filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenues | $ | 732.2 | $ | 656.4 | |||||||
| Cost of revenues | 153.3 | 141.2 | |||||||||
| Gross profit | 578.9 | 515.2 | |||||||||
| Operating expenses: | |||||||||||
| Selling and marketing (excluding customer base amortization) | 368.9 | 366.1 | |||||||||
| Software development | 94.5 | 82.4 | |||||||||
| General and administrative | 141.1 | 98.5 | |||||||||
| Customer base amortization | 17.2 | 11.0 | |||||||||
| 621.7 | 558.0 | ||||||||||
| Loss from operations | (42.8) | (42.8) | |||||||||
| Interest income, net | 38.5 | 56.2 | |||||||||
| Other expense, net | (2.4) | (1.9) | |||||||||
| (Loss) income before income taxes | (6.7) | 11.5 | |||||||||
| Income tax expense | 8.1 | 4.8 | |||||||||
| Net (loss) income | $ | (14.8) | $ | 6.7 | |||||||
| Net (loss) income per share - basic | $ | (0.04) | $ | 0.02 | |||||||
| Net (loss) income per share - diluted | $ | (0.04) | $ | 0.02 | |||||||
| Weighted-average outstanding shares - basic | 410.5 | 405.6 | |||||||||
| Weighted-average outstanding shares - diluted | 410.5 | 407.3 |
See accompanying notes.
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net (loss) income | $ | (14.8) | $ | 6.7 | |||||||
| Other comprehensive income (loss), net of tax | |||||||||||
| Foreign currency translation adjustment | 8.8 | (4.3) | |||||||||
| Total other comprehensive income (loss) | 8.8 | (4.3) | |||||||||
| Total comprehensive (loss) income | $ | (6.0) | $ | 2.4 |
See accompanying notes.
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
| March 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 3,680.8 | $ | 4,681.0 | |||||||
| Restricted cash | 97.4 | — | |||||||||
| Equity investment | 285.6 | — | |||||||||
| Accounts receivable | 232.3 | 210.7 | |||||||||
| Less: Allowance for credit losses | (25.3) | (22.8) | |||||||||
| Accounts receivable, net | 207.0 | 187.9 | |||||||||
| Prepaid expenses and other current assets | 82.5 | 81.3 | |||||||||
| Total current assets | 4,353.3 | 4,950.2 | |||||||||
| Deferred income taxes, net | 49.8 | 30.6 | |||||||||
| Property and equipment, net | 1,097.6 | 1,014.9 | |||||||||
| Lease right-of-use assets | 96.7 | 103.0 | |||||||||
| Goodwill | 3,673.2 | 2,527.6 | |||||||||
| Intangible assets, net | 957.2 | 433.2 | |||||||||
| Deferred commission costs, net | 173.9 | 169.6 | |||||||||
| Deposits and other assets | 26.4 | 27.7 | |||||||||
| Total assets | $ | 10,428.1 | $ | 9,256.8 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 38.7 | $ | 47.0 | |||||||
| Accrued wages and commissions | 96.5 | 133.3 | |||||||||
| Accrued expenses | 235.9 | 163.7 | |||||||||
| Litigation accrual | 95.0 | — | |||||||||
| Income taxes payable | 28.5 | 23.2 | |||||||||
| Lease liabilities | 28.2 | 32.0 | |||||||||
| Deferred revenue | 181.4 | 137.1 | |||||||||
| Other current liabilities | 20.2 | 16.0 | |||||||||
| Total current liabilities | 724.4 | 552.3 | |||||||||
| Long-term debt, net | 992.2 | 991.9 | |||||||||
| Deferred income taxes, net | 7.9 | 7.6 | |||||||||
| Income taxes payable | 26.1 | 25.0 | |||||||||
| Lease and other long-term liabilities | 121.3 | 126.5 | |||||||||
| Total liabilities | 1,871.9 | 1,703.3 | |||||||||
| Total stockholders' equity | 8,556.2 | 7,553.5 | |||||||||
| Total liabilities and stockholders' equity | $ | 10,428.1 | $ | 9,256.8 |
See accompanying notes.
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | 409.5 | $ | 4.1 | $ | 5,231.9 | $ | — | $ | (25.5) | $ | 2,343.0 | $ | 7,553.5 | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (14.8) | (14.8) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 8.8 | — | 8.8 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | 0.1 | — | 0.9 | — | — | — | 0.9 | ||||||||||||||||||||||||||||||||||
| Restricted stock grants | 2.3 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Restricted stock grants surrendered | (0.3) | — | (33.4) | — | — | — | (33.4) | ||||||||||||||||||||||||||||||||||
| Employee stock purchase plan | 0.1 | — | 6.3 | — | — | — | 6.3 | ||||||||||||||||||||||||||||||||||
| Management stock purchase plan | — | — | (1.3) | — | — | — | (1.3) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 29.7 | — | — | — | 29.7 | ||||||||||||||||||||||||||||||||||
| Stock repurchases under stock repurchase programs (0.2 million shares) | — | — | — | (18.5) | — | — | (18.5) | ||||||||||||||||||||||||||||||||||
| Common stock issued for Matterport Acquisition | 11.7 | 0.1 | 1,024.9 | — | — | — | 1,025.0 | ||||||||||||||||||||||||||||||||||
| 423.4 | $ | 4.2 | $ | 6,259.0 | $ | (18.5) | $ | (16.7) | $ | 2,328.2 | $ | 8,556.2 |
See accompanying notes.
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 408.1 | $ | 4.1 | $ | 5,147.8 | $ | (17.6) | $ | 2,204.3 | $ | 7,338.6 | ||||||||||||||||||||||||
| Net income | — | — | — | — | 6.7 | 6.7 | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (4.3) | — | (4.3) | |||||||||||||||||||||||||||||
| Restricted stock grants | 1.4 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Restricted stock grants surrendered | (0.4) | — | (24.5) | — | — | (24.5) | |||||||||||||||||||||||||||||
| Employee stock purchase plan | 0.1 | — | 5.2 | — | — | 5.2 | |||||||||||||||||||||||||||||
| Management stock purchase plan | — | — | (1.5) | — | — | (1.5) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 22.4 | — | — | 22.4 | |||||||||||||||||||||||||||||
| Balance at March 31, 2024 | 409.2 | $ | 4.1 | $ | 5,149.4 | $ | (21.9) | $ | 2,211.0 | $ | 7,342.6 |
See accompanying notes.
COSTAR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Operating activities: | |||||||||||
| Net (loss) income | $ | (14.8) | $ | 6.7 | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 47.3 | 33.3 | |||||||||
| Amortization of deferred commissions costs | 31.0 | 27.2 | |||||||||
| Amortization of Senior Notes discount and issuance costs | 0.6 | 0.6 | |||||||||
| Non-cash lease expense | 8.4 | 8.3 | |||||||||
| Stock-based compensation expense | 30.4 | 22.8 | |||||||||
| Deferred income taxes, net | (0.5) | (2.8) | |||||||||
| Credit loss expense | 9.4 | 7.9 | |||||||||
| Other operating activities, net | (3.4) | 0.1 | |||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts receivable | (15.7) | (15.6) | |||||||||
| Prepaid expenses and other current assets | 7.2 | 2.2 | |||||||||
| Deferred commissions | (34.3) | (38.7) | |||||||||
| Accounts payable and other liabilities | (22.1) | 77.2 | |||||||||
| Lease liabilities | (9.8) | (8.1) | |||||||||
| Income taxes payable, net | 6.7 | 5.4 | |||||||||
| Deferred revenue | 12.8 | 13.1 | |||||||||
| Net cash provided by operating activities | 53.2 | 139.6 | |||||||||
| Investing activities: | |||||||||||
| Proceeds from sale and settlement of investments | 203.4 | — | |||||||||
| Proceeds from sale of property, equipment, and other assets | 0.1 | — | |||||||||
| Purchases of property, equipment, and other assets for new campuses | (53.7) | (376.7) | |||||||||
| Purchases of property, equipment, and other assets | (25.5) | (3.6) | |||||||||
| Purchases of equity securities | (284.8) | — | |||||||||
| Cash paid for acquisitions, net of cash acquired | (750.1) | — | |||||||||
| Net cash used in investing activities | (910.6) | (380.3) | |||||||||
| Financing activities: | |||||||||||
| Repurchase of restricted stock to satisfy tax withholding obligations | (34.7) | (26.0) | |||||||||
| Stock repurchase | (18.5) | — | |||||||||
| Proceeds from exercise of stock options and employee stock purchase plan | 6.6 | 4.6 | |||||||||
| Principal repayments of financing lease obligations | (0.7) | — | |||||||||
| Other financing activities | — | (1.1) | |||||||||
| Net cash used in financing activities | (47.3) | (22.5) | |||||||||
| Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash | 1.9 | (1.1) | |||||||||
| Net decrease in cash, cash equivalents, and restricted cash | (902.8) | (264.3) | |||||||||
| Cash, cash equivalents, and restricted cash at the beginning of period | 4,681.0 | 5,215.9 | |||||||||
| Cash, cash equivalents, and restricted cash at the end of period | $ | 3,778.2 | $ | 4,951.6 |
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Supplemental cash flow disclosures: | |||||||||||
| Interest paid | $ | 14.7 | $ | 14.8 | |||||||
| Income taxes paid | $ | 2.0 | $ | 2.2 | |||||||
| Supplemental non-cash investing and financing activities: | |||||||||||
| Accrued capital expenditures and non-cash landlord incentives | $ | 102.8 | $ | 21.1 | |||||||
See accompanying notes.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION
CoStar Group is a leading global provider of real estate information and analytics, online marketplaces, and 3D digital twin technology. The Company has created and compiled a standardized platform of real estate information and analytics and online marketplaces where industry professionals, consumers of real estate, and the related business communities can continuously interact and facilitate transactions by efficiently accessing and exchanging accurate and standardized real estate-related information. The Company's service offerings span all property types, including office, residential, retail, industrial, multifamily, land, mixed-use, and hospitality. The Company's services are typically distributed to its customers under subscription-based agreements that typically renew automatically and have a minimum term of one year. The Company operates within two operating segments, North America, which includes the U.S. and Canada and International, which primarily includes Europe, Asia-Pacific, and Latin America.
The Company completed the Visual Lease Acquisition and Matterport Acquisition in November 2024 and February 2025, respectively. See Note 5 for further discussion of these acquisitions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Accounting policies are consistent for each operating segment.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information. In the opinion of the Company’s management, the financial statements reflect all adjustments, consisting only of a normal recurring nature, necessary to present fairly the Company’s financial position at March 31, 2025 and December 31, 2024, the results of its operations for the three months ended March 31, 2025 and 2024, its comprehensive income (loss) for the three months ended March 31, 2025 and 2024, its changes in stockholders' equity for the three months ended March 31, 2025 and 2024, and its cash flows for the three months ended March 31, 2025 and 2024.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Report. Therefore, these financial statements should be read in conjunction with the Company’s 2024 Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, allowance for credit losses, the useful lives and recoverability of long-lived and intangible assets, goodwill impairment assessment, income taxes, accounting for business combinations, stock-based compensation, estimating the Company's incremental borrowing rate for its leases, the estimate of net realizable value of inventory, the determination of stand-alone selling prices of various performance obligations, and contingencies, among others. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ from these estimates.
Revenue Recognition
The Company derives revenues primarily by (i) providing access to its proprietary database of commercial real estate information, including benchmarking and analytics for the hospitality industry and analytics for lenders, and (ii) providing online marketplaces for professional property management companies, property owners, real estate agents and brokers, and landlords, in each case, typically through a fixed monthly fee for its subscription-based advertising services. Other subscription-
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
based services include (i) real estate and lease management solutions to commercial customers and real estate investors, (ii) access to applications to manage workflow for residential real estate agents, and (iii) access to its AI-powered spatial data platform to create high-fidelity and high-accuracy digital twins of physical spaces to generate valuable data, analytics, and insights for customers.
Subscription contract rates are generally based on the number of sites, number of users, organization size, the customer’s business focus, geography, the number of properties reported on or analyzed, the number and types of services to which a customer subscribes, the number of properties a customer advertises, the number of transactions and average transaction size a broker or agent has closed, and the prominence and placement of a customer's advertised properties in the search results. The Company’s subscription-based license or membership agreements typically renew automatically, and a majority have a term of at least one year. Revenues from subscription-based contracts were approximately 96% of total revenues for both the three months ended March 31, 2025 and 2024.
The Company also derives revenues from transaction-based services including: (i) an online auction platform for commercial real estate through Ten-X, (ii) the sale of Matterport cameras and capture equipment, (iii) providing assistance with the data capture process to create digital twins through Matterport, (iv) providing online tenant applications, including background and credit checks, and rental payment processing, and (v) ancillary products and services that are sold on an ad hoc basis.
The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers, (ii) identification of distinct performance obligations in the contract, (iii) determination of contract transaction price, (iv) allocation of contract transaction price to the performance obligations, and (v) determination of revenue recognition based on timing of satisfaction of the performance obligations.
The Company recognizes revenues upon the satisfaction of its performance obligation(s) (upon transfer of control of promised services to its customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those services. Revenues from subscription-based services are recognized on a straight-line basis over the term of the agreement. Revenues from transaction-based services are recognized when the promised product or services are delivered, which, in the case of Ten-X auctions, is at the time of a successful closing for the sale of a property. Revenues from product sales are recognized upon control transferring to the customers, which is generally upon shipment. Revenue for sales of Matterport cameras are recorded net of estimates of returns, as buyers are entitled to return the camera within 30 days from the date of purchase for a full refund. These rights are accounted for as variable consideration and recognized as a reduction to the revenue recognized.
In limited circumstances, the Company's contracts with customers include promises to transfer multiple services, such as contracts for its subscription-based services and professional services. For these contracts, the Company accounts for individual performance obligations separately if they are distinct, which involves the determination of the standalone selling price for each distinct performance obligation.
Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of the Company's fulfillment of its performance obligation(s) and is recognized as those obligations are satisfied.
Contract assets represent a conditional right to consideration for satisfied performance obligations that become a receivable when the conditions are satisfied. Contract assets are generated when contractual billing schedules differ from revenue recognition timing.
Certain sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions incurred for obtaining new contracts are deferred and then amortized as selling and marketing expenses on a straight-line basis over a period of benefit that the Company has determined to be two years for our residential products and three years for all other products. The amortization periods were determined based on several factors, including the nature of the technology and proprietary data underlying the services being purchased, customer contract renewal rates and industry competition. Sales commissions that do not represent incremental costs of obtaining a contract, or that would otherwise be amortized over a period of one year or less, are not subject to capitalization.
See Note 3 for further discussion of the Company's revenue recognition.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Cost of Revenues
Cost of revenues principally consists of salaries, benefits, bonuses, stock-based compensation expenses, and other indirect costs for the Company's researchers who collect and analyze the real estate data that is the basis for the Company's information, analytic, and online marketplace services and for employees that support these products. Additionally, cost of revenues includes amortization of acquired trade names, technology, and certain other intangible assets; product hosting costs; credit card and other transaction fees relating to processing customer transactions; cost of data from third-party data sources; costs of capture services; costs of Matterport cameras sold; and costs related to advertising purchased on behalf of customers.
Foreign Currency Translation
The Company’s reporting currency is the U.S. dollar. The functional currency for the majority of its operations is the local currency, with the exception of certain international locations for which the functional currency is the British Pound or U.S. dollar. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars using the exchange rates in effect as of the balance sheet date. Gains and losses resulting from translation are included in accumulated other comprehensive loss. Currency gains and losses on the translation of intercompany loans made to foreign subsidiaries that are of a long-term investment nature are also included in accumulated other comprehensive loss. Gains and losses resulting from transactions denominated in a currency other than the functional currency of the entity are included in other expense, net in the condensed consolidated statements of operations using the average exchange rates in effect during the period. The Company recognized a net foreign currency loss of $4.3 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss were as follows (in millions):
| March 31, 2025 | December 31, 2024 | ||||||||||
| Foreign currency translation loss | $ | (16.7) | $ | (25.5) | |||||||
| Total accumulated other comprehensive loss | $ | (16.7) | $ | (25.5) |
There were no amounts reclassified out of accumulated other comprehensive loss to the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024.
Income Taxes
Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and the basis reported in the Company’s condensed consolidated financial statements. Deferred tax liabilities and assets are determined based on the difference between the financial statement and the tax basis of assets and liabilities using enacted rates in effect during the year in which the Company expects differences to reverse. Valuation allowances are provided against assets, including net operating losses, if the Company determines it is more likely than not that some portion or all of an asset may not be realized. Interest and penalties related to income tax matters are recognized in income tax expense.
The Company has elected to record the GILTI under the current-period cost method.
See Note 11 for further discussion of the Company's accounting for income taxes.
Net (Loss) Income Per Share
Net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period on a basic and diluted basis.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table sets forth the calculation of basic and diluted net (loss) income per share (in millions, except per share data):
| Three Months Ended March 31, | |||||||||||
| Numerator: | 2025 | 2024 | |||||||||
| Net (loss) income | $ | (14.8) | $ | 6.7 | |||||||
| Denominator: | |||||||||||
| Denominator for basic net (loss) income per share — weighted-average outstanding shares | 410.5 | 405.6 | |||||||||
| Effect of dilutive securities: | |||||||||||
| Stock options, restricted stock awards, and restricted stock units | — | 1.7 | |||||||||
| Denominator for diluted net (loss) income per share — weighted-average outstanding shares | 410.5 | 407.3 | |||||||||
| Net (loss) income per share — basic | $ | (0.04) | $ | 0.02 | |||||||
| Net (loss) income per share — diluted | $ | (0.04) | $ | 0.02 |
The Company’s potentially dilutive securities include outstanding stock options and unvested stock-based awards, which include restricted stock awards that vest over a specific service period, restricted stock awards with a performance condition, restricted stock awards with a performance condition and a market condition, restricted stock units, and Matching RSUs awarded under the MSPP. Shares underlying unvested restricted stock awards that vest based on a performance condition and those that vest based on a performance and market condition that have not been achieved as of the end of the period are not included in the computation of basic or diluted earnings per share. Diluted net (loss) income per share considers the impact of potentially dilutive securities except when the inclusion of the potentially dilutive securities would have an anti-dilutive effect.
The following table summarizes the shares underlying the unvested performance-based restricted stock and anti-dilutive securities excluded from the basic and diluted earnings per share calculations (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Performance-based restricted stock awards | 1.4 | 0.8 | |||||||||
| Anti-dilutive securities | 2.2 | 1.6 | |||||||||
Stock-Based Compensation
Equity instruments issued in exchange for services performed by officers, employees, and directors of the Company are accounted for using a fair value-based method and the fair value of such equity instruments is recognized as expense in the condensed consolidated statements of operations.
For stock-based awards that vest over a specific service period, compensation expense is measured based on the fair value of the awards at the grant date and is recognized on a straight-line basis over the service period of the awards, net of an estimated forfeiture rate. For equity instruments that vest based on achievement of a performance condition or both a performance and market condition, stock-based compensation expense is recognized over the service period of the awards based on the expected achievement of the related performance conditions at the end of each reporting period. If the Company's initial estimates of the achievement of the performance conditions change, the related stock-based compensation expense may fluctuate from period to period based on those estimates. If the performance conditions are not met, no stock-based compensation expense will be recognized and any previously recognized stock-based compensation expense will be reversed. For awards with both a performance and a market condition, the Company estimates the fair value of each equity instrument granted on the date of grant using a Monte-Carlo simulation model. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards, which includes the recent market price and volatility of the Company's shares. When determining the grant date fair value of all stock-based awards, the Company considers whether it is in possession of any material, non-public information that upon its release would have a
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
material effect on its share price, and if so, whether the observable share price or expected volatility assumptions used in determining the fair value of the awards should be adjusted.
Stock-based compensation expense for stock options, restricted stock awards, and restricted stock units issued under equity incentive plans; stock purchases under the ESPP; and DSUs and Matching RSUs awarded under the MSPP included in the Company’s condensed consolidated statements of operations were as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cost of revenues | $ | 4.0 | $ | 3.7 | |||||||
| Selling and marketing (excluding customer base amortization) | 5.1 | 2.5 | |||||||||
| Software development | 7.7 | 5.3 | |||||||||
| General and administrative | 13.6 | 11.3 | |||||||||
| Total stock-based compensation expense | $ | 30.4 | $ | 22.8 |
Loss Contingencies and Litigation Expense
The Company is subject to the possibility of losses from various contingencies, including certain legal proceedings. Significant judgment is necessary to estimate the probability and amount of a loss, if any, from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. In accounting for the resolution of contingencies, significant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods. If only a range of estimated losses can be determined, the Company records an amount within the range that, in its judgment, reflects the most likely outcome; if none of the estimates within that range are a better estimate than any other amount, the Company records the low end of the range. Any such accrual would be charged to expense in the appropriate period.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists of cash deposited as collateral related to a litigation bond in a third-party insured account. See Note 12 for further discussion regarding the Company's litigation.
Cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets and condensed consolidated statements of cash flows as of March 31, 2025 and December 31, 2024 were as follows (in millions):
| March 31, 2025 | December 31, 2024 | ||||||||||
| Cash and cash equivalents | $ | 3,680.8 | $ | 4,681.0 | |||||||
| Restricted cash | 97.4 | — | |||||||||
| Total cash, cash equivalents, and restricted cash | $ | 3,778.2 | $ | 4,681.0 |
Allowance for Credit Losses
The Company maintains an allowance for credit losses to cover its current expected credit losses on its trade receivables and contract assets arising from the failure of customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables and contract assets based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables and historical write-off trends. Based on the Company’s experience, the customer's delinquency status, which is analyzed periodically, is the strongest indicator of the credit quality of the underlying trade receivables. The Company’s policy is to write off trade receivables when they are deemed uncollectible. A majority of the Company's trade receivables are less than 365 days outstanding.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Under the CECL impairment model, the Company develops and documents its allowance for credit losses on its trade receivables based on five portfolio segments. The determination of portfolio segments is based primarily on the qualitative consideration of the nature of the Company’s business operations and the characteristics of the underlying trade receivables, as follows:
-
CoStar Portfolio Segment - The CoStar portfolio segment consists of two classes of trade receivables based on geographical location: North America and International.
-
Information Services Portfolio Segment - The Information Services portfolio segment consists of four classes of trade receivables: CoStar Real Estate Manager; Hospitality, North America; Hospitality, International, and other Information Services.
-
Multifamily Portfolio Segment - The Multifamily portfolio segment consists of one class of trade receivables.
-
LoopNet Portfolio Segment - The LoopNet portfolio segment consists of one class of trade receivables.
-
Other Revenues Portfolio Segment - The Other Revenues portfolio segment consists of two class of trade receivables: Matterport and other marketplaces.
The majority of Residential revenue is e-commerce based and does not result in accounts receivable. Residential accounts receivable and the related allowance for credit losses are not material.
See Note 4 for further discussion of the Company’s accounting for allowance for credit losses.
Inventories
Inventories consist primarily of finished goods, assemblies, and raw materials. Assemblies are generally purchased from contract manufacturers. Inventories are valued at the lower of cost or net realizable value. Costs are determined using standard cost, which approximates actual cost on a first-in, first-out basis. The Company assesses the valuation of inventory and periodically adjusts the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions, as well as damaged or otherwise impaired goods. Inventories are included in prepaid expenses and other current assets on the Company's condensed consolidated balance sheets.
Inventories related to the Matterport Acquisition as of March 31, 2025 consisted of the following (in millions):
| March 31, 2025 | |||||
| Finished goods | $ | 2.4 | |||
| Work in process | 0.6 | ||||
| Purchased parts and raw materials | 2.3 | ||||
| Total inventories | $ | 5.3 |
Leases
The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at the commencement of the arrangement, at which time the Company also measures and recognizes an ROU asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. For the purposes of recognizing ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize an ROU asset or lease liability for short-term leases, which are leases with a term of 12 months or less. The lease term is defined as the noncancellable portion of the lease term, plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.
In determining the amount of lease payments used in measuring ROU assets and lease liabilities, the Company has elected the practical expedient not to separate non-lease components from lease components for all classes of underlying assets. Consideration deemed part of the lease payments used to measure ROU assets and lease liabilities generally includes fixed
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
payments and variable payments based on either an index or a rate, offset by lease incentives. Upon commencement, the initial ROU asset also includes any lease prepayments. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The rates implicit within the Company's leases are generally not determinable. Therefore, the Company's incremental borrowing rate is used to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment and is determined at lease commencement and is subsequently reassessed upon a modification to the lease arrangement.
Lease costs related to the Company's operating leases are generally recognized as a single ratable lease cost over the lease term.
See Note 7 for further discussion of the Company’s accounting for leases.
Equity Investment
The Company holds an investment in publicly held equity securities in which the Company does not have a controlling interest or exercise significant influence. The equity securities are included in the Equity investment caption on the condensed consolidated balance sheets and are measured at fair value with changes recorded through other expense, net on the condensed consolidated statements of operations.
Long-Lived Assets, Intangible Assets, and Goodwill
Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Goodwill is tested for impairment at least annually, on October 1, or more frequently if an event or other circumstance indicates that the fair value of a reporting unit may be below its carrying amount. The Company may first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or elect to bypass the qualitative assessment. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or the Company elects to bypass the qualitative assessment, the Company then performs a quantitative assessment by determining the fair value of each reporting unit. The estimate of the fair value of each reporting unit is based on a projected discounted cash flow model that includes significant assumptions and estimates, including the discount rate, growth rate, and future financial performance. Assumptions about the discount rate are based on a weighted-average cost of capital for comparable companies. Assumptions about the growth rate and future financial performance of a reporting unit are based on the Company’s forecasts, business plans, economic projections, and anticipated future cash flows. The fair value of each reporting unit is compared to the carrying amount of the reporting unit. If the carrying value of the reporting unit exceeds the fair value, then an impairment loss is recognized for the difference.
Leasing Operations and Other Expense, Net
In February 2024, the Company closed on the purchase of an office tower and the land on which it rests in Arlington, Virginia. In January 2025, the Company relocated its headquarters from Washington, D.C. to Arlington, VA occupying approximately 30% of the building. The Company intends to build out further space in this building to support anticipated growth and expansion of its operations in the coming years. Maintenance, physical facilities, leasing, property management, and other key responsibilities related to property ownership are outsourced to professional real-estate managers. The office tower measures approximately 550,000 rentable square feet.
The Company accounted for the purchase of this building as an asset acquisition at the cost to acquire, including transaction costs. The Company estimated the fair values of acquired tangible assets (consisting of land, buildings, improvements, and other assets), identified intangible assets and liabilities (consisting of in-place leases and above- and below-market leases), and other liabilities based on its evaluation of information and estimates available at the date of acquisition. Based on these estimates, the Company allocated the total cost to the identified assets acquired and liabilities assumed based on their relative fair value.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The fair value of the building and building improvements consists of the physical structure containing rentable area, as well as amenities such as parking structures, and was valued as if vacant, using the cost approach, which uses replacement cost data obtained from industry recognized guides less depreciation as an input to estimate the fair value, with consideration given to its age, functionality, use classification, construction quality, replacement cost, and accumulated depreciation (effective age vs. economic life). The Company also considered the value of the building using an income approach. The income approach uses market leasing assumptions to estimate the fair value of the property as if vacant, assuming lease-up at prevailing market rental rates over a market-based lease-up period, including deductions for lost-rent during lease-up and leasing costs. The cost and income approaches are reconciled to arrive at an estimated building fair value. The Company assessed the fair value of land based on market comparisons.
The fair values of identified intangible assets and liabilities were determined based on the following:
-
The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate that reflects the risks associated with the acquired lease) of the difference between: (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using market rates current at the time of the acquisition for the remaining term of the lease. Amounts allocated to above-market leases are recorded as above-market leases in intangible assets, net in the condensed consolidated balance sheets. These intangible assets are amortized on a straight-line basis as a component of leasing operations to other expense, net in the condensed consolidated statements of operations over the remaining terms of the respective leases.
-
Factors considered in determining the value allocable to in-place leases during hypothetical lease-up periods related to space that is leased at the time of acquisition include: (i) lost rent and operating cost recoveries during the hypothetical lease-up period and (ii) theoretical leasing commissions required to execute similar leases. These intangible assets are recorded as in-place leases in intangible assets, net in the condensed consolidated balance sheets and are amortized to other expense, net in the condensed consolidated statements of operations over the remaining terms of the existing leases.
The total cost of the land and building was $343.0 million and was allocated to the following components (in millions):
| Component | Balance Sheet Caption | Amount | |||||||||
| Land | Property and equipment, net | $ | 17.2 | ||||||||
| Building | Property and equipment, net | 224.5 | |||||||||
| Land and building improvements | Property and equipment, net | 27.5 | |||||||||
| Above-market leases | Intangible assets, net | 41.7 | |||||||||
| In-place leases | Intangible assets, net | 32.1 | |||||||||
| $ | 343.0 |
The cash paid for this asset acquisition was included in the caption purchases of property, equipment, and other assets for new campuses in the condensed consolidated statement of cash flows. The Company records the activity from this building's operations and leases, including building depreciation and operating expenses for space occupied by third parties, as other expense, net in the condensed consolidated statements of operations.
In October 2024, the Company and a building tenant modified a lease agreement to reduce the leased space and extend the lease term of a portion of the remaining space. Among other provisions, the modified lease agreement requires the tenant to make a $48 million buyout payment, in two equal installments, which will be recognized prospectively over the modified lease term. The Company received the first installment of the buyout payment in the fourth quarter of 2024. The second installment of the buyout payment is due in 2025. The tenant surrendered certain space concurrently with the execution of the modified lease agreement and the Company began to outfit this space to host its employees.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Deferred lease income as of March 31, 2025 and December 31, 2024 was as follows (in millions):
| Balance | Balance Sheet Caption | March 31, 2025 | December 31, 2024 | |||||||||||
| Current portion | Other current liabilities | $ | 5.9 | $ | 4.5 | |||||||||
| Non-current portion | Lease and other long-term liabilities | 15.7 | 18.5 | |||||||||||
| Total deferred lease income | $ | 21.6 | $ | 23.0 |
Lease income includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease. When a renewal option is included within the lease, the Company assesses whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Further, lease income includes tenant reimbursement amounts for the recovery of the operating expenses and real estate taxes. Tenant reimbursements, which vary each period, are non-lease components that are not the predominant activity within the contract. The Company has elected the practical expedient that allows it to combine certain lease and non-lease components of operating leases. Non-lease components are recognized together with fixed base rent in “lease income,” as variable lease income in the same period as the related expenses are incurred. Variable lease income was not material for the three months ended March 31, 2025. Components of other expense, net related to leasing operations for the three months ended March 31, 2025 and 2024 were as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Lease income(1) | $ | 4.5 | $ | 3.2 | |||||||
| Less: | |||||||||||
| Property operating expenses | 1.2 | 1.5 | |||||||||
| Depreciation and amortization expense | 3.9 | 3.6 | |||||||||
| Other expense from leasing operations | $ | (0.6) | $ | (1.9) | |||||||
| __________________________ | |||||||||||
| (1) Includes $1.1 million and $1.9 million of amortization expense of above-market leases for three months ended March 31, 2025 and 2024, respectively. |
Building depreciation and operating expenses for space occupied by the Company are allocated between cost of revenues, selling and marketing (excluding customer base amortization), software development, and general and administrative expenses on the condensed consolidated statement of operations based on the headcount of the respective departments occupying the building. As of March 31, 2025, the Company occupied approximately 30% of the property with the remainder leased or available to be leased to third parties.
Debt Issuance Costs
Costs incurred in connection with the issuance of long-term debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method for term debt and on a straight-line basis for revolving debt. The Company made a policy election to classify deferred issuance costs on the revolving credit facility as a long-term asset on its condensed consolidated balance sheets. Upon a refinancing or amendment, previously capitalized debt issuance costs are expensed and included in loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. If the Company determines that there has not been a substantial modification of the related debt, any previously capitalized debt issuance costs are amortized as interest expense over the term of the new debt instrument.
See Note 10 for further discussion of the Company's accounting for its outstanding debt, revolving credit facility, and related issuance costs.
Business Combinations
The Company includes the results of operations of the businesses that it acquires from the date of acquisition. The Company generally allocates the purchase consideration to the tangible assets acquired and liabilities assumed and intangible assets acquired based on their estimated fair values on the date of the acquisition. The purchase price is generally determined
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
based on the fair value of the assets transferred, liabilities assumed, and equity interests issued, after considering any transactions that are separate from the business combination. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The Company applies significant assumptions, estimates, and judgments in determining the fair value of assets acquired and liabilities assumed on the acquisition date, especially with respect to intangible assets and contingent liabilities. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer bases, acquired technology, acquired trade names, useful lives, royalty rates, and discount rates. Estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any adjustments to provisional amounts that are identified during the measurement period, not to exceed one year from the date of acquisition, are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
The Company has elected the practical expedient provided under ASC 805, Business Combinations, which allows for contract assets and liabilities acquired or assumed in an acquisition to be measured in accordance with the accounting framework for revenue from contracts with customers as if the Company had originated the acquired contract. This is an exception to the general requirement to measure assets acquired and liabilities assumed at their fair value on the acquisition date.
For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition date and may extend its review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether the Company includes these contingencies as part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.
If the Company cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax-related) by the end of the measurement period, which is generally the case given the nature of such matters, the Company will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been assumed at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in the Company's estimates of such contingencies will affect earnings and could have a material effect on its results of operations and financial position.
In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. The Company reevaluates these items based upon facts and circumstances that existed as of the acquisition date with any adjustments to its preliminary estimates being recorded to goodwill, provided that the Company is within the measurement period. Subsequent to the measurement period, changes to these uncertain tax positions and tax-related valuation allowances will affect the Company's provision for income taxes in its condensed consolidated statements of operations and comprehensive (loss) income and could have a material impact on its results of operations and financial position.
Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the condensed consolidated statements of operations.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
The Company adopted ASU No. 2023-07 (Topic 280), Improvements to Reportable Segment Disclosures effective January 1, 2024. This guidance requires enhanced disclosures about significant segment expenses. Additionally, it requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The adoption resulted in expanded segment reporting disclosures, with no impacts to our financial condition and results of operations.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as an expansion of other income tax disclosures. The ASU is effective on a prospective basis for annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The ASU requires incremental disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization, and selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company's disclosures.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenue
Revenues by operating segment and type of service consist of the following (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| North America | International | Total | North America | International | Total | ||||||||||||||||||||||||||||||
| CoStar | $ | 247.6 | $ | 17.5 | $ | 265.1 | $ | 235.7 | $ | 14.6 | $ | 250.3 | |||||||||||||||||||||||
| Information Services | 36.0 | 3.8 | 39.8 | 27.4 | 5.6 | 33.0 | |||||||||||||||||||||||||||||
| Multifamily | 282.5 | — | 282.5 | 254.8 | — | 254.8 | |||||||||||||||||||||||||||||
| LoopNet | 70.0 | 2.8 | 72.8 | 66.4 | 2.7 | 69.1 | |||||||||||||||||||||||||||||
| Residential | 16.5 | 10.7 | 27.2 | 8.4 | 10.2 | 18.6 | |||||||||||||||||||||||||||||
| Other Revenues | 44.8 | — | 44.8 | 30.6 | — | 30.6 | |||||||||||||||||||||||||||||
| Total revenues | $ | 697.4 | $ | 34.8 | $ | 732.2 | $ | 623.3 | $ | 33.1 | $ | 656.4 |
Deferred Revenue
Deferred revenue as of March 31, 2025 and December 31, 2024 was as follows (in millions):
| Balance | Balance Sheet Caption | March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Current portion | Deferred revenue | $ | 181.4 | $ | 137.1 | |||||||||||||||||||||||||||||||||
| Non-current portion | Lease and other long-term liabilities | 1.6 | 0.2 | |||||||||||||||||||||||||||||||||||
| Total deferred revenue | $ | 183.0 | $ | 137.3 | ||||||||||||||||||||||||||||||||||
Changes in deferred revenue for the period were as follows (in millions):
| Balance at December 31, 2024 | $ | 137.3 | |||
| Revenues recognized in the current period from the amounts in the beginning balance | (68.8) | ||||
| New deferrals, net of amounts recognized in the current period (1) | 113.7 | ||||
| Effects of foreign currency | 0.8 | ||||
| Balance at March 31, 2025 | $ | 183.0 | |||
| __________________________ | |||||
(1) This balance includes $32.1 million of new deferrals from acquisition completed in 2025. See Note 5 for further discussion of acquisitions.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Contract Assets
Contract assets are generated when contractual billing schedules differ from revenue recognition timing and represent a conditional right to consideration for satisfied performance obligations that becomes a receivable when the conditions are satisfied. Contract assets as of March 31, 2025 and December 31, 2024 were as follows (in millions):
| Balance | Balance Sheet Caption | March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Current portion | Prepaid expenses and other current assets | $ | 6.5 | $ | 5.8 | |||||||||||||||||||||||||||||||||
| Non-current portion | Deposits and other assets | 4.9 | 6.0 | |||||||||||||||||||||||||||||||||||
| Total contract assets | $ | 11.4 | $ | 11.8 | ||||||||||||||||||||||||||||||||||
Revenues were reduced by $0.4 million and $0.1 million from contract assets for the three months ended March 31, 2025 and 2024, respectively.
Unsatisfied Performance Obligations
Remaining contract consideration for which revenue has not been recognized due to unsatisfied performance obligations was approximately $455.3 million at March 31, 2025, which the Company expects to recognize over the next eight years. This amount does not include contract consideration for contracts with a duration of one year or less.
Commissions
Commissions expense is included in selling and marketing expense (excluding customer base amortization) in the Company's condensed consolidated statements of operations. Commissions expense activity for the three months ended March 31, 2025 and 2024 was as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Commissions incurred | $ | 46.2 | $ | 51.8 | |||||||
| Commissions capitalized in the current period | (32.9) | (38.7) | |||||||||
| Amortization of deferred commissions costs | 31.0 | 27.2 | |||||||||
| Total commissions expense | $ | 44.3 | $ | 40.3 |
The Company did not recognize any impairment losses on commissions during the three months ended March 31, 2025 or 2024.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. ALLOWANCE FOR CREDIT LOSSES
The following tables detail the activity related to the allowance for credit losses for trade receivables by portfolio segment (in millions):
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||
| CoStar | Information Services | Multifamily | LoopNet | Other Revenues | Total | ||||||||||||||||||||||||||||||
| Beginning balance at December 31, 2024 | $ | 6.1 | $ | 3.9 | $ | 9.4 | $ | 3.0 | $ | 0.4 | $ | 22.8 | |||||||||||||||||||||||
| Current-period provision (release) for expected credit losses | 4.5 | (0.1) | 3.7 | 1.0 | 0.3 | 9.4 | |||||||||||||||||||||||||||||
| Write-offs charged against the allowance | (3.2) | (0.8) | (2.1) | (0.8) | — | (6.9) | |||||||||||||||||||||||||||||
| Ending balance at March 31, 2025 | $ | 7.4 | $ | 3.0 | $ | 11.0 | $ | 3.2 | $ | 0.7 | $ | 25.3 |
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| CoStar | Information Services | Multifamily | LoopNet | Other Revenues | Total | |||||||||||||||||||||||||||||||||
| Beginning balance at December 31, 2023 | $ | 9.7 | $ | 2.5 | $ | 7.3 | $ | 2.7 | $ | 1.0 | $ | 23.2 | ||||||||||||||||||||||||||
| Current-period provision for expected credit losses | 3.1 | 0.2 | 3.1 | 1.4 | 0.1 | 7.9 | ||||||||||||||||||||||||||||||||
| Write-offs charged against the allowance | (4.9) | (0.7) | (2.5) | (1.7) | — | (9.8) | ||||||||||||||||||||||||||||||||
| Ending balance at March 31, 2024 | $ | 7.9 | $ | 2.0 | $ | 7.9 | $ | 2.4 | $ | 1.1 | $ | 21.3 |
Credit loss expense is included in general and administrative expenses on the condensed consolidated statements of operations. Credit loss expense related to contract assets was not material for the three months ended March 31, 2025 and 2024. Residential accounts receivable and the related allowance for credit losses were not material three months ended March 31, 2025 and 2024.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. ACQUISITIONS
Matterport
On February 28, 2025, the Company completed the Matterport Acquisition. Matterport is a leader in the digitization and datafication of the built world. Matterport’s pioneering technology has set the standard for digitizing, accessing and managing buildings, spaces, and places online. Matterport’s platform, comprised of innovative software, spatial data-driven data science, and 3D capture technology, has broken down the barriers that have kept the largest asset class in the world, buildings and physical spaces, offline and underutilized for so long. The Company intends to integrate Matterport's 3D digital twin technology with its information service products and online marketplaces to allow buyers, sellers, and renters to explore properties with greater depth and insight.
Pursuant to the terms and conditions of the Matterport Merger Agreement, the Company acquired Matterport, with each share of Matterport Common Stock outstanding immediately prior to the closing of the Matterport Acquisition exchanged for (i) 0.03552 of a CoStar Group Share, the Matterport Merger Exchange Ratio, and (ii) $2.75 in cash (the "Matterport Acquisition Consideration"), with fractional shares of CoStar Group Shares paid in cash.
As part of the acquisition, the Company issued certain rollover equity awards to the employees of Matterport, which included approximately 2.3 million shares of restricted stock units and approximately 1.8 million stock option awards. The total fair value of the rollover equity awards was $272.6 million, of which the portion attributable to services performed prior to the acquisition date was allocated to purchase consideration. The remaining fair value was allocated to future services and will be expensed over the remaining service periods as share-based compensation.
The total purchase consideration for the Matterport Acquisition was $1.9 billion, which consisted of the following (in millions):
| Amount | |||||
| Cash | $ | 902.1 | |||
| CoStar Group Shares (11.7 million shares) | 881.2 | ||||
| Fair value of rollover awards | 143.8 | ||||
| Total | $ | 1,927.1 |
The following table summarizes the amounts recorded for acquired assets and assumed liabilities recorded at their fair value as of the closing date of the Matterport Acquisition (in millions):
| Preliminary: February 28, 2025 | |||||
| Cash and cash equivalents | $ | 55.1 | |||
| Restricted cash | 97.0 | ||||
| Accounts receivable | 13.3 | ||||
| Available for sale investments | 203.7 | ||||
| Deferred tax assets, net of valuation allowance | 24.6 | ||||
| Goodwill | 1,136.4 | ||||
| Intangible assets | 527.0 | ||||
| Deferred revenue | (32.1) | ||||
| Litigation accrual | (95.0) | ||||
| Other assets and (liabilities), net | (2.9) | ||||
| Fair value of identifiable net assets acquired | $ | 1,927.1 |
Generally, the net assets of Matterport were recorded at their estimated fair values. In valuing the acquired assets and assumed liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
contractual obligations, and appropriate discount rates. The key assumptions used in the valuation include discount rates, royalty rates, projected revenue growth rates, customer attrition rates, and profit margins.
The purchase price allocation is preliminary and subject to change during the measurement period as additional information is obtained about the facts and circumstances that existed at closing. Any material adjustments to provisional amounts identified during the measurement period will be recognized and disclosed in the reporting period in which the adjustment amounts are determined. The primary areas that remain subject to additional information is the the Company's assessment of certain tax matters; contingencies, including those discussed in Note 12, Commitments and Contingencies; and fair value assessment of certain acquired intangibles.
The following table summarizes the fair values (in millions) of the identifiable intangible assets acquired in the Matterport Acquisition included in the Company's North America operating segment, their related estimated useful lives (in years), and their respective amortization methods:
| Estimated Fair Value | Estimated Useful Life | Amortization Method | |||||||||||||||
| Developed technology | $ | 295.0 | 9 | Straight-line | |||||||||||||
| Customer relationships | 140.0 | 5 | Accelerated | ||||||||||||||
| Trade names | 92.0 | 15 | Straight-line | ||||||||||||||
| Total intangible assets | $ | 527.0 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the Matterport Acquisition includes but is not limited to: (i) the expected synergies and other benefits that the Company believes will result from combining Matterport's operations with the Company's operations and (ii) any intangible assets that do not qualify for separate recognition, such as the assembled workforce. The $1.1 billion of goodwill recorded as part of the Matterport Acquisition is associated with the Company's North America operating segment, of which none is expected to be deductible for income tax purposes. Transaction costs associated with the Matterport Acquisition were $17.6 million during the three months ended March 31, 2025, and consist primarily of legal, accounting, and other professional service costs. These costs are included within general and administrative expenses on the condensed consolidated statements of operations.
Visual Lease
In November 2024, CoStar acquired Visual Lease for total consideration of $276.0 million, in accordance with the terms under the Visual Lease Merger Agreement. Visual Lease is the operator of a SaaS platform for integrated lease management and lease accounting.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the amounts recorded for acquired assets and assumed liabilities recorded at their fair value as of the closing date of the acquisition (in millions):
| Preliminary: November 1, 2024 | Measurement Period Adjustments | Updated Preliminary: November 1, 2024 | |||||||||||||||
| Cash and cash equivalents | $ | 5.2 | $ | — | $ | 5.2 | |||||||||||
| Accounts receivable | 4.2 | — | 4.2 | ||||||||||||||
| Deferred tax assets | 5.3 | 0.5 | 5.8 | ||||||||||||||
| Goodwill | 148.0 | 1.5 | 149.5 | ||||||||||||||
| Intangible assets | 135.9 | — | 135.9 | ||||||||||||||
| Deferred revenue | (22.4) | — | (22.4) | ||||||||||||||
| Other assets and (liabilities), net | (0.2) | (2.0) | (2.2) | ||||||||||||||
| Fair value of identifiable net assets acquired | $ | 276.0 | $ | — | $ | 276.0 |
The net assets of Visual Lease were recorded at their estimated fair values. In valuing the acquired assets and assumed liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. The purchase price allocation is preliminary, subject primarily to the Company's assessment of certain tax matters and contingencies. The key assumptions used in the valuation include discount rates, projected revenue growth rates, customer attrition rates, and profit margins.
The following table summarizes the fair values (in millions) of the identifiable intangible assets acquired in the Visual Lease Acquisition included in the Company's North America operating segment, their related estimated useful lives (in years), and their respective amortization methods:
| Estimated Fair Value | Estimated Useful Life | Amortization Method | |||||||||||||||
| Customer base | $ | 119.3 | 15 | Accelerated | |||||||||||||
| Trade name | 1.3 | 5 | Straight-line | ||||||||||||||
| Software technology | 1.5 | 3 | Straight-line | ||||||||||||||
| Database technology | 13.8 | 7.5 | Straight-line | ||||||||||||||
| Total intangible assets | $ | 135.9 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the Visual Lease Acquisition includes, but is not limited to: (i) the expected synergies and other benefits that the Company believes will result from combining its operations with our CoStar Real Estate Manager operations and (ii) any intangible assets that do not qualify for separate recognition, such as the assembled workforce. The $149.5 million of goodwill recorded as part of the acquisition is associated with the Company's North America operating segment, of which $132.7 million is expected to be deductible for income tax purposes. Transaction costs associated with the Visual Lease Acquisition were $6.8 million.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Pro Forma Financial Information (unaudited)
The unaudited pro forma financial information presented below reflects the condensed consolidated results of operations of the Company assuming the Matterport Acquisition had taken place on January 1, 2024 and was as follows (in millions, except per share data):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenue | $ | 757.7 | $ | 695.4 | |||||||
| Net loss | $ | (57.1) | $ | (49.9) | |||||||
| Net loss per share - basic | $ | (0.14) | $ | (0.12) | |||||||
| Net loss per share - diluted | $ | (0.14) | $ | (0.12) |
The material pro forma adjustments primarily consist of incremental amortization expense based on the preliminary fair value of the intangible assets acquired, increased compensation expense relating to the issuance of certain equity plans in connection with the Matterport Acquisition, accounting policy alignment adjustments, and the income tax impact of the aforementioned pro forma adjustments. They have also been adjusted to reflect $17.6 million acquisition-related costs incurred during the three months ended March 31, 2025 as having occurred on January 1, 2024.
The impact of the Matterport Acquisition on the Company's revenue and net loss in the condensed consolidated statements of operations from February 28, 2025 through March 31, 2025 was $15.9 million and $13.2 million, respectively.
6. INVESTMENTS AND FAIR VALUE MEASUREMENTS
We categorize assets and liabilities recorded or disclosed at fair value on the condensed consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:
Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3 - Unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The Company's financial assets that were measured at fair value on a recurring basis were as follows (in millions):
| March 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 3,430.0 | $ | — | $ | — | $ | 3,430.0 | |||||||||||||||
| Total cash equivalents | $ | 3,430.0 | $ | — | $ | — | $ | 3,430.0 | |||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| Equity investment | $ | 285.6 | $ | — | $ | — | $ | 285.6 | |||||||||||||||
| Total short-term investments | $ | 285.6 | $ | — | $ | — | $ | 285.6 | |||||||||||||||
| Total assets measured at fair value | $ | 3,715.6 | $ | — | $ | — | $ | 3,715.6 |
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 4,520.0 | $ | — | $ | — | $ | 4,520.0 | |||||||||||||||
| Total cash equivalents | $ | 4,520.0 | $ | — | $ | — | $ | 4,520.0 | |||||||||||||||
| Total assets measured at fair value | $ | 4,520.0 | $ | — | $ | — | $ | 4,520.0 |
Equity Investment
Total realized and unrealized gains and losses associated with the equity investment were as follows (in millions):
| Three Months Ended March 31, 2025 | |||||
| Net unrealized gains recognized on equity investments held as of the end of the period | $ | 2.5 | |||
| Total net gains recognized in other expense, net | $ | 2.5 |
Available-for-sale Debt Securities
The Company acquired $203.7 million of available-for-sale debt securities, inclusive of $2.0 million of accrued interest, in the Matterport Acquisition. These securities were sold for net proceeds of $203.4 million resulting in a negligible realized loss.
Other Financial Instruments
The Company holds other financial instruments, including cash deposits, accounts receivable, accounts payable, accrued expenses, and Senior Notes. The carrying value for such financial instruments, other than the Senior Notes, each approximated their fair values as of both March 31, 2025 and December 31, 2024. The estimated fair value of the Company's outstanding Senior Notes using quoted prices from the over-the-counter markets, considered Level 2 inputs, was $0.9 billion as of March 31, 2025 and December 31, 2024.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. LEASES
The Company has operating and finance leases for its office facilities, data centers, and certain vehicles, as well as finance leases for office equipment. The Company's leases have remaining terms up to ten years. The leases contain various renewal and termination options. The period that is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. The period that is subject to an option to terminate the lease is included if it is reasonably certain that the option will not be exercised.
Lease costs related to the Company's operating and finance leases included in the condensed consolidated statements of operations were as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| Operating lease costs: | 2025 | 2024 | |||||||||
| Cost of revenues | $ | 3.0 | $ | 2.6 | |||||||
| Selling and marketing (excluding customer base amortization) | 3.9 | 3.9 | |||||||||
| Software development | 2.0 | 1.7 | |||||||||
| General and administrative | 1.3 | 1.4 | |||||||||
| Total operating lease costs | $ | 10.2 | $ | 9.6 | |||||||
| Finance lease costs: | |||||||||||
| Amortization of ROU assets | 1.2 | 1.9 | |||||||||
| Interest on lease liabilities | 0.2 | 0.3 | |||||||||
| Total finance lease costs | 1.4 | 2.2 | |||||||||
| Total lease costs | $ | 11.6 | $ | 11.8 | |||||||
Finance lease costs primarily relate to vehicles used by the Company's research teams, and the amortization of the ROU assets are recorded to cost of revenue in the condensed consolidated statements of operations. The impact of lease costs related to short-term leases was not material for the three months ended March 31, 2025 and 2024.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Supplemental balance sheet information related to operating leases was as follows (in millions):
| Balance | Balance Sheet Location | March 31, 2025 | December 31, 2024 | |||||||||||
| Operating lease liabilities | $ | 130.4 | $ | 138.9 | ||||||||||
| Less: imputed interest | 17.4 | 18.2 | ||||||||||||
| Present value of lease liabilities | 113.0 | 120.7 | ||||||||||||
| Less: current portion of lease liabilities | Lease liabilities | 23.1 | 27.0 | |||||||||||
| Long-term lease liabilities | Lease and other long-term liabilities | $ | 89.9 | $ | 93.7 | |||||||||
| Weighted-average remaining lease term in years | 5.6 | 5.6 | ||||||||||||
| Weighted-average discount rate | 4.4 | % | 4.4 | % | ||||||||||
| ROU Assets | Lease right-of-use assets | $ | 96.7 | $ | 103.0 | |||||||||
| Finance lease liabilities | $ | 15.7 | $ | 16.6 | ||||||||||
| Less: imputed interest | 1.3 | 1.6 | ||||||||||||
| Present value of lease liabilities | 14.4 | 15.0 | ||||||||||||
| Less: current portion of lease liabilities | Lease liabilities | 5.1 | 5.0 | |||||||||||
| Long-term lease liabilities | Lease and other long-term liabilities | $ | 9.3 | $ | 10.0 | |||||||||
| Weighted-average remaining lease term in years | 2.7 | 3.0 | ||||||||||||
| Weighted-average discount rate | 6.4 | % | 6.4 | % | ||||||||||
| ROU Assets | Property and equipment, net | $ | 14.6 | $ | 15.7 | |||||||||
Supplemental cash flow information related to leases was as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows used in operating leases | $ | 11.3 | $ | 9.7 | |||||||
| Operating cash flows used in finance leases | $ | 0.2 | $ | 0.3 | |||||||
| Financing cash flows used in finance leases | $ | 0.7 | $ | 1.3 | |||||||
| ROU assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | 0.8 | $ | 3.6 | |||||||
| Finance leases | $ | 0.1 | $ | 4.6 | |||||||
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
8. GOODWILL
The changes in the carrying amount of goodwill by operating segment consist of the following (in millions):
| North America | International | Total | |||||||||||||||
| Goodwill, December 31, 2023 | $ | 2,149.2 | $ | 237.0 | $ | 2,386.2 | |||||||||||
| Acquisitions, including measurement period adjustments(1) | 148.0 | (1.1) | 146.9 | ||||||||||||||
| Effect of foreign currency translation | — | (5.5) | (5.5) | ||||||||||||||
| Goodwill, December 31, 2024 | 2,297.2 | 230.4 | 2,527.6 | ||||||||||||||
| Acquisitions, including measurement period adjustments(2) | 1,137.9 | — | 1,137.9 | ||||||||||||||
| Effect of foreign currency translation | — | 7.7 | 7.7 | ||||||||||||||
| Goodwill, March 31, 2025 | $ | 3,435.1 | $ | 238.1 | $ | 3,673.2 | |||||||||||
| __________________________ |
(1) North America goodwill generated during the year ended December 31, 2024 from the Visual Lease Acquisition was $148.0 million.
(2) North America goodwill generated during the three months ended March 31, 2025 from the Matterport Acquisition was $1,136.4 million.
The Company did not recognize any impairment losses on goodwill during the three months ended March 31, 2025 or 2024.
9. INTANGIBLE ASSETS
Intangible assets consist of the following (in millions, except amortization period data):
| March 31, 2025 | December 31, 2024 | Weighted- Average Amortization Period (in years) | |||||||||||||||
| Acquired technology and data | $ | 367.0 | $ | 47.4 | 9 | ||||||||||||
| Accumulated amortization | (30.2) | (24.7) | |||||||||||||||
| Acquired technology and data, net | 336.8 | 22.7 | |||||||||||||||
| Acquired customer base | 700.1 | 556.9 | 10 | ||||||||||||||
| Accumulated amortization | (322.8) | (304.1) | |||||||||||||||
| Acquired customer base, net | 377.3 | 252.8 | |||||||||||||||
| Acquired trade names and other intangible assets | 333.4 | 240.8 | 14 | ||||||||||||||
| Accumulated amortization | (146.5) | (141.4) | |||||||||||||||
| Acquired trade names and other intangible assets, net | 186.9 | 99.4 | |||||||||||||||
| Acquired above-market leases | 41.5 | 41.5 | 9 | ||||||||||||||
| Accumulated amortization | (10.4) | (9.3) | |||||||||||||||
| Acquired above-market leases, net | 31.1 | 32.2 | |||||||||||||||
| Acquired in-place leases | 32.0 | 32.0 | 9 | ||||||||||||||
| Accumulated amortization | (6.9) | (5.9) | |||||||||||||||
| Acquired in-place leases, net | 25.1 | 26.1 | |||||||||||||||
| Intangible assets, net | $ | 957.2 | $ | 433.2 |
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company did not recognize any impairment losses on intangible assets during the three months ended March 31, 2025 or 2024. During the three months ended March 31, 2025, the Company removed $0.3 million of intangible assets that were fully amortized from the acquired intangible assets and accumulated amortization, which had no net impact on the Company's financial results.
10. LONG-TERM DEBT
The table below presents the components of outstanding debt (in millions):
| March 31, 2025 | December 31, 2024 | ||||||||||
| 2.800% Senior Notes due July 15, 2030 | $ | 1,000.0 | $ | 1,000.0 | |||||||
| 2024 Credit Agreement, due May 24, 2029 | — | — | |||||||||
| Total face amount of long-term debt | 1,000.0 | 1,000.0 | |||||||||
| Senior Notes unamortized discount and issuance costs | (7.8) | (8.1) | |||||||||
| Long-term debt, net | $ | 992.2 | $ | 991.9 |
Senior Notes
On July 1, 2020, the Company issued $1.0 billion aggregate principal amount of 2.800% Senior Notes due July 15, 2030. The Senior Notes were sold to a group of financial institutions as initial purchasers who subsequently resold the Senior Notes to non-U.S. persons pursuant to Regulation S under the Securities Act, and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 99.921% of their principal amount. Interest on the Senior Notes is payable semi-annually in arrears on January 15 and July 15. The Senior Notes may be redeemed in whole or in part by the Company (a) at any time prior to April 15, 2030 at a redemption price equal to 100% of the principal amount of the Senior Notes, plus the Applicable Premium (as calculated in accordance with the indenture governing the Senior Notes), and any accrued and unpaid interest, if any, on the principal amount of Senior Notes being redeemed to, but excluding, the redemption date, and (b) on or after April 15, 2030 at a redemption price equal to 100% of the principal amount of the Senior Notes, plus any accrued and unpaid interest, if any, on the principal amount of Senior Notes being redeemed to, but excluding, the redemption date. The Company’s obligations under the Senior Notes are guaranteed on a senior, unsecured basis by the Company’s domestic wholly-owned subsidiaries, and the indenture governing the Senior Notes contains covenants, events of default, and other customary provisions with which the Company was in compliance as of March 31, 2025.
Revolving Credit Facility
On May 24, 2024, the Company entered into the 2024 Credit Agreement, which provides for a $1.1 billion revolving credit facility with a term of five years (maturing May 24, 2029) and a letter of credit sublimit of $20 million from a syndicate of financial institutions and issuing banks. The 2024 Credit Agreement replaces the Company's 2020 Credit Agreement.
Borrowings bear interest at a floating rate, which can be, at the Company’s option, either (a) an alternate base rate plus an applicable rate ranging from 0.125% to 0.750% or (b) a Term SOFR, SONIA rate, or EURIBOR for the specified interest period plus an applicable rate ranging from 1.125% to 1.750%, in each case depending on the Company’s Debt Rating (as defined in the 2024 Credit Agreement).
The 2024 Credit Agreement contains customary affirmative covenants for transactions of this type, including, among others, the provision of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain material events, preservation of existence, maintenance of properties, and compliance with laws, including environmental laws, subject to certain exceptions. The 2024 Credit Agreement contains customary negative covenants, including, among others, restrictions on the ability of the Company and its subsidiaries to merge and consolidate with other companies, restrictions on the ability of certain subsidiaries to incur indebtedness, and restrictions on the ability of the Company and certain subsidiaries to grant liens or security interests on assets, subject to certain exceptions. The 2024 Credit Agreement contains a financial maintenance covenant that requires the Company to maintain a Total Leverage Ratio (as defined in the 2024 Credit Agreement) of less than or equal to 4.50 to 1.00, tested at the end of each fiscal quarter. The 2024 Credit Agreement also provides for a number of customary events of default, including, among others: payment defaults to the Lenders, voluntary and involuntary bankruptcy proceedings, covenant defaults, material inaccuracies of representations and
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
warranties, cross-acceleration to other material indebtedness, certain change of control events, material money judgments, and other customary events of default. The occurrence of an event of default could result in the acceleration of obligations and the termination of lending commitments under the 2024 Credit Agreement. The Company was in compliance with the covenants in the 2024 Credit Agreement as of March 31, 2025. As of March 31, 2025, the Company had no amounts drawn under this facility.
The Company had $3.5 million and $3.8 million of deferred debt issuance costs related to the revolving credit facility as of March 31, 2025 and December 31, 2024, respectively. These amounts are included in deposits and other assets on the Company's condensed consolidated balance sheets.
The Company recognized interest expense as follows (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Interest on outstanding borrowings | $ | 7.0 | $ | 7.0 | |||||||
| Amortization of Senior Notes discount and issuance costs | 0.6 | 0.6 | |||||||||
| Interest capitalized for construction in process | (2.6) | (1.1) | |||||||||
| Commitment fees and other | 0.7 | 0.8 | |||||||||
| Total interest expense | $ | 5.7 | $ | 7.3 | |||||||
11. INCOME TAXES
The income tax provision reflects an effective tax rate of approximately (121)% and 42% for the three months ended March 31, 2025 and 2024, respectively. The decrease in the effective tax rate for the three months ended March 31, 2025 was primarily due to an overall book loss position with U.S. net income that is taxable and a U.K. net loss with no tax benefit as well as a discrete tax expense for transaction costs for the three months ended March 31, 2025.
12. COMMITMENTS AND CONTINGENCIES
The following summarizes the Company's significant contractual obligations, including related payments due by period, as of March 31, 2025 (in millions):
| Year Ending December 31, | Operating lease obligations | Finance lease obligations | Long-term debt principal interest payments | Long-term debt principal payments | |||||||||||||||||||
| Remainder of 2025 | $ | 21.4 | $ | 4.5 | $ | — | $ | 14.0 | |||||||||||||||
| 2026 | 24.7 | 5.9 | — | 28.0 | |||||||||||||||||||
| 2027 | 22.8 | 4.9 | — | 28.0 | |||||||||||||||||||
| 2028 | 21.7 | 0.4 | — | 28.0 | |||||||||||||||||||
| 2029 | 13.8 | — | — | 28.0 | |||||||||||||||||||
| Thereafter | 26.0 | — | 1,000.0 | 28.0 | |||||||||||||||||||
| Total | $ | 130.4 | $ | 15.7 | $ | 1,000.0 | $ | 154.0 |
The Company leases office facilities under various non-cancelable operating leases, as well as data centers and vehicles under finance lease arrangements. The leases contain various renewal options.
See Note 7 for further discussion of the Company's lease commitments.
Litigation
Currently, and from time to time, the Company is involved in litigation incidental to the conduct of its business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount can be
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
reasonably estimated. While it is reasonably possible that an unfavorable outcome may occur as a result of one or more of the Company’s current litigation matters, at this time, management has concluded that the resolutions of these matters are not expected to have a material effect on the Company's condensed consolidated financial position, future results of operations, or liquidity. Legal defense costs are expensed as incurred, except as set forth below.
Matterport-Related Matters
On July 23, 2021, plaintiff William J. Brown, a former employee and a stockholder of Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), sued Matterport, Gores Holdings VI, Inc. (now known as Matterport, Inc.), Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Matterport directors R.J. Pittman, David Gausebeck, Matt Bell, Peter Hebert, Jason Krikorian, Carlos Kokron and Michael Gustafson (collectively, the “Brown Defendants”) in the Court of Chancery of the State of Delaware (the “Chancery Court ”). Brown claimed that the Brown Defendants imposed invalid transfer restrictions on his shares of Matterport stock in connection with the Gores Merger transactions (the "Gores Transaction" and the Agreement and the Plan of Merger thereunder, the "Gores Merger Agreement") between Matterport, Inc. and Legacy Matterport (the “Transfer Restrictions”), and that Matterport’s board of directors violated their fiduciary duties in connection with a purportedly misleading letter of transmittal. An expedited trial regarding the facial validity of the Transfer Restrictions took place in December 2021. On January 11, 2022, the court issued a ruling that the Transfer Restrictions did not apply to Brown. Separate proceedings regarding Brown's remaining claims, including the amount of any damages suffered by Brown were the subject of the second phase of the case. Legacy Matterport's position was that Brown did not suffer any damages as he would have sold his shares as soon as possible after the Gores Transaction closed had Legacy Matterport not prevented him from trading based on its application of the Transfer Restrictions. Trial was held in November 2023 and a post-trial hearing was held on February 22, 2024. On May 28, 2024, the court ruled that Matterport had a reasonable basis to deny the plaintiff’s November 2021 demand that the transfer restrictions be removed from his shares and that the plaintiff lacked standing as to whether the transfer restrictions complied with Delaware law. However, the court awarded Brown $79.1 million plus pre- and post-judgment interest as damages for losses caused by Matterport’s initial refusal to issue freely transferable shares (the “Brown Judgment”). Oral argument on the appeal was heard on February 26, 2025. On April 22, 2025, the Delaware Supreme Court substantially affirmed the Chancery Court's $79.1 million damages award but reversed and remanded for additional proceedings on the manner in which post-judgment interest was calculated. The Chancery Court has not scheduled further proceedings on the issue of post-judgment interest.
The Company has estimated a litigation accrual of $95.0 million considering the substantially-affirmed damages award and the Company's estimate of the expected interest award using the Chancery Court's previously determined interest methodology. This estimated litigation accrual is reflected in the purchase price allocation for the Matterport Acquisition and is subject to change based on the Chancery Court's revised ruling. The Company estimated additional interest of up to approximately $15 million could be awarded if the Chancery Court followed the methodology Brown previously argued, and which was rejected. The Company anticipates the revised ruling will occur in the second quarter of 2025. Subsequent to the Brown Judgment, on August 14, 2024, a litigation bond was posted and Matterport transferred $95.0 million in cash as collateral into a designated insured interest-bearing account. The cash collateral of $97.4 million was classified as restricted cash on the Company’s condensed consolidated balance sheet as of March 31, 2025.
Since the Brown judgment in May 2024, other former Legacy Matterport stockholders have filed complaints (the “Post-Brown Complaints”) in the Chancery Court alleging that they were prevented from trading their Matterport shares through invalid transfer restrictions. These complaints were filed as follows: on July 19, 2024 by Damien Leostic and William Schmitt; on August 16, 2024 by Greg Coombe; on September 19, 2024 by Build Legacy LLC, Build the Future Trust under agreement dated November 16, 2023, Penchant Capital LLC, Penchant Trust, and iRobot Corporation. On September 16, 2024, Kimberly Burdi-Dumas, a former Matterport employee, filed a putative class action complaint on behalf of all persons or entities who were stockholders of Legacy Matterport as of July 21, 2021, and who, pursuant to the Gores Transaction, were thereafter issued and held Matterport shares that were improperly restricted from being sold until January 18, 2022. On November 26, 2024, Schmitt amended his complaint to bring a class action on behalf of former members of Matterport, Inc. who did not receive their shares immediately following the closing of Gores Transaction. On December 6, 2024, the Burdi-Dumas complaint was amended to include a second plaintiff, Janet Day, and additional claims. The Company has not yet answered the Post-Brown Complaints.
On February 1, 2024, two stockholders, Laurie Hanna and Vasana Smith (collectively “Plaintiffs”) filed a complaint derivatively on behalf of Matterport against R.J. Pittman, Michael Gustafson, Peter Hebert, James Krikorian, James Daniel Fay, David Gausebeck, Japjit Tulsi, Judi Otteson, Jay Remley, and numerous stockholders of Matterport (collectively “Hanna and Smith Defendants”) in the Chancery Court. The complaint alleges that the issuance of 23,460,000 earn-out shares worth
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
$225 million was a breach of fiduciary duty and an act of corporate waste, which unjustly enriched recipients of the earn-out shares at the expense of Matterport and its common stockholders. The complaint seeks disgorgement of all unjust enrichment by the Hanna and Smith Defendants, an award of compensatory damages to Matterport, an award of costs and disbursements to the Plaintiffs, as well as a declaration that Plaintiffs may maintain the action on behalf of Matterport and that Plaintiffs are adequate representatives of Matterport, and a finding that demand on the Matterport board is excused as futile. On June 24, 2024, the Plaintiffs filed an amended complaint, which alleges, inter alia, that the members of the Matterport board breached their fiduciary duties by issuing a proxy statement which failed to disclose certain information concerning Matterport’s prior issuance of certain earn-out shares previously issued and the subsequent impact on the amount of the Matterport Acquisition Consideration that would have been received by the plaintiffs and other stockholders if those earn-out shares had not been issued. On July 11, 2024, the court denied Plaintiffs’ motion to expedite. The Company has otherwise not yet responded to the complaint.
The Company monitors developments in these legal matters that could affect the estimate the Company may have previously accrued. As of March 31, 2025, there were no amounts accrued that the Company believes would be material to its financial position, except as noted above. Further, the range of reasonably possible losses in excess of accrued liabilities currently cannot be reasonably estimated, except as noted above.
13. SEGMENT REPORTING
Segment Information
The Company manages its business geographically in two operating segments and two reportable segments, with the 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. Segment reporting is based on the management approach, whereby external segment reporting is aligned with the internal reporting used by the CODM, which is the Company’s Chief Executive Officer. The CODM relies on an internal management reporting process that provides revenue and operating segment EBITDA for making decisions and assessing performance as the source of the Company’s reportable segments. EBITDA is used by management internally to measure operating and management performance and to evaluate the performance of the business.
Summarized EBITDA information by operating segment consists of the following (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| North America | International | Total | North America | International | Total | ||||||||||||||||||||||||||||||
| Revenues (1) | $ | 697.4 | $ | 34.8 | $ | 732.2 | $ | 623.3 | $ | 33.1 | $ | 656.4 | |||||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||
| Personnel | 320.6 | 21.5 | 342.1 | 276.8 | 23.2 | 300.0 | |||||||||||||||||||||||||||||
| Marketing | 203.4 | 12.6 | 216.0 | 222.6 | 17.3 | 239.9 | |||||||||||||||||||||||||||||
| General and administrative (2) | 164.3 | 10.6 | 174.9 | 120.7 | 8.5 | 129.2 | |||||||||||||||||||||||||||||
| EBITDA | $ | 9.1 | $ | (9.9) | $ | (0.8) | $ | 3.2 | $ | (15.9) | $ | (12.7) | |||||||||||||||||||||||
| __________________________ | |||||||||||||||||||||||||||||||||||
| (1) See Note 3 for details of revenue disaggregated by segment. | |||||||||||||||||||||||||||||||||||
| (2) Excludes personnel costs. |
The Company is domiciled in the U.S. and revenues earned outside the U.S. were $47.9 million and $37.7 million for three months ended March 31, 2025 and 2024, respectively.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following summarizes stock-based compensation, which is a significant non-cash item included in the personnel costs above, by segment (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| North America | $ | 29.0 | $ | 21.8 | |||||||
| International | 1.4 | 1.0 | |||||||||
| Total | $ | 30.4 | $ | 22.8 |
The reconciliation of EBITDA to (loss) income before income taxes consists of the following (in millions):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| EBITDA | $ | (0.8) | $ | (12.7) | |||||||
| Amortization of acquired intangible assets in cost of revenues | (10.5) | (8.8) | |||||||||
| Amortization of acquired intangible assets in operating expenses | (17.2) | (11.0) | |||||||||
| Depreciation and other amortization | (14.3) | (10.3) | |||||||||
| Interest income, net | 38.5 | 56.2 | |||||||||
| Other expense, net (1) | (2.4) | (1.9) | |||||||||
| (Loss) income before income taxes | $ | (6.7) | $ | 11.5 | |||||||
| __________________________ | |||||||||||
| (1) Includes $5.0 million and $5.5 million of amortization and depreciation expense including above-market lease amortization associated with lessor activities for the three months ended March 31, 2025 and 2024, respectively. |
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Summarized information by operating segment consists of the following (in millions):
| March 31, 2025 | December 31, 2024 | ||||||||||
| Property and equipment, net | |||||||||||
| North America | $ | 1,088.1 | $ | 1,006.7 | |||||||
| International | 9.5 | 8.2 | |||||||||
| Total property and equipment, net | $ | 1,097.6 | $ | 1,014.9 | |||||||
| Goodwill | |||||||||||
| North America | $ | 3,435.1 | $ | 2,297.2 | |||||||
| International | 238.1 | 230.4 | |||||||||
| Total goodwill | $ | 3,673.2 | $ | 2,527.6 | |||||||
| Assets | |||||||||||
| North America | $ | 9,679.3 | $ | 8,852.0 | |||||||
| International | 748.8 | 404.8 | |||||||||
| Total assets | $ | 10,428.1 | $ | 9,256.8 | |||||||
| Liabilities | |||||||||||
| North America | $ | 1,766.1 | $ | 1,603.0 | |||||||
| International | 105.8 | 100.3 | |||||||||
| Total liabilities | $ | 1,871.9 | $ | 1,703.3 |
14. STOCKHOLDER'S EQUITY
Stock Repurchase Program
In February 2025, the Board of Directors approved the Stock Repurchase Program that authorizes the repurchase of up to $500 million of its common stock. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act. Repurchases may be made from time to time at management's discretion, and the timing and amount of any such repurchases will be determined based on share price, market conditions, legal requirements, and other relevant factors. The program has no time limit and can be discontinued at any time at the Company’s discretion.
During the first quarter of 2025, the Company repurchased 240,000 CoStar Group Shares for an aggregate cost of $18.5 million. As of March 31, 2025, $481.5 million remains available for repurchases under the Stock Repurchase Program. Shares of common stock repurchased under the Stock Repurchase Program become treasury shares and are accounted for when the transaction is settled. As of March 31, 2025, there were no unsettled share repurchases. Direct costs incurred to acquire the shares are included in the total cost of the shares.
Preferred Stock
The Company has 2 million shares of preferred stock, $0.01 par value, authorized for issuance. The Board of Directors may issue the preferred stock from time to time as shares of one or more classes or series.
Common Stock
The Company has 1.2 billion shares of common stock, $0.01 par value, authorized for issuance. Dividends may be declared and paid on the common stock, subject in all cases to the rights and preferences of the holders of preferred stock and authorization by the Board of Directors. In the event of liquidation or winding up of the Company and after the payment of all preferential amounts required to be paid to the holders of any series of preferred stock, any remaining funds shall be distributed among the holders of the issued and outstanding common stock.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
15. EMPLOYEE BENEFIT PLANS
Stock Incentive Plans
In April 2007, the Board of Directors adopted the CoStar Group 2007 Stock Incentive Plan (as amended, the “2007 Plan”), subject to stockholder approval, which was obtained on June 7, 2007. In April 2016, the Board of Directors adopted the CoStar Group 2016 Stock Incentive Plan (as amended, the “2016 Plan”), subject to stockholder approval, which was obtained on June 9, 2016. All shares of common stock that were authorized for issuance under the 2007 Plan that, as of June 9, 2016, remained available for issuance under the 2007 Plan (excluding shares subject to outstanding awards) were rolled into the 2016 Plan and, as of that date, no shares of common stock were available for new awards under the 2007 Plan. The 2007 Plan continues to govern vested unexercised stock options issued prior to June 9, 2016. Upon the occurrence of a Change of Control, as defined in the 2007 Plan, all outstanding unexercisable options under the 2007 Plan immediately become exercisable.
The 2016 Plan provides for the grant of stock options, restricted stock, restricted stock units, and stock appreciation rights to officers, employees, and directors of the Company and its subsidiaries. Stock options granted under the 2016 Plan may be non-qualified or may qualify as incentive stock options. Except in limited circumstances related to a merger or other acquisition, the exercise price for an option may not be less than the fair market value of the Company’s common stock on the date of grant. The vesting period for each grant of options, restricted stock, restricted stock units, and stock appreciation rights under the 2016 Plan is determined by the Board of Directors or a committee thereof and is generally three to four years, subject to minimum vesting periods for restricted stock and restricted stock units of at least one year. In some cases, vesting of awards under the 2016 Plan may be based on performance conditions. The Company initially reserved approximately 22.7 million shares of common stock for issuance under the 2016 Plan, which included shares of common stock that were authorized and remained available for issuance under the 2007 Plan as of June 9, 2016. Any shares of common stock subject to (a) outstanding awards under the 2007 Plan as of June 9, 2016 or (b) outstanding awards under the 2016 Plan after June 9, 2016, that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised or settled in vested and nonforfeitable shares) will become authorized and unissued under the 2016 Plan. Pursuant to the terms of the 2016 Plan, all amounts reserved or issued under the plan were adjusted to reflect the Company’s ten-for-one common stock split. Unless terminated sooner, the 2016 Plan will terminate in June 2026, but will continue to govern unexercised and unexpired awards issued under the 2016 Plan prior to that date. Approximately 10.3 million shares were available for future grant under the 2016 Plan as of March 31, 2025.
In connection with the Matterport Acquisition, the Company assumed the Matterport's 2021 Incentive Award Plan and Matterport, Inc. Amended and Restated 2011 Stock Incentive Plan (“Assumed 2021 Plans”), including outstanding restricted stock units and stock options originally granted by Matterport under the Assumed 2021 Plans to continuing employees. These assumed awards will vest in accordance with their original terms, generally over four years. The Company does not intend to issue further grants under these plans. Shares forfeited due to employee termination or expiration are returned to the share pool. As of March 31, 2025, approximately 1.7 million shares remained available under the Assumed 2021 Plans.
At March 31, 2025, there was approximately $375.7 million of unrecognized compensation cost related to stock incentive plans, net of estimated forfeitures, which the Company expects to recognize over a weighted-average-period of 2.8 years. See Note 2 for further discussion of stock-based compensation expense.
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Stock Options
Option activity was as follows:
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contract Life (in years) | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 1,904,590 | $ | 51.48 | 4.80 | $ | 43.8 | |||||||||||||||||
| Assumed in Matterport Acquisition | 1,799,170 | $ | 9.54 | ||||||||||||||||||||
| Granted | 212,700 | $ | 78.33 | ||||||||||||||||||||
| Exercised | (92,950) | $ | 9.33 | $ | 6.4 | ||||||||||||||||||
| Canceled or expired | (26,000) | $ | 91.98 | ||||||||||||||||||||
| Outstanding at March 31, 2025 | 3,797,510 | $ | 33.87 | 4.67 | $ | 174.5 | |||||||||||||||||
| Exercisable at March 31, 2025 | 3,443,074 | $ | 29.18 | 4.19 | $ | 174.2 |
The Company estimated the fair value of each option granted on the date of grant using the Black-Scholes option-pricing model, using the assumptions in the following table:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Dividend yield | 0 | % | 0 | % | |||||||
| Expected volatility | 35 | % | 35 | % | |||||||
| Risk-free interest rate | 4.3 | % | 4.3 | % | |||||||
| Expected life (in years) | 5 | 5 | |||||||||
| Weighted-average grant date fair value | $ | 30.05 | $ | 31.57 |
The expected dividend yield is determined based on the Company's past cash dividend history and anticipated future cash dividend payments. The Company has never declared nor paid any dividends on its common stock and does not anticipate paying any dividends on its common stock during the foreseeable future, but intends to retain any earnings for future growth of its business. Expected volatility is calculated based on historical volatility of the daily closing price of the Company's common stock over a period consistent with the expected life of the options granted. The risk-free interest rate is based on the U.S. Treasury rate with terms similar to the expected life of the options granted. The expected life for the options is determined based on multiple factors, including historical employee behavior patterns of exercising options and post-employment termination behavior as well as expected future employee option exercise patterns.
Restricted Stock Awards
The Compensation Committee of the Board of Directors of the Company has approved grants of restricted common stock to senior executive officers and directors of the Company that vest over a specific service period and to senior executive officers that vest based on the achievement of certain performance conditions, primarily, the achievement of a three-year cumulative revenue goal established at the grant date. The CEO of the Company has approved grants of restricted common stock to other executive officers and employees of the Company that vest over a specific service period and to other executive officers that vest based on the achievement of certain performance conditions, primarily, the achievement of revenue growth and profit margins established at the grant date. The grant of awards with performance conditions supports the Company’s goal of aligning executive incentives with long-term stockholder value and ensuring that executive officers have a continuing stake in the long-term success of the Company.
The vesting of restricted common stock is subject to continuing employment requirements. Certain performance-based restricted common stock awards are also subject to a market condition such that the actual number of shares that vest at the end of the respective three-year period is determined based on the Company’s achievement of performance goals and an established
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Company specific TSR factor relative to the S&P 500 Index over the same three-year performance period. At the end of the three-year performance period, if the performance condition is achieved at or above the pre-established threshold, the number of shares earned is further adjusted by a TSR payout percentage, which ranges between 80% and 120%, based on the Company’s TSR performance relative to that of S&P 500 Index over the respective three-year period.
The Company estimates the fair value of its equity awards with both a performance and market condition on the date of grant using a Monte-Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards. Expense is only recorded for awards that are expected to vest, net of estimated forfeitures. The assumptions used to estimate the fair value of awards with both a performance and a market condition were as follows:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Dividend yield | 0 | % | 0 | % | |||||||
| Expected volatility | 31 | % | 34 | % | |||||||
| Risk-free interest rate | 4.2 | % | 4.5 | % | |||||||
| Expected life (in years) | 3 | 3 | |||||||||
| Weighted-average grant date fair value | $ | 85.29 | $ | 86.96 | |||||||
The expected dividend yield is determined based on the Company's past cash dividend history and anticipated future cash dividend payments. The Company has never declared nor paid any dividends on its common stock and does not anticipate paying any dividends on its common stock during the foreseeable future, but intends to retain any earnings for future growth of its business. Expected volatility is calculated based on historical volatility of the daily closing price of the common stock of the companies within the S&P 500 Index over a period consistent with the expected life of the awards. The risk-free interest rate is based on the U.S. Treasury rate with terms similar to the expected life of the awards. The expected life is consistent with the performance measurement period of the awards.
As of March 31, 2025, the Company determined that it was probable that at least the minimum performance goals associated with restricted stock awards with performance and market conditions granted during 2023, 2024, and 2025 would be met by their forfeiture dates. As of March 31, 2025, the Company determined that it was probable the performance goals associated with restricted stock awards with performance conditions granted during the first quarter of 2025 would be met by their forfeiture dates. The Company recorded a total of approximately $1.1 million and $2.5 million of stock-based compensation expense related to restricted stock awards with performance conditions and with performance and market conditions for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the Company expects to record an aggregate stock-based compensation expense of approximately $49.6 million for restricted stock awards with performance and market conditions over the remainder of 2025 and in 2026, 2027, and 2028.
The following table presents unvested restricted stock awards activity for the three months ended March 31, 2025:
| Restricted Stock Awards — without Market Condition | Restricted Stock Awards — with Market Condition | ||||||||||||||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value per Share | Number of Shares | Weighted-Average Grant Date Fair Value per Share | ||||||||||||||||||||
| Unvested restricted stock awards at December 31, 2024 | 2,554,989 | $ | 76.19 | 733,200 | $ | 81.49 | |||||||||||||||||
| Granted | 1,843,900 | $ | 76.45 | 435,120 | $ | 85.29 | |||||||||||||||||
| Vested | (761,464) | $ | 73.97 | (124,068) | $ | 71.19 | |||||||||||||||||
| Canceled | (94,401) | $ | 75.15 | (48,252) | $ | 71.19 | |||||||||||||||||
| Unvested restricted stock awards at March 31, 2025 | 3,543,024 | $ | 76.61 | 996,000 | $ | 84.93 |
COSTAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Restricted Stock Units
The following table presents unvested restricted stock units activity for the three months ended March 31, 2025:
| Number of Units | Weighted-Average Grant Date Fair Value per Share | ||||||||||
| Unvested restricted stock units at December 31, 2024 | 23,532 | $ | 73.88 | ||||||||
| Assumed in Matterport Acquisition | 2,256,423 | $ | 75.63 | ||||||||
| Granted | 9,892 | $ | 74.36 | ||||||||
| Vested | (262,042) | $ | 75.49 | ||||||||
| Canceled | (9,567) | $ | 75.55 | ||||||||
| Unvested restricted stock units at March 31, 2025 | 2,018,238 | $ | 75.62 |
16. SUBSEQUENT EVENTS
The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any material subsequent events that required adjustment or disclosure in the condensed consolidated financial statements.
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