However, this measure should be considered in addition to, not as a substitute for or superior to, income from operations or other measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for further information regarding our segment operating results.

Segment Revenues. North America revenues increased $55 million, or 9%, to $658 million and included:

an increase in Multifamily revenues of $37 million due to increases in pricing for existing customers and an increase in the number of properties listed on our network,
an increase in CoStar revenues of $17 million due to an increase the average price per subscriber and an increase in subscribers, as well as due to converting legacy STR customers to our new CoStar-based benchmarking product,
an increase in Residential revenues of $7 million due to revenue from the launch of the new Homes.com membership subscriptions partially offset by the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy,
an increase in LoopNet revenues of $3 million due to an increase in the average price per listing and an increase in the number of paid listings, and
a decrease in Information Services revenues of $7 million attributable to converting legacy STR customers to our new CoStar-based benchmarking product, partially offset by an increase in revenue from CoStar Real Estate Manager.

The $13 million, or 57%, increase in International revenues was primarily attributable to the impact of the OnTheMarket Acquisition, as well as an increase in CoStar sales.

Segment EBITDA. North America EBITDA decreased $25 million, or 29%, to $64 million. The decrease in North America EBITDA was primarily due to increases in marketing costs, personnel costs, and professional service fees, partially offset by increases in revenues described above. International EBITDA decreased $13 million to a loss of $13 million. The decrease in International EBITDA was primarily due to the OnTheMarket Acquisition for which we have increased marketing expenses since acquisition and an increase in personnel costs associated with the expansion of our international research team.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The following table provides a comparison of our selected consolidated results of operations for the nine months ended September 30, 2024 and 2023 (in millions, except percentages):


	Nine Months Ended September 30,
	2024		2023		Increase (Decrease) ($)		Increase (Decrease) (%)
Revenues:
CoStar	$	760.2	$	687.5	$	72.7	11	%
Information Services	99.4		128.2		(28.8)		(22)
Multifamily	790.8		670.3		120.5		18
LoopNet	209.8		196.3		13.5		7
Residential	72.5		36.2		36.3		100
Other Marketplaces	94.1		96.4		(2.3)		(2)
Total revenues	2,026.8		1,814.9		211.9		12
Cost of revenues	417.6		355.2		62.4		18
Gross profit	1,609.2		1,459.7		149.5		10
Operating expenses:
Selling and marketing (excluding customer base amortization)	1,055.7		743.2		312.5		42
Software development	243.0		197.8		45.2		23
General and administrative	314.3		274.4		39.9		15
Customer base amortization	31.5		31.3		0.2		1
Total operating expenses	1,644.5		1,246.7		397.8		32
(Loss) Income from operations	(35.3)		213.0		(248.3)		(117)
Interest income, net	165.3		153.9		11.4		7
Other (expense) income, net	(4.9)		1.6		(6.5)		NM
Income before income taxes	125.1		368.5		(243.4)		(66)
Income tax expense	46.2		90.3		(44.1)		(49)
Net income	$	78.9	$	278.2	$	(199.3)	(72)
__________________________
NM - Not meaningful

Revenues. Revenues increased $212 million, or 12%, to $2.0 billion. The increase in our revenues primarily included:

an increase in Multifamily revenues of $121 million, or 18%, due to an increase in the number of properties listed on our network and increases in pricing for existing customers,
an increase in CoStar revenues of $73 million, or 11%, due to an increase in subscribers and an increase in average price per subscriber, as well as converting legacy STR customers to our new CoStar-based benchmarking product,
an increase in Residential revenues of $36 million, or 100%, due to the OnTheMarket Acquisition and the launch of the new Homes.com membership subscriptions, partially offset by the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy,
an increase in LoopNet revenues of $14 million, or 7%, due to an increase in the average price per listing and an increase in the number of paid listings, and
a decrease in Information Services revenues of $29 million, or 22%, attributable to converting legacy STR customers to our new CoStar-based benchmarking product, partially offset by an increase in revenue from CoStar Real Estate Manager.

Gross Profit. Gross profit increased $150 million, or 10%, to $1.6 billion, and the gross profit percentage decreased from 80% to 79%. Cost of revenues increased $62 million, or 18%, to $418 million and, as a percentage of revenues, increased from 20% to 21%. The increase in cost of revenues primarily included:

an increase in personnel costs of $39 million related to rising headcount to support our residential research efforts, and increases in salaries and benefits costs for our existing employees,
an increase of $17 million for web hosting costs and support costs for our researchers, and
an increase of $4 million of payment processing fees.

Selling and Marketing Expenses (excluding customer base amortization). Selling and marketing expenses increased $313 million, or 42%, to $1.1 billion and, as a percentage of revenues, increased from 41% to 52%. The increase primarily included:

an increase in marketing expenses of $258 million for advertising our brands,
an increase in personnel and events costs of $44 million related to rising headcount in our sales force and increases in salaries, bonus, stock-based compensation, and benefits costs for our existing employees, and
an increase of $6 million in events and travel costs.

Software Development Expenses. Software development expenses increased $45 million, or 23%, to $243 million and, as a percentage of revenues, increased from 11% to 12%. The increase primarily included:

an increase in personnel costs of $34 million related to rising headcount and increases in salaries, stock-based compensation, benefits costs for our existing employees, and recruiting costs and
an increase of $7 million in software and equipment costs.

General and Administrative Expenses. General and administrative expenses increased $40 million, or 15%, to $314 million and, as a percentage of revenues, increased from 15% to 16%. The increase primarily included:

an increase in professional services of $23 million, primarily related to acquisition activities and costs to defend our intellectual property,
an increase in personnel costs of $11 million related to existing employees, and
an increase of $2 million in occupancy costs.

Customer Base Amortization Expense. Customer base amortization expense was consistent.

Interest Income, net. Interest income, net increased $11 million, or 7%, to $165 million. This increase was primarily due to an increase in interest earned on our cash equivalents.

Other (Expense) Income, net. Other (expense) income, net was insignificant for the nine months ended September 30, 2024 and 2023.

Income Tax Expense. Income tax expense decreased $44 million, or 49%, to $46 million and the effective tax rate was 37% of income before income taxes compared to 24% of income before income taxes for the nine months ended September 30, 2023. The decrease in income tax expense was primarily attributable to lower U.S. income and larger U.K. losses with no tax benefit.

Business Segment Results for Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

We manage our business geographically in two operating segments, with our primary areas of measurement and decision-making being North America, which includes the U.S. and Canada, and International, which primarily includes Europe, Asia-Pacific, and Latin America. Management relies on an internal management reporting process that provides revenues and operating segment EBITDA. Management believes that operating segment EBITDA is an appropriate measure for evaluating the operational performance of our operating segments. EBITDA is used by management to internally measure our operating and management performance and to evaluate the performance of our business. However, this measure should be considered in

addition to, not as a substitute for or superior to, (loss) income from operations or other measures of financial performance prepared in accordance with GAAP.

Segment Revenues. North America revenues increased $175 million, or 10%, to $1.9 billion and included:

an increase in Multifamily revenues of $121 million due to increases in pricing for existing customers and an increase in the number of properties listed on our network,
an increase in CoStar revenues of $55 million due to an increase in subscribers and an increase in average price per subscriber, as well as converting legacy STR customers to our new CoStar-based benchmarking product,
an increase in LoopNet revenues of $12 million due to an increase in the average price per listing and an increase in the number of paid listings,
an increase in Residential revenues of $5 million due to the launch of the new Homes.com membership subscriptions, partially offset by the discontinuation and reduced sales of certain products and services that were inconsistent with our long-term business strategy, and
a decrease in Information Services revenues of $16 million attributable to converting legacy STR customers to our new CoStar-based benchmarking product, partially offset by an increase in revenue from CoStar Real Estate Manager.

The $37 million, or 58%, increase in International revenues was primarily attributable to the impact of the OnTheMarket Acquisition, as well as an increase in CoStar sales.

Segment EBITDA. North America EBITDA decreased $193 million, or 66%, to $97 million. The decrease in North America EBITDA was primarily due to increases in marketing costs, personnel costs, professional service fees, and credit loss expenses, partially offset by increases in revenues described above. International EBITDA decreased $49 million to a loss of $47 million. The decrease in International EBITDA was primarily due to the OnTheMarket Acquisition for which we have increased marketing expenses since acquisition and an increase in personnel costs associated with the expansion of our international research team.

Liquidity and Capital Resources

We believe the balance of cash and cash equivalents, which was $4.9 billion as of September 30, 2024, along with cash generated by ongoing operations and continued access to capital markets, will be sufficient to satisfy our cash requirements over the next 12 months and beyond. Other than the construction commitments and pending acquisition discussed below, our cash requirements have not changed materially from what is described in the 2023 Form 10-K.

Construction Commitments. We are expanding our Richmond, Virginia campus, which is expected to result in a material cash requirement in 2024 and beyond. We broke ground on the expansion in November 2022 and expect construction to be substantially completed in the first half of 2026. We have engaged a project manager, architects, and a general contractor on terms that generally require payments as services are provided or construction is performed. As of September 30, 2024, we are obligated to spend an additional $365 million as further work is performed under these contracts. We plan to amend these contracts to include additional commitments as construction progresses and to fund the expansion with cash on hand. We expect the remaining cost of construction to be in the range of $485 million – $505 million and expect to spend an additional $100 million for construction costs for the remainder of 2024.

In conjunction with this expansion, we negotiated various tax incentives with the Commonwealth of Virginia and the City of Richmond, including the allowance to use market-based income apportionment for income taxes and partial reimbursements of property tax assessments related to the value of the campus expansion. These incentives are conditional upon achieving job creation and capital expenditure targets from 2022 to 2029. Failure to meet these targets could result in a reduction of the value of the tax incentives and repayment of previous tax reductions. The value of the allowance to use a market-based income apportionment for income taxes is dependent on our taxable income. We estimate the value of the allowance to use market-based income apportionment for income taxes and partial reimbursements of property tax assessments related to the value of the campus expansion to be in the range of $275 million - $285 million.

Pending Acquisitions. On April 21, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Matterport Merger Agreement”) with Matterport, Merger Sub I, and Merger Sub II, pursuant to which, among other things, and subject to its terms, (i) Merger Sub I will merge with and into Matterport (the “First Merger”), with Matterport surviving the First Merger as a wholly owned subsidiary of the Company (the “Surviving Corporation”) and (ii) in the event that the Threshold Percentage (as defined in the Matterport Merger Agreement) is at least 40%, immediately following the First

Merger and as part of a single integrated transaction, the Surviving Corporation will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II surviving the Second Merger as a wholly owned subsidiary of the Company.

Subject to the terms and conditions of the Matterport Merger Agreement, each share of Matterport Common Stock issued and outstanding immediately prior to the effective time of the First Merger (the “First Effective Time”) (other than any cancelled shares or Dissenting Shares (as defined in the Matterport Merger Agreement)) will be converted into (i) a number of CoStar Group Shares equal to the Merger Exchange Ratio (such consideration, the “Per Share Stock Consideration”) and (ii) $2.75 in cash per share, without interest (the “Per Share Cash Consideration”). Holders of Matterport Common Stock will receive cash in lieu of fractional CoStar Group Shares (the “Fractional Share Consideration” and, together with the Per Share Stock Consideration and the Per Share Cash Consideration, collectively, the “Matterport Merger Consideration”).

Consummation of the Mergers is subject to certain customary conditions, including, among others, expiration or termination of the applicable waiting periods under the HSR Act and the Antitrust Laws (each as defined in the Matterport Merger Agreement) of certain other jurisdictions, the absence of any law, injunction, order, or award restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the Mergers and the CoStar Group Shares to be issued in the Mergers being approved for listing on Nasdaq Global Select Market. Each party’s obligation to consummate the Mergers is subject to certain other conditions, including the accuracy of the representations and warranties of the other party, compliance in all material respects by the other party with its obligations under the Matterport Merger Agreement, and the absence of a material adverse effect related to the other party. Consummation of the Mergers is not subject to approval by our stockholders or to any financing condition.

On July 3, 2024, Matterport and CoStar Group each received a request for additional information and documentary materials (the “Second Request”) from the FTC in connection with the FTC’s review of the Transaction. The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after Matterport and CoStar Group have each substantially complied with their respective Second Requests, unless that period is extended or terminated sooner by the FTC. Each of Matterport and CoStar Group expect to respond promptly to the Second Request and to continue to work cooperatively with the FTC in its review of the Transaction. Matterport and CoStar Group expect that the Transaction will be completed in the fourth quarter of 2024 or the first quarter of 2025, subject to the expiration or termination of the waiting period under the HSR Act and the satisfaction or waiver of the other closing conditions specified in the Matterport Merger Agreement.

The cash consideration is estimated to be $940 million, not considering Fractional Share Consideration. The Company intends to fund the cash consideration with cash on hand.

On October 18, 2024, CRI, Neptune Merger Sub, Visual Lease, LLC, and Shareholder Representative Services LLC as the Holder Representative entered into the Visual Lease Merger Agreement pursuant to which, among other things, and subject to its terms, Neptune Merger Sub will merge with and into Visual Lease, LLC with Visual Lease, LLC surviving the merger as a wholly-owned subsidiary of the CRI.

The purchase price is $272.5 million to be paid in cash, subject to customary working capital and other post-closing adjustments. Consummation of the Merger is subject to certain customary conditions and regulatory reviews, including, among others, expiration or termination of the applicable waiting periods under the HSR Act and the Antitrust Laws (as defined in the Visual Lease Merger Agreement).

The Company intends to fund the transaction with cash on hand and expects the transaction to close in the fourth quarter of 2024.

Our future capital requirements will depend on many factors, including, among others, our operating results, expansion and integration efforts, and our level of acquisition activity or other strategic transactions. To date, we have grown in part by acquiring other companies, and we expect to continue to make acquisitions.

Cash and cash equivalents decreased to approximately $4.9 billion as of September 30, 2024, compared to cash and cash equivalents of approximately $5.2 billion as of December 31, 2023. The decrease in cash and cash equivalents for the nine months ended September 30, 2024 was primarily due to $563 million of cash used in investing activities and cash used in financing activities of $14 million primarily related to repurchases of restricted stock to satisfy tax withholding obligations, partially offset by cash provided by operating activities of $298 million.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $298 million compared to $341 million for the nine months ended September 30, 2023. The $43 million decrease in cash provided by operating activities

was primarily driven by a decrease in net income, partially offset by an increase in non-cash expenses and working capital changes.

Net cash used in investing activities for the nine months ended September 30, 2024 was $563 million compared to $76 million for the nine months ended September 30, 2023, primarily driven by an increase in the purchase of property, equipment, and other assets for our new campuses of $448 million, including $343 million related to the purchase of an office building in Arlington, Virginia to relocate our Washington, DC-based employees, and an increase in purchases of other property, equipment, and intangible assets of $35 million.

Net cash used in financing activities for the nine months ended September 30, 2024 was $14 million compared to net cash used in financing activities of $3 million for the nine months ended September 30, 2023. The increase was primarily driven by repurchases of restricted stock to satisfy tax withholding obligations and payment of debt issuance costs related to the 2024 Credit Agreement.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. The following accounting policies involve a “critical accounting estimate” because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different acceptable assumptions would yield different results. Changes in the accounting estimates are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations. We review these estimates and assumptions periodically and reflect the effects of revisions in the period that they are determined to be necessary. We consider policies relating to the following matters to be critical accounting policies:

Intangible assets and goodwill,
Income taxes,
Revenue recognition, and
Business combinations.

For an in-depth discussion of each of our significant accounting policies, including the related critical accounting estimates and further information regarding estimates and assumptions involved in their application, see the 2023 Form 10-K and Note 2 of the Notes to Condensed Consolidated Financial Statements included in Part I of this Report. During the nine months ended September 30, 2024, there were no material changes to our critical accounting estimates from those described in the 2023 Form 10-K.

Recent Accounting Pronouncements

See Note 2 of the Notes to Condensed Consolidated Financial Statements included in Part I of this Report.

Cautionary Statement Concerning Forward-Looking Statements

We have made forward-looking statements in this Report and will make forward-looking statements in our press releases, investor conference calls, Annual Reports on Form 10-K, other Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC 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 2024 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-GAAP net income, non-GAAP net income per diluted share, weighted-average outstanding shares, cash flow from operating activities, operating costs, capital and other expenditures, the impact of current economic conditions on our revenues, revenue growth rates and profitability, key priorities for 2024, trends in customer behavior, legal proceedings and claims, legal costs, effective tax rate, the anticipated benefits of completed, pending or proposed acquisitions, the anticipated timing for integration of completed acquisitions, the anticipated benefits of cross-selling efforts, geographic and product expansion, planned service enhancements, expansion and development of our sales forces, planned sales and marketing activities and investments, the impact or results of sales and marketing initiatives, product integrations, elimination and de-emphasizing of services, investments in residential marketplace services and our residential marketplace strategy, net new bookings, contract renewal rates, use of proceeds from equity and debt offerings, the use of proceeds from any draws under our $1.1 billion credit facility provided by the 2024 Credit Agreement,

expectations regarding our compliance with financial and restrictive covenants in the 2024 Credit Agreement, employee relations, management’s plans, goals and objectives for future operations, sources and adequacy of liquidity and growth, and markets for our stock. Sections of this Report that contain forward-looking statements include the Condensed Consolidated Financial Statements and related Notes, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Controls and Procedures,” “Legal Proceedings” and “Risk Factors.”

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:

our inability to attract and retain new customers;
our inability to successfully develop and introduce new or updated information, analytics, and online marketplace services;
our inability to compete successfully against existing or future competitors in attracting advertisers and in general;
competition;
the effects of fluctuations and market cyclicality;
the effects of global economic uncertainties and downturns or a downturn or consolidation in the real estate industry;
our inability to hire qualified persons for, or retain and continue to develop, our sales force, or unproductivity of our sales force;
our inability to retain and attract highly capable management and operating personnel;
the downward pressure that our internal and external investments may place on our operating margins;
our inability in increasing brand awareness;
our inability to maintain or increase internet traffic to our marketplaces, and the risk that the methods, including Google Analytics, that we use to measure unique visitors to our portals may misstate the actual number of unique persons who visit our network of mobile applications, and websites for a given month or may differ from the methods used by competitors;
our inability to attract new advertisers;
our inability to successfully identify, finance, integrate, and/or manage costs related to acquisitions;
the effects of cyberattacks and security vulnerabilities, and technical problems or disruptions;
the risks related to a large infrastructure project to build out our campus in Richmond, Virginia;
our inability to generate increased revenues from our current or future geographic expansion plans;
the risks related to acceptance of credit cards and debit cards and facilitation of other customer payments;
the effects of climate change and other events beyond our control;
the effects related to increased attention to ESG matters;
our inability to obtain and maintain accurate, comprehensive, or reliable data;
our ability to enforce or defend our ownership and use of intellectual property;
our inability to successfully halt the operation of websites that aggregate our data, data from other companies, or “copycat” websites that may misappropriate our data;
our inability to defend against potential legal liability for collecting, displaying, or distributing information;
our inability to obtain or retain listings from real estate brokers, agents, property owners, and apartment property managers;
our ability to maintain or establish relationships with third-party listing providers;
our ability to comply with the rules and compliance requirements of MLSs;
the risks related to international operations;
the effects of foreign currency fluctuations;
the effects of Brexit;
our indebtedness;
the effects of a lowering or withdrawal of the ratings assigned to our debt securities by rating agencies;
the effects of any actual or perceived failure to comply with privacy or data protection laws, regulations or standards;
the effects of changes in tax laws, regulations, or fiscal and tax policies;
the effects of third-party claims, litigation, regulatory proceedings, or government investigations;
risks related to return on investment;
risks associated with the ability to consummate the Mergers and the timing of the closing of the Mergers;
the ability to successfully integrate operations and employees following the closing of the Mergers;
the ability to realize anticipated benefits and synergies of the Mergers as rapidly as, or to the extent anticipated by, financial analysts or investors;
the potential impact of the announcement of the Mergers or the consummation of the Mergers on business relationships, including with employees, customers, suppliers, and competitors;
the potential unfavorable outcomes of any legal proceedings that have been or may be instituted against us or Matterport;
the ability to retain key personnel; and
costs, fees, expenses, and charges related to the Mergers.

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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