Based on the closing price of the common stock on June 30, 20082009 on the Nasdaq Stock Market®,Market, Nasdaq Global Select Market®,Market, the aggregate market value of registrant’s common stock held by non-affiliates of the registrant was approximately $460$641 million.
As of February 17, 2009,19, 2010, there were 19,729,41920,581,462 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, which is expected to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2008,2009, are incorporated by reference into Part III of this Report.
TABLE OF CONTENTS
| PART I | ||
| Item 1. | 3 | |
| Item 1A. | ||
| Item 1B. | ||
| Item 2. | ||
| Item 3. | ||
| Item 4. | ||
| PART II | ||
| Item 5. | ||
| Item 6. | ||
| Item 7. | ||
| Item 7A. | ||
| Item 8. | ||
| Item 9. | ||
| Item 9A. | ||
| Item 9B. | ||
| PART III | ||
| Item 10. | ||
| Item 11. | ||
| Item 12. | ||
| Item 13. | ||
| Item 14. | ||
| PART IV | ||
| Item 15. | ||
| F-1 |
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PART I
| Item 1. |
(In this report, the words “we,” “our,” “us,” “CoStar” or the “Company” refer to CoStar Group, Inc. and its direct and indirect subsidiaries. This report also refers to our websites, but information contained on those sites is not part of this report.)report).
CoStar Group, Inc., a Delaware corporation, is the number one provider of information/information, marketing and analytic services to the commercial real estate industry in the United States (“U.S.”) and United Kingdom (“U.K.”) based on the fact that we offer the most comprehensive commercial real estate database available, have the largest research department in the industry, provide more information/information, marketing and analytic services than any of our competitors and believe we generate more revenues than any of our competitors. CoStar’s integrated suite of services offers customers online access to the most comprehensive database of commercial real estate information, which has been researched and verified by our team of researchers, currently covering the U.S., as well as London and other parts of the U.K. and parts of France. Prior to 2007, CoStar operated within one segment. Due to the increased size, complexity and funding requirements associated with our international expansion, in 2007 we began to manage our business geographically in two operating segments, with our primary areas of measurement and decision-making being the U.S. and International, which includes the U.K. and France.
Since our founding in 1987, CoStar’s strategy has been to provide commercial real estate professionals with critical knowledge to explore and complete transactions, by offering the most comprehensive, timely and standardized information on U.S. commercial real estate. As a result of our January 2003 acquisition of Focus Information Limited (now, CoStar U.K. Limited), June 2004 acquisition of Scottish Property Network, December 2006 acquisition of Grecam S.A.S., and February 2007 acquisition of Property Investment Exchange Limited, and July 2009 acquisition of Property and Portfolio Research, Inc. (“PPR”) and its wholly owned U.K. subsidiary, Property and Portfolio Research Ltd. (“PPR UK”) we have extended our offering of comprehensive commercial real estate information to include London and other parts of the U.K. and parts of France. Information about CoStar’s revenues from, and long-lived assets located in, foreign countries is included in Notes 2 and 12 to our consolidated financial statements. CoStar’s revenues, net income, assets and liabilities, broken out by segment are set forth in Note 12 to our consolidated financial statements. Information about risks attendant to our foreign operations is included in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.”
We deliver our content to our U.S. customers primarily via an integrated suite of online service offerings that includes information about space available for lease, comparable sales information, tenant information, information about properties for sale, internet marketing services, property information for clients’ websites, information about industry professionals and their business relationships, analytic information, data integration, and industry news. We also provide market research and analysis for commercial real estate investors and lenders via our PPR service offerings. We have created and are continually improving a standardized information platform where the commercial real estate industry and related businesses can continuously interact and easily facilitate transactions due to the efficient exchange of accurate information we have supplied.
We have a number of assets that provide a unique foundation for our standardized platform, including the most comprehensive proprietary database in the industry; the largest research department in the industry; proprietary data collection, information management and quality control systems; a large in-house product development team; a broad suite of web-based information/information, marketing and analytic services; a large team of analysts and economists and a large base of clients. Our database has been developed and enhanced for more than 2122 years by a research department that makes thousands of daily database updates. In addition to our internal efforts to grow the database, we have obtained and assimilated over 51 proprietary databases.
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commercial properties in approximately 81 new Core Based Statistical Areas (“CBSAs”) across the U.S. in an effort to expand the geographical coverage of our service offerings, including our new retail service. In the fourth quarter of 2007, we released our CoStar Property Professional service in the 81 new CBSAs across the U.S. In 2008, we released CoStar Showcase, an internet marketing service that provides commercial real estate professionals the opportunity to make their listings accessible to all visitors to our public website, www.CoStar.com.
During the second half of 2009, as part of our strategy for providing subscribers with tools for conducting primary research and analysis on commercial real estate, we expanded subscribers’ capabilities to use our database of research-verified commercial property information to conduct in-depth analysis and generate online reports of trends in sales and leasing activity. Furthermore, in July 2009, we added analytic and market forecasting services to our platform of research and marketing services with our acquisition of PPR and in October 2009 we acquired Resolve Technology, Inc., (“Resolve Technology”) adding business intelligence and portfolio management software used by institutional real estate investment companies.
We intend to introduce a consistent worldwide platform of service offerings. Following our acquisitions of PPR and Resolve Technology in 2009, we began integrating their respective product and service offerings with our own, including the services we have successfully integrated following our prior acquisitions. In 2007, we introduced the “CoStar Group” as the brand encompassing our worldwide operations. We believe that our recent U.S. and International expansion and integration efforts have created a platform for long-term growth.
Our subscription-based information/marketinginformation services, consisting primarily of CoStar Property Professional, CoStar Tenant, CoStar COMPS Professional and FOCUS services, currently generate more then 90%than 95% of our total revenues. Our contracts for our subscription-based information/marketinginformation services typically have a minimum term of one year and renew automatically. Upon renewal, subscription contract rates may increase in accordance with contract provisions or as a result of contract renegotiations. To encourage clients to use our services regularly, we generally charge a fixed monthly amount for our subscription-based services rather than fees based on actual system usage. Contract rates are based on the number of sites, number of users, organization size, the client’s business focus, geography and the number of services to which a client subscribes. Our subscription clients generally pay contract fees on a monthly basis, but in some cases may pay us on a quarterly or annual basis.
Industry Overview
The market for commercial real estate information and analysis is vast based on the variety, volume and value of transactions related to commercial real estate. Each transaction has multiple participants and multiple information requirements, and in order to facilitate transactions, industry participants must have extensive, accurate and current information.information and analysis. Members of the commercial real estate and related business community require daily access to current data such as space availability, properties for sale, rental rates, vacancy rates, tenant movements, sales comparables, supply, new construction, absorption rates and other important market developments to carry out their businesses effectively. Market research (including historical and forecast conditions) and applied analytics have also become instrumental to the success of commercial real estate industry participants operating in the current economic environment. There is a strong need for an efficient marketplace, where commercial real estate professionals can exchange information, evaluate opportunities using standardized data and interpretive analyses, and interact with each other on a continuous basis.
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A large number of parties involved in the commercial real estate and related business community make use of the services we provide in order to obtain information they need to conduct their businesses, including:
| • | Sales and leasing brokers | • | Government agencies |
| • | Property owners | • | Mortgage-backed security issuers |
| • | Property managers | • | Appraisers |
| • | Design and construction professionals | • | Pension fund managers |
| • | Real estate developers | • | Reporters |
| • | Real estate investment trust managers | • | Tenant vendors |
| • | Investment bankers | • | Building services vendors |
| • | Commercial bankers | • | Communications providers |
| • | Mortgage bankers | • | Insurance companies’ managers |
| • | Mortgage brokers | • | Institutional advisors |
| • | Retailers | • | Investors and asset managers |
The commercial real estate and related business community generally has operated in an inefficient marketplace because of the fragmented approach to gathering and exchanging information within the marketplace. Various organizations, including hundreds of brokerage firms, directory publishers and local research companies, collect data on specific markets and develop software to analyze the information they have independently gathered. This highly fragmented methodology has resulted in duplication of effort in the collection and analysis of information, excessive internal cost and the creation of non-standardized data containing varying degrees of accuracy and comprehensiveness, resulting in a formidable information gap.
The creation of a standardized information platform for commercial real estate requires an infrastructure including a standardized database, accurate and comprehensive research capabilities, experienced analysts, easy to use technology and intensive participant interaction. By combining its extensive database, approximately 900over 975 researchers and outside contractors, experienced team of analysts and economists, technological expertise and broad customer base, CoStar believeswe believe that it haswe have created such a platform.
The U.S. and global economies have changed adversely over the past year or more, and the commercial real estate industry has been negatively impacted. The commercial real estate market has seen a reduction in property sales and leasing activity, lower absorption rates, climbing vacancy rates and decreases in rental rates and sales prices. The full extent of the impact of our current financial crisis is not yet clear. As our customers continue to look for ways to reduce spending, we may continue to see reduced demand for our information/information, marketing and analytic services. However, we believe that even in a weakened economy there is a continuing need for accurate, standardized commercial real estate information/information, marketing and analytic services. We believe that access to continuously researched and verified commercial real estate information becomes even more valuable in a down market, as industry players assess where market conditions are heading, how their businesses should adapt, determine what properties are worth, and try to market their properties, among other things. Moreover, outsourcing the labor-intensive task of conducting basic real estate research may result in cost savings for our clients.
CoStar’s Comprehensive Database
CoStar has spent more than 2122 years building and acquiring a database of commercial real estate information, which includes information on leasing, sales, comparable sales, tenants, and demand statistics, as well as digital images.
As of January 30, 2009,29, 2010, our database of real estate information covered the U.S., as well as London, England and other parts of the U.K. and parts of France, and contained:
More than 1.11.4 million sale and lease listings;
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This highly complex database is comprised of hundreds of data fields, tracking such categories as:
| • | Location | • | Mortgage and deed information |
| • | Site and zoning information | • | For-sale information |
| • | Building characteristics | • | Income and expense histories |
| • | Space availability | • | Tenant names |
| • | Tax assessments | • | Lease expirations |
| • | Ownership | • | Contact information |
| • | Sales and lease comparables | • | Historical trends |
| • | Space requirements | • | Demographic information |
| • | Number of retail stores | • | Retail sales per square foot |
CoStar Research
We have developed a sophisticated data collection organization utilizing a multi-faceted research process. In 2008,2009, our full time researchers and contractors drove millions of miles, conducted hundreds of thousands of on-site building inspections, and conducted millions of interviews of brokers, owners and tenants.
Research Department. As of January 30, 2009,29, 2010, we have approximately 900975 commercial real estate research professionals and outside contractors performing research. Our research professionals undergo an extensive training program so that we can maintain consistent research methods and processes throughout our research department. Our researchers collect and analyze commercial real estate information through millions of phone calls, e-mails, internet updates and faxes each year, in addition to field inspections, public records review, news monitoring and direct mail. Each researcher is responsible for maintaining the accuracy and reliability of database information. As part of their update process, researchers develop cooperative relationships with industry professionals that allow them to gather useful information. Because of the importance commercial real estate professionals place on our data and our prominent position in the industry, many of these professionals routinely take the initiative and proactively report available space and transactions to our researchers.
CoStar has an extensive field research effort that includes physical inspection of properties in order to research new markets, find additional inventory, photograph properties and verify existing information.
CoStar utilizes 147146 high-tech field research vehicles in 4139 states and the U.K. Of these vehicles, 10099 are custom-designed energy efficient hybrid cars that are equipped with computers, proprietary Global Positioning System tracking software, high resolution digital cameras and handheld laser instruments to help precisely measure buildings, geo-code them and position them on digital maps. Some of our researchers also use custom-designed trucks with the same equipment as well as pneumatic masts that extend up to an elevation of twenty-five feet to allow for unobstructed building photographs from “birds-eye” views. Each CoStar vehicle uses wireless technology to track and transmit field data. A typical site inspection consists of photographing the building, measuring the building, geo-coding the building, capturing “For Sale” or “For Lease” sign information, counting parking spaces, assessing property condition and construction, and gathering tenant information. Certain researchers canvass properties, interviewing tenants suite by suite. In addition, many of our field researchers are photographers who take photographs of commercial real estate properties to add to CoStar’s database of digital images.
Data and Image Providers. We license a small portion of our data and images from public record providers and third party data sources. Licensing agreements with these entities provide for our use of a variety of commercial real estate information, including property ownership, tenant information, demographic information, maps and aerial photographs, all of which enhance various CoStar services. These license agreements generally grant us a non-exclusive license to use the data and images in the creation and supplementation of our information/information, marketing and analytic services and include what we believe are standard terms, such as a contract term ranging from one to five years, automatic renewal of the contract and fixed periodic license fees or a combination of fixed periodic license fees plus additional fees based upon our usage.
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Management and Quality Control Systems. Our research processes include automated and non-automated controls to ensure the integrity of the data collection process. A large number of automated data quality tests check for potential errors, including occupancy date conflicts, available square footage greater than building area, typical floor space greater than land area and expired leases. We also monitor changes to critical fields of information to ensure all information is kept in compliance with our standard definitions and methodology. Our non-automated quality control procedures include:
| · | calling our information sources on recently updated properties to re-verify information; |
| · |
| performing periodic research audits and field checks to determine if we correctly canvassed buildings; |
| · | providing training and retraining to our research professionals to ensure accurate data compilation; and |
| · | compiling measurable performance metrics for research teams and managers for feedback on data quality. |
Finally, one of the most important and effective quality control measures we rely on is feedback provided by the commercial real estate professionals using our data every day.
Proprietary Technology
As of January 30, 2009,29, 2010, CoStar had a staff of 90122 product development, database and network professionals. CoStar’s information technology professionals focus on developing new services for our customers and delivering research automation tools that improve the quality of our data and increase the efficiency of our research analysts.
Our information technology team is responsible for developing and maintaining CoStar products, including CoStar Property Professional, CoStar Property Express, CoStar COMPS, CoStar Tenant, CoStar Showcase, CoStar Commercial MLS, and CoStar Connect, as well as our international products. In 2006, CoStar released a major upgrade to its CoStar COMPS service that provides customers with over 100 improvements, including access to for sale information, aerialsFOCUS, SPN, Shopproperty, PPR products and enhanced mapping.services, Resolve Portfolio Maximizer and Request. In 2007, to better support our retail customers, we added significant features to CoStar Property Professional including tenant proximity and demographic search capability, mapping layers, detailed retail tenant information and demographics. In 2008, CoStar released CoStar Showcase, an internet marketing service that provides commercial real estate professionals the opportunity to make their listings accessible to all visitors to our public website, www.CoStar.com. CoStar has also begun development of an international platform, which will allow CoStar to offer CoStar Property Professional in international countries.www.CoStar.com.
Our information technology team is responsible for developing the infrastructure necessary to support CoStar’s business processes, our comprehensive database of commercial real estate information/information, marketing and analytic services and our extensive image library. The team implements technologies and systems that introduce efficient workflows and controls that increase the production capacity of our research teams and improve the quality of our data. Over the years, the team has developed data collection and quality control mechanisms that we believe are unique to the commercial real estate industry. The team continues to develop and modify our enterprise information management system that integrates CoStar sales, research, field research, customer support and accounting information. We use this system to maintain our commercial real estate research information, manage contacts with the commercial real estate community, provide research workflow automation and conduct daily automated quality assurance checks. In addition, our information technology team has also developed fraud-detection technology to detect and prevent unauthorized access to our services.
Our information technology professionals also maintain the servers and network components necessary to support CoStar services and research systems. Our encrypted virtual private network provides remote researchers and salespeople secure access to CoStar applications and network resources. CoStar maintains a comprehensive data protection policy that provides for use of encrypted data fields and off-site storage of all system backups, among other protective measures. CoStar’s services are continually monitored in an effort to ensure our customers fast and reliable access.
Services
Our suite of information/information, marketing and analytic services is branded and marketed to our customers. Our services are derived from a database of building-specific information and offer customers specialized tools for accessing, analyzing and using our information. Over time, we expect to enhance our existing information/information, marketing and analytic services and develop additional services that make use of our comprehensive database to meet the needs of our existing customers as well as potential new categories of customers.
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Our various information/information, marketing and analytic services are described in detail in the following paragraphs as of January 30, 2009:29, 2010:
CoStar Property Professional® CoStar Property Professional, or “CoStar Property,” is the Company’s flagship service. It provides subscribers a comprehensive inventory of office, industrial, retail and multifamily properties and land in markets throughout the U.S., including for-lease and for-sale listings, historical data, building photographs, maps and floor plans. Commercial real estate professionals use CoStar Property to identify available space for lease, evaluate leasing and sale opportunities, value assets and position properties in the marketplace. Our clients also use CoStar Property to analyze market conditions by calculating current vacancy rates, absorption rates or average rental rates, and forecasting future trends based on user selected variables. CoStar Property provides subscribers with powerful map-based search capabilities as well as a user controlled, password protected extranet (or electronic “file cabinet”) where brokers may share space surveys and transaction-related documents online, in real time, with team members. When used together with CoStar Connect, CoStar Property enables subscribers to share space surveys and transaction-related documents with their clients, accessed through their corporate website. CoStar Property, along with all of CoStar’s other core information/information, marketing and analytic services, areis delivered solely via the internet.
CoStar COMPS Professional® CoStar COMPS Professional, or “COMPS Professional,” provides comprehensive coverage of comparable sales information in the U.S. commercial real estate industry. It is the industry’s most comprehensive database of comparable sales transactions and is designed for professionals who need to research property comparables, identify market trends, expedite the appraisal process and support property valuations. COMPS Professional service offers subscribers numerous fields of property information, access to support documents (e.g., deeds of trust) for new comparables, demographics and the ability to view for-sale properties alongside sold properties in three formats – plotted on a map, aerial image or in a table.
CoStar Tenant® CoStar Tenant is a detailed online business-to-business prospecting and analytical tool providing commercial real estate professionals with the most comprehensive commercial real estate-related U.S. tenant information available. CoStar Tenant profiles tenants occupying space in commercial buildings across the U.S. and provides updates on lease expirations - one of the service’s key features - as well as occupancy levels, growth rates and numerous other facts. Delivering this information via the internet allows users to target prospective clients quickly through a searchable database that identifies only those tenants meeting certain criteria.
CoStar Showcase® CoStar Showcase offers commercial real estate professionals a simple way to get their for salefor-sale and for leasefor-lease listings in front of a broad internet audience who search on Google,TM, Yahoo,® Bing, Showcase.com and Costar.com to find commercial properties. When customers sign up for CoStar Showcase, their listings become accessible to visitors to Showcase.com and Costar.com, who can search those listings for free. To drive traffic to CoStar Showcase subscriber listings, CoStar invests in Google,TM Yahoo and Yahoo®Bing keyword based pay-per-click advertising to capture the high volume traffic of users actively searching for commercial properties on those search engines. As part of their CoStar Showcase subscription, subscribers also receive customized websites for each of their brokers that displays their bio, photo, contact information and updated listings that they can use to promote their services. CoStar Showcase can be purchased as a firm-wide annual subscription by firms who want all of their brokers to be able to access the service, or it can be purchased by individual brokers on a month-to-month basis. When individual brokers sign up for CoStar Showcase, they also receive access to CoStar Commercial MLS.
CoStar Property Express® CoStar Property Express provides access, via an annual subscription, to a “light” or scaled down version of CoStar Property. Commercial real estate professionals use CoStar Property Express to look up and search for leasefor-lease and for salefor-sale listings in CoStar’s comprehensive national database. CoStar Property Express provides base building information, photos, floor plans, maps and a limited number of reports.
CoStar Listings Express® CoStar Listings Express provides access via an annual subscription to a listings only version of CoStar Property Express. Commercial real estate professionals use CoStar Listings Express to look up and search for lease and for sale listings in CoStar’s comprehensive national database. CoStar Listings Express provides base building information, photos, floor plans, maps and a limited number of reports on only properties that are either for lease or for sale. CoStar Listings Express does not provide information on fully leased properties, as found in CoStar Property Professional and CoStar Property Express.
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CoStar COMPS Express® CoStar COMPS Express provides users with immediate, subscription free access with payment by credit card to the CoStar COMPS Professional system on a report-by-report basis. Subscribers also use this on-demand service to research comparable sales information outside of their subscription markets.
CoStar Connect® CoStar Connect allows commercial real estate firms to license CoStar’s technology and information to market their U.S. property listings on their corporate websites. Customers enhance the quality and depth of their listing information through access to CoStar’s database of content and digital images. The service automatically updates via the CoStar Property database and manages customers’ online property information, providing comprehensive listings coverage and significantly reducing the expense of building and maintaining their websites’ content and functionality.
CoStar Commercial MLS® CoStar Commercial MLS is the industry’s most comprehensive collection of researched for sale listings. CoStar Commercial MLS draws upon CoStar’s large database of digital images and includes office, industrial, multifamily and retail properties, as well as shopping centers and raw land. CoStar Commercial MLS represents an efficient means for sellers to market their properties to a large audience and for buyers to easily identify target properties.
CoStar Advertising® CoStar Advertising offers property owners a highly targeted and cost effective way to market a space for lease or a property for sale directly to the individuals looking for that type of space through interactive advertising. Our advertising model is based on varying levels of exposure, enabling the advertiser to target as narrowly or broadly as its budget permits. With the CoStar Advertising program, when the advertiser’s listings appear in a results set, they receive priority positioning and are enhanced to stand out. The advertiser can also purchase exposure in additional submarkets, or the entire market area so that this ad will appear even when this listing would not be returned in a results set.
CoStar Professional Directory® CoStar Professional Directory, a service available exclusively to CoStar Property Professional subscribers, provides detailed contact information for approximately 1.11.3 million commercial real estate professionals, including specific information about an individual’s current and prior activities such as completed transactions, current landlord representation assignments, sublet listings, major tenants and owners represented and local and national affiliations. Commercial real estate brokers can input their biographical information and credentials and upload their photo to create personal profiles. Subscribers use CoStar Professional Directory to network with their peers, identify and evaluate potential business partners, and maintain accurate mailing lists of other industry professionals for their direct mail marketing efforts.
CoStar Market Report™ The CoStar Market Report provides in-depth current and historical analytical information covering office, industrial and retail properties across the U.S. Published quarterly, each market report includes details such as absorption rates, vacancy rates, rental rates, average sales prices, capitalization rates, existing inventory and current construction activity. This data is presented using standard definitions and calculations developed by CoStar, and offers real estate professionals critical and unbiased information necessary to make intelligent commercial real estate decisions. CoStar Market Reports are available to CoStar Property Professional subscribers at no additional charge, and are available for purchase by non-subscribers.charge.
Metropolis™ The Metropolis service is a single interface that combines commercial real estate data from multiple information providers into a comprehensive resource. The Metropolis service allows a user to input a property address and then view detailed information on that property from multiple information providers, including CoStar services. This technology offers commercial real estate professionals a simple and convenient solution for integrating a wealth of third party information and proprietary data, and is currently available for the Southern California markets.
PPR® Our subsidiary PPR, and its U.K. subsidiary, PPR UK, offer products and services designed to meet the research needs of commercial real estate investors and lenders. PPR covers metropolitan areas throughout the United States, the U.K., Europe, and Asia, with offerings including historical and forecast market data and analysis by market and property type, and services including access to PPR’s analysts, economists, and strategists to develop and deliver custom research solutions.
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Resolve Portfolio Maximizer® Resolve Portfolio Maximizer is an industry leading real estate portfolio management software solution. Resolve Portfolio Maximizer allows users to model partnership structures, calculate waterfall distributions and fees, model and analyze debt obligations, and create multiple “what if” scenarios for alternative investment decisions.
Request™ Request is the first business intelligence software solution built specifically for managing commercial real estate investments. Request helps users eliminate some of the difficulties of consolidating real estate investment data from disparate sources and facilitates standardization of information presentation and reporting across an organization. Request also provides a platform for users to develop business intelligence and reporting capabilities.
FOCUS™ CoStar’s U.K. subsidiary, CoStar UKU.K. Limited, offers several services, theservices; its primary of whichservice is FOCUS. FOCUS is a digital online service offering information on the U.K. commercial real estate market. This service seamlessly links data on individual properties and companies across the U.K., including comparable sales, available space, requirements, tenants, lease deals, planning information, socio-economics and demographics, credit ratings, photos and maps.
SPN™ SPN provides users online access to a comprehensive database of information for properties located in Scotland, including available space, comparable sales and lease deals.
Propex™ Propex gives users access to the commercial property investment market. It is used by U.K. investment agencies and professional investors and is a secure online exchange through which investment deals may be introduced. It is a primary channel for the distribution of live transaction data and property research data in the U.K. investment market. Propex also provides private investors with a gateway into the commercial property investment market. It is a free-access listing website, which provides details of commercial property investments. It is used by U.K. agencies to sell investments suitable for the private investor.
Shopproperty.co.uk™ Shopproperty is a listing database of available retail units across the U.K. on a free-access website. Shopproperty.co.uk is the only specialist listing website with fully licensed Goad street-trader plans.
Grecam™ Our French subsidiary, Grecam S.A.S., provides commercial real estate information throughout the Paris region through its Observatoire Immobilier D’ Entreprise (“OIE”) service offering. The OIE service provides commercial property availability and transaction information to its subscribers through both an online service and market reports.
Clients
We draw clients from across the commercial real estate and related business community. Commercial real estate brokers have traditionally formed the largest portion of CoStar clients, however, we also provide services to owners, landlords, financial institutions, retailers, vendors, appraisers, investment banks, governmental agencies, and other parties involved in commercial real estate. The following chart lists U.S. and U.K. clients that are well known or have the highest annual subscription fees in each of the various categories, each as of January 30, 2009.
29, 2010.| Brokers | Lenders, Investment Bankers | Institutional Advisors, Asset Managers | ||
CB Richard Ellis | BlackRock | |||
CB Richard Ellis — U.K. | Prudential | |||
Colliers | Prudential — U.K. | |||
Colliers Conrad Ritblat Erdman — U.K. | Metropolitan Life | |||
Cushman & Wakefield | ING Clarion Partners | |||
Cushman & Wakefield — U.K. | Duke Realty Corporation | |||
Weichert Commercial Brokerage | USAA Real Estate Company | |||
Jones Lang LaSalle | NorthMarq Capital | |||
Jones Lang LaSalle — U.K. | AEW Capital Management LP | |||
Grubb & Ellis | Progressive Casualty Insurance Co. | |||
Gerald Eve — U.K. | ||||
Drivers Jonas — U.K. | ||||
Lambert Smith Hampton — U.K. | ||||
Charles Dunn Company, Inc. | Owners, Developers | Appraisers, Accountants | ||
Marcus & Millichap | ||||
Hines | Integra | |||
LNR Property Corp | Deloitte | |||
Shorenstein Company, LLC | ||||
Marvin F. Poer | ||||
Tishman Speyer | KPMG | |||
Studley | Manulife Financial | |||
Industrial Developments International (IDI) | ||||
Land Securities — U.K. | ||||
Binswanger | ||||
Re/Max | ||||
Carter | Retailers | Government Agencies | ||
USI Real Estate Brokerage Services | Nationwide Insurance | U.S. General Services Administration | ||
DAUM Commercial Real Estate Services | County of Los Angeles | |||
Merle Norman Cosmetics, Inc. | Internal Revenue Service | |||
Massage Envy | City of Chicago | |||
7-Eleven | Cook County Assessor’s Office | |||
Dollar General Corporation | U.S. Department of Housing and | |||
Walgreens | Urban Development | |||
Town Fair Tire | Corporation of London — U.K. | |||
Rent-A-Center | ||||
Spencer Gifts LLC | Federal | |||
REITs | Property Managers | Vendors | ||
Simon Property Group, Inc. | Transwestern Commercial Services | Turner Construction Company | ||
Brandywine Realty Trust | ||||
Lincoln Property Company | Kastle Systems | |||
PM Realty Group | Comcast Corporation | |||
Navisys Group | ADT Security | |||
Liberty Property Trust | Osprey Management Company | |||
Kimco Realty | Leggat McCall Properties | |||
Vornado Realty Trust | ||||
Verizon Communications, Inc. | ||||
For the years ended December 31, 2006, 2007, 2008 and 2008,2009, no single client accounted for more than 5% of our revenues.
Sales and Marketing
As of January 30, 2009,29, 2010, we had 220276 sales, marketing and customer support employees, with the majority of our direct sales force located in field sales offices. Our sales teams are primarily located in 2225 field sales offices throughout the U.S. and in London, England; Manchester, England; Glasgow, Scotland and Paris, France. Our inside sales team is located in our Bethesda, Maryland offices.office. This team prospects for new clients and performs service demonstrations exclusively by telephone and over the internet to support the direct sales force.
Our local offices typically serve as the platform for our in-market sales, customer support and field research operations for their respective regions. The sales force is responsible for selling to new prospects, training new and existing clients, providing ongoing customer support, renewing existing client contracts and identifying cross-selling opportunities. In addition, the sales force has primary front line responsibility for customer care.
Our sales strategy is to aggressively attract new clients, while providing ongoing incentives for existing clients to subscribe to additional services. We actively manage client accounts in order to retain clients by providing frequent service demonstrations as well as company-client contact and communication. We place a premium on training new and existing client personnel on the use of our services so as to promote maximum client utilization and satisfaction with our services. Our strategy also involves entering into multi-year, multi-market license agreements with our larger clients.
We seek to make our services essential to our clients’ businesses. To encourage clients to use our services regularly, we generally charge a fixed monthly amount for our subscription-based services rather than fees based on actual system usage. Contract rates are generally based on the number of sites, number of users, organization size, the client’s business focus, geography and the number of services to which a client subscribes. Our subscription clients generally pay contract fees on a monthly basis, but in some cases may pay us on a quarterly or annual basis. In addition, through CoStar COMPS Express, clients can access our database of commercial real estate information without a subscription on a pay per use basis.
Our customer service and support staff is charged with ensuring high client satisfaction by providing ongoing customer support.
Our primary marketing methods include: service demonstrations; face to face networking; web-based marketing; direct marketing; communication via our corporate website and news services; participation in trade show and industry events; print advertising in trade magazines and localother business journals;publications; client referrals; and CoStar Advisor™, the Company’s newsletter, which is distributed to our clients and prospects. Web-based marketing and direct marketing are the most cost-effective means for us to find prospective clients. Our web-based marketing efforts include paid advertising with major search engines and commercial real estate news sites and our direct marketing efforts include direct mail, email and telemarketing, and make extensive use of our unique, proprietary database. Once we have identified a prospective client, our most effective sales method is a service demonstration. We use various forms of advertising to build brand identity and reinforce the value and benefits of our services. We also sponsor and attend local association activities and events, and attend and/or exhibit at industry trade shows and conferences to reinforce our relationships with our core user groups, including industry-leading events for commercial brokers and retail and financial services institutions.
In May 2008, we released CoStar Showcase®, an internet marketing service that provides commercial real estate professionals the opportunity to make their listings available to all visitors to our public website, websites, www.CoStar.com, and Showcase.com, and allows each visitor to search those property listings for free. CoStar Showcase draws additional traffic to our website through searches on Google,TM Yahoo, and Yahoo®.Bing. Commercial real estate listings are derived from our database and are researched and verified by CoStar researchers. CoStar Showcase subscribers need only designate their listings for inclusion in the free property search tool. In addition, CoStar Showcase customers who have not subscribed for our other services, serve as leads for additional cross-selling opportunities.
Competition
The market for information/information, marketing and analytic services generally is competitive and rapidly changing. In the commercial real estate industry, the principal competitive factors for commercial real estate information/information, marketing and analytic services and providers are:
quality and depth of the underlying databases;
ease of use, flexibility, and functionality of the software;
timeliness of the data;
breadth of geographic coverage and services offered;
client service and support;
perception that the service offered is the industry standard;
price;
effectiveness of marketing and sales efforts;
proprietary nature of methodologies, databases and technical resources;
vendor reputation;
brand loyalty among customers; and
capital resources.
We compete directly and indirectly for customers with the following categories of companies:
online services or websites targeted to commercial real estate brokers, buyers and sellers of commercial real estate properties, insurance companies, mortgage brokers and lenders, such as LoopNet, Inc., Cityfeet.com, Inc., Reed Business Information Limited, officespace.com, MrOfficeSpace.com, TenantWise, Inc., WorkplaceIQ and TenantWise, Inc;RealPoint LLC;
publishers and distributors of information/information, marketing and analytic services, including regional providers and national print publications, such as Black’s Guide, Property and Portfolio Research, Torto Wheaton Research,CBRE Economic Advisors, Marshall & Swift, Yale Robbins, Inc., Reis, Inc., Real Capital Analytics, Inc. and The Smith Guide, Inc.;
locally controlled real estate boards, exchanges or associations sponsoring property listing services and the companies with whom they partner, such as Xceligent, Catalyst, the National Association of Realtors, CCIM Institute, Society of Industrial and Office Realtors (SIOR) the Commercial Association of Realtors Data Services and the Association of Industrial Realtors;Realtors (AIR);
in-house research departments operated by commercial real estate brokers; and
public record providers.
As the commercial real estate information/information, marketing and analytic services marketplace develops, additional competitors (including companies which could have greater access to data, financial, product development, technical, analytic or marketing resources than we do) may enter the market and competition may intensify. For example, the National Association of Realtors and Bloomberg L.P. have moved into the commercial real estate information business and intend to compete with us in the commercial real estate information space. Similarly, a company like Google, which has a far-reaching web presence and substantial data aggregation capabilities, could easily enter the commercial real estate marketing arena, something Google has already done with residential real estate. While we believe that we have successfully differentiated ourselves from existing competitors, competition could materially harm our business.
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Proprietary Rights
To protect our proprietary rights in our methodologies, database, software, trademarks and other intellectual property, we depend upon a combination of:
trade secret, copyright, trademark, database protection and other laws;
nondisclosure, noncompetition and other contractual provisions with employees and consultants;
license agreements with customers;
patent protection; and
technical measures.
We seek to protect our software’s source code, our database and our photography as trade secrets and under copyright law. Although copyright registration is not a prerequisite for copyright protection, we have filed for copyright registration for many of our databases, photographs, software and other materials. Under current U.S. copyright law, the arrangement and selection of data may be protected, but the actual data itself may not be. In addition, with respect to our U.K. databases, certain database protection laws provide additional protections of these databases. We license our services under license agreements that grant our clients non-exclusive, non-transferable licenses. These agreements restrict the disclosure and use of our information and prohibit the unauthorized reproduction or transfer of the information/information, marketing and analytic services we license.
We also attempt to protect the secrecy of our proprietary database, our trade secrets and our proprietary information through confidentiality and noncompetition agreements with our employees and consultants. Our services also include technical measures designed to discourage and detect unauthorized copying of our intellectual property. We have established an internal antipiracy team that uses fraud-detection technology to continually monitor our services to detect and prevent unauthorized access, and we actively prosecute individuals and firms that engage in this unlawful activity.
We have filed trademark applications to register trademarks for a variety of names for CoStar services and other marks, and have obtained registered trademarks for a variety of our marks, including “CoStar”, “COMPS”,“CoStar,” “COMPS,” “CoStar Property”,Property,” “CoStar Tenant”,Tenant,” “CoStar Showcase” and “CoStar Group”.Group.” Depending upon the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to become generic. We consider our trademarks in the aggregate to constitute a valuable asset. In addition, we have filed several patent applications covering certain of our methodologies and software and currently have one patent in the U.K. which expires in 2021 covering, among other things, certain of our field research methodologies, and threesix patents in the U.S. which expire in 2020, 2021, 2022, 2023 (2 patents) and 2022,2025, covering, among other things, critical elements of CoStar’s proprietary field research technology and mapping tools. We regard the rights under our patents as valuable to our business but do not believe that our business is materially dependent on any single patent.
Employees
As of January 30, 2009,29, 2010, we employed 1,1781,438 employees. None of our employees isare represented by a labor union. We have experienced no work stoppages. We believe that our employee relations are excellent.
Available Information
Our investor relations internet website is http://www.costar.com/investors.aspx. The reports we file with or furnish to the Securities and Exchange Commission, including our annual report, quarterly reports and current reports, are available free of charge on our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. You may review and copy any of the information we file with the Securities and Exchange Commission at the Commission's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information regarding the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Securities and Exchange Commission maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.
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| Item 1A. |
Cautionary Statement Concerning Forward-Looking Statements
We have made forward-looking statements in this Report and make forward-looking statements in our press releases and conference calls that are subject to risks and uncertainties. Forward-looking statements include information that is not purely historic fact and include, without limitation, statements concerning our financial outlook for 20092010 and beyond, our possible or assumed future results of operations generally, and other statements and information regarding assumptions about our revenues, EBITDA, fully diluted net income, taxable income, cash flow from operating activities, available cash, operating costs, amortization expense, intangible asset recovery, net income per share, diluted net income per share, weighted-average outstanding shares, capital and other expenditures, effective tax rate, equity compensation charges, future taxable income, purchase amortization, financing plans, geographic expansion, acquisitions, contract renewal rate, capital structure, contractual obligations, legal proceedings and claims, our database, database growth, services and facilities, employee relations, future economic performance, our ability to liquidate or realize our long-term investments, management’s plans, goals and objectives for future operations, and growth and markets for our stock. Sections of this Report which contain forward-looking statements include “Business,” “Risk Factors,” “Properties,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Controls and Procedures” and the Financial Statements and related Notes.
Our forward-looking statements are also identified by words such as “believes,” “expects,” “thinks,” “anticipates,” “intends,” “estimates” or similar expressions. You should understand that these forward-looking statements are estimates reflecting our judgment, beliefs and expectations, not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. The following important factors, in addition to those discussed or referred to under the heading “Risk Factors,” and other unforeseen events or circumstances, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements: general economic conditions; commercial real estate market conditions; changes or consolidations within the commercial real estate industry; customer retention; our ability to attract new clients; our ability to sell additional services to existing clients; competition; foreign currency fluctuations; our ability to identify, acquire and integrate acquisition candidates; our ability to obtain any required financing on favorable terms; global credit market conditions affecting investments; our ability to integrate our U.S. and international product offerings; our ability to continue to expand successfully; our ability to effectively penetrate the market for retail real estate information and gain acceptance in that market; our ability to control costs; litigation; changes in accounting policies or practices; release of new and upgraded services by us or our competitors; data quality; development of our sales force; employee retention; technical problems with our services; managerial execution; changes in relationships with real estate brokers and other strategic partners; legal and regulatory issues; and successful adoption of and training on our services.
Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date of this Report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
Risk Factors
A downturncontinuing decline or consolidation in the commercial real estate industry may decrease customer demand for our services. TheA continuing decline in the commercial real estate industry’s leasing activity, rental rates and absorption rates and the on-goingor a sustained downturn in the commercial real estate market’s for sale activity may affectcontinue to hamper our ability to generate revenues and may lead to more cancellations by our current or future customers, botheither of which could cause our revenues or our revenue growth rate to decline and reduce our profitability. A depressed commercial real estate market has a negative impact on our core customer base, which could decrease demand for our information/information, marketing and analytic services. Also, companies in this industry are consolidating, often in order to reduce expenses. Consolidation, or other cost-cutting measures by our customers, may lead to more cancellations of our information/information, marketing and analytic services by our customers, reduce the number of our existing clients, reduce the size of our target market or increase our clients’ bargaining power, all of which could cause our revenues or our revenue growth to decline and reduce our profitability.
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Negative general economic conditions could increase our expenses and reduce our revenues. Our business and the commercial real estate industry are particularly affected by negative trends in the general economy. The success of our business depends on a number of factors relating to general global, national, regional and local economic conditions, including perceived and actual economic conditions, recessions, inflation, deflation, exchange rates, interest rates, taxation policies, availability of credit, employment levels, and wage and salary levels. Negative general economic conditions could continue to adversely affect our business by reducing our revenues and profitability. Further, continuing bank failures and freezing of the credit markets generally, other adverse national and global economic events, as well as any significant terrorist attack, are likely to have a further dampening effect on the economy in general, which could negatively affect our financial performance and our stock price. Market disruptions may also contribute to extreme price and volume fluctuations in the stock market that may affect our stock price for reasons
unrelated to our operating performance. In addition, a significant increase in inflation could increase our expenses more rapidly than expected, the effect of which may not be offset by corresponding increases in revenue. Conversely, deflation resulting in a decline of prices could reduce our revenues. In the current economic environment, it is difficult to predict whether we will experience significant inflation or deflation in the near future. A significant increase in either could have an adverse effect on our results of operations. As a result of currentthe negative economic conditions that have persisted for more than a year, we have recently seen an increase inincreased customer cancellations, reductions of services and failures to timely pay amounts due to us. If we continue to experience greater cancellations and more reductions of services and failures to timely pay and we do not acquire new clients or sell new services to our existing clients, our revenues may decline and our financial position would be adversely affected.
Our revenues and financial position will be adversely affected if we are not able to attract and retain clients. Our success and revenues depend on attracting and retaining subscribers to our information/information, marketing and analytic services. Our subscription-based information/information, marketing and analytic services generate the largest portion of our revenues. However, we may be unable to attract new clients, and our existing clients may decide not to add, not to renew or to cancel subscription services. In addition, in order to increase our revenue, we must continue to attract new customers, continue to keep our cancellation rate low and continue to sell new services to our existing customers. We may not be able to continue to grow our customer base, keep the cancellation rate for customers and services low or sell new services to existing customers as a result of several factors, including without limitation: economic pressures, a decision that customers have no need for our services; a decision to use alternative services; customers’ and potential customers’ pricing and budgetary constraints; consolidation in the real estate and/or financial services industries; data quality; technical problems; or competitive pressures. If clients decide to cancel services or not to renew their subscription agreements, and we do not sell new services to our existing clients or attract new clients, then our renewal rate, revenues and our revenue growth raterevenues may decline.
If we are unable to hire qualified persons for, or retain and continue to develop, our sales force, or if our sales force is unproductive, our revenues could be adversely affected. In order to support revenues and future revenue growth, we need to continue to develop, train and retain our sales force. Our ability to build and develop a strong sales force may be affected by a number of factors, including: our ability to attract, integrate and motivate sales personnel; our ability to effectively train our sales force; the ability of our sales force to sell an increased number of services; our ability to manage effectively an outbound telesales group; the length of time it takes new sales personnel to become productive; the competition we face from other companies in hiring and retaining sales personnel; and our ability to effectively manage a multi-location sales organization. If we are unable to hire qualified sales personnel and develop and retain the members of our sales force, including sales force management, or if our sales force is unproductive, our revenues or growth rate could decline and our expenses could increase.
If we are unable to increase our revenues or our operating costs are higher than expected, our profitability may continue to decline and our operating results may fluctuate significantly. We may not be able to accurately forecast our revenues or future revenue growth rate. Many of our expenses, particularly personnel costs and occupancy costs, are relatively fixed. As a result, we may not be able to adjust spending quickly enough to offset any unexpected increase in expenses or revenue shortfall. We may experience higher than expected operating costs, including increased personnel costs, occupancy costs, selling and marketing costs, investments in geographic
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expansion, acquisition costs, communications costs, travel costs, software development costs, professional fees and other costs. If operating costs exceed our expectations and cannot be adjusted accordingly, our profitability may be reduced and our results of operations and financial position will be adversely affected. In 2009, we were unable to sustain our historic revenue growth rates, and in fact, our annual revenues declined in 2009 compared to 2008. We may not be able to return to our historic revenue growth rates and our revenues may continue to decline. Our ability to increase our revenues and operating profit will depend on increased demand for our services. Our sales are affected by, among other things, general economic and commercial real estate conditions. Reduced demand, whether due to changes in customer preference, a further weakening of the U.S. or global economy, competition or other reasons, may result in decreased revenue and growth, adversely affecting our operating results.
Competition could render our services uncompetitive. The market for information systems and services in general is highly competitive and rapidly changing. Competition in this market may increase further as a result of current recessionary economic conditions, as customer bases and customer spending decrease and service providers are competing for fewer customer resources. Our existing competitors, or future competitors, may have greater name recognition, larger customer bases, better technology or data, lower prices, easier access to data, greater user traffic or greater financial, technical or marketing resources than we have. Our competitors may be able to undertake more effective marketing campaigns, obtain more data, adopt more aggressive pricing policies, make more attractive offers to potential employees, subscribers, distribution partners and content providers or may be able to respond more quickly to new or emerging technologies or changes in user requirements. If we are unable to retain customers or obtain new customers, our revenues could decline. Increased competition could result in lower revenues and higher expenses, which would reduce our profitability.
Litigation or government investigations in which we become involved may significantly increase our expenses and adversely affect our stock price. Currently and from time to time, we are a party to various lawsuits. Any lawsuits, threatened lawsuits or government investigations in which we are involved could cost us a significant amount of time and money to defend, could distract management’s attention away from operating our business, could result in negative publicity, and could adversely affect our stock price. In addition, if any claims are determined against us or if a settlement requires us to pay a large monetary amount or take other action that materially restricts or impedes our operations, our profitability could be significantly reduced and our financial position could be adversely affected. We cannot make assurances that we will have any or sufficient insurance to cover any litigation claims.
Fluctuating foreign currencies may negatively impact our business, results of operations and financial position. Due to our acquisitions of CoStar UKU.K. Limited (formerly FOCUS Information Limited), SPN, Grecam S.A.S., Propex, and Propex,Property and Portfolio Research Ltd. a portion of our business is denominated in the British Pound and Euro and as a result, fluctuations in foreign currencies may have an impact on our business, results of operations and financial position. Recently, foreignForeign currency exchange rates have fluctuated greatly and may continue to fluctuate. Significant foreign currency exchange rate fluctuations may negatively impact our international revenue, which in turn affects our consolidated revenue. Currencies may be affected by internal factors, general economic conditions and external developments in other countries, all of which can have an adverse impact on a country’s currency. Currently, we are not party to any hedging transactions intended to reduce our exposure to exchange rate fluctuations. We may seek to enter into hedging transactions in the future, but we may be unable to enter into these transactions successfully, on acceptable terms or at all. We cannot predict whether we will incur foreign exchange losses in the future. Further, significant foreign exchange fluctuations resulting in a decline in the British Pound or Euro may decrease the value of our foreign assets, as well as decrease our revenues and earnings from our foreign subsidiaries, which would reduce our profitability and adversely affect our financial position.
We may be subject to legal liability for collecting, displaying or distributing information. Because the content in our database is collected from various sources and distributed to others, we may be subject to claims for breach of contract, defamation, negligence, unfair competition or copyright or trademark infringement or claims based on other theories. We could also be subject to claims based upon the content that is accessible from our website through links to other websites or information on our website supplied by third parties. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against any claims. Our potential liability for information distributed by us to others could require us to implement measures to reduce our exposure to such liability, which may require us to expend substantial resources and limit the attractiveness of our information/information, marketing and analytic services to users.
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An impairment in carrying value of goodwill could negatively impact our consolidated results of operations and net worth. Goodwill and identifiable intangible assets not subject to amortization are tested annually by each reporting unit on October 1st of each year for impairment and are tested for impairment more frequently based upon the existence of one or more indicators. We consider our operating segments, U.S. and International, as our reporting units under Statement of Financial Accounting Standards Board (“SFAS”FASB”) No. 142authoritative guidance for consideration of potential impairment of goodwill. We assess the impairment of long-lived assets, identifiable intangibles and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The existence of one or more of the following indicators could cause us to test for impairment prior to the annual assessment.
Significant underperformance relative to historical or projected future operating results;
Significant changes in the manner of our use of acquired assets or the strategy for our overall business;
Significant negative industry or economic trends; or
Significant decline in our market capitalization relative to net book value for a sustained period.
These types of events or indicators and the resulting impairment analysis could result in goodwill impairment charges in the future, which would reduce our profitability. Impairment charges could negatively affect our financial results in the periods of such charges, which may reduce our profitability. As of December 31, 2008,2009, we had $54.3$80.3 million of goodwill, $31.5$55.2 million in our U.S. segment and $22.8$25.1 million in our International segment.
Our stock price may be negatively affected by fluctuations in our financial results. Our operating results, revenues and expenses may fluctuate as a result of changes in general economic conditions and also for many other reasons, many of which are outside of our control, such as: cancellations or non-renewals of our services; competition; our ability to control expenses; loss of clients or revenues; technical problems with our services; changes or consolidation in the real estate industry; our investments in geographic expansion and to increase coverage in existing markets; interest rate fluctuations; the timing and success of new service introductions and enhancements; successful execution of our expansion plans; data quality; the development of our sales force; managerial execution; employee retention; foreign currency and exchange rate fluctuations; inflation; successful adoption of and training on our services; litigation; acquisitions of other companies or assets; sales, brand enhancement and marketing promotional activities; client support activities; changes in client budgets; or our investments in other corporate resources. In addition, changes in accounting policies or practices may affect our level of net income. Fluctuations in our financial results, revenues and expenses may cause the market price of our common stock to decline.
Market volatility may have an adverse effect on our stock price. The trading price of our common stock has fluctuated widely in the past, and we expect that it will continue to fluctuate in the future. The price could fluctuate widely based on numerous factors, including: economic factors; quarter-to-quarter variations in our operating results; changes in analysts’ estimates of our earnings; announcements by us or our competitors of technological innovations or new services; general conditions in the commercial real estate industry; developments or disputes concerning copyrights or proprietary rights or other legal proceedings; and regulatory developments. In addition, in recent years, the stock market in general, and the shares of internet-related and other technology companies in particular, have experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of the specific companies and may have the same effect on the market price of our common stock.
Negative conditions in the global credit markets may affect the liquidity of a portion of our long-term investments. Currently, our long-term investments include mostly AAA rated auction rate securities (“ARS”), which are primarily student loan securities supported by guarantees from the Federal Family Education Loan Program (“FFELP”) of the U.S. Department of Education. Continuing negative conditions in the global credit markets have prevented some investors from liquidating their holdings of auction rate securities because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities. As of December 31, 2009, we held $32.8 million par value of ARS, all of which failed to settle at auctions. When an auction fails for ARS in which we have invested, we may be unable to liquidate some or all of these securities at par. In the event we need or desire to immediately access these funds, we will not be able to do so until a future auction on these investments is successful, a buyer is found outside the auction process or an alternative action is determined. If a buyer is found but is unwilling to purchase the investments at par, we may incur a loss, which would reduce our profitability and adversely affect our financial position.
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Our ARS investments are not currently trading and therefore do not currently have a readily determinable market value. Accordingly, the estimated fair value of the ARS no longer approximates par value. We have used a discounted cash flow model to determine the estimated fair value of our investment in ARS as of December 31, 2009. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, credit spreads, timing and amount of cash flows, liquidity risk premiums, expected holding periods and default risk of the ARS. Based on this assessment of fair value, as of December 31, 2009, we determined there was a decline in the fair value of our ARS investments of approximately $3.0 million. The decline was deemed to be a temporary impairment and recorded as an unrealized loss in accumulated other comprehensive loss in stockholders’ equity. If the issuers of these ARS are unable to successfully close future auctions and their credit ratings deteriorate, we may be required to record additional unrealized losses in accumulated other comprehensive loss or an other-than-temporary impairment charge to earnings on these investments, which would reduce our profitability and adversely affect our financial position.
International operations expose us to additional business risks, which may reduce our profitability. Our international operations and expansion subject us to additional business risks, including: currency exchange rate fluctuations; adapting to the differing business practices and laws in foreign countries; difficulties in managing foreign operations; limited protection for intellectual property rights in some countries; difficulty in collecting accounts receivable and longer collection periods; costs of enforcing contractual obligations; impact of recessions in economies outside the U.S.; and potentially adverse tax consequences. In addition, international expansion imposes additional burdens on our executive and administrative personnel, systems development, research and sales departments, and general managerial resources. If we are not able to manage our international operations successfully, we may incur higher expenses and our profitability may be reduced. Finally, the investment required for additional international expansion could exceed the profit generated from such expansion, which would reduce our profitability and adversely affect our financial position.
If we are unable to enforce or defend our ownership and use of intellectual property, our business, competitive position and operating results could be harmed. The success of our business depends in large part on the intellectual property involved in our methodologies, database, services and software. We rely on a combination of trade secret, patent, copyright and other laws, nondisclosure and noncompetition provisions, license agreements and other contractual provisions and technical measures to protect our intellectual property rights. However, current law may not provide for adequate protection of our databases and the actual data. In addition, legal standards relating to the validity, enforceability and scope of protection of proprietary rights in internet related businesses are uncertain and evolving, and we cannot assure you of the future viability or value of any of our proprietary rights. Our business could be significantly harmed if we are not able to protect our content and our other intellectual property. The same would be true if a court found that our services infringe other persons’ intellectual property rights. Any intellectual property lawsuits or threatened lawsuits in which we are involved, either as a plaintiff or as a defendant, could cost us a significant amount of time and money and distract management’s attention from operating our business. In addition, if we do not prevail on any intellectual property claims, this could result in a change to our methodology or information/information, marketing and analytic services and could reduce our profitability.
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Our current or future geographic expansion plans may not result in increased revenues, which may negatively impact our business, results of operations and financial position. Expanding into new markets and investing resources towards increasing the depth of our coverage within existing markets imposes additional burdens on our research, systems development, sales, marketing and general managerial resources. During 2009,2010, we plan to continue to increase the depth of our coverage in the U.S. and U.K. If we are unable to manage our expansion efforts effectively, if our expansion efforts take longer than planned or if our costs for these efforts exceed our expectations, our financial position could be adversely affected. In addition, if we incur significant costs to improve data quality within existing markets, or are not successful in marketing and selling our services in these markets or in new markets, our expansion may have a material adverse effect on our financial position by increasing our expenses without increasing our revenues, adversely affecting our profitability.
We may not be able to successfully introduce new or upgraded information, marketing and analytic services, which could decrease our revenues and our profitability. Our future business and financial success will depend on our ability to continue to introduce new and upgraded services into the marketplace. To be successful, we must adapt to rapid technological changes by continually enhancing our information, marketing and analytic services. Developing new services and upgrades to services imposes heavy burdens on our systems department, management and researchers. This process is costly, and we cannot assure you that we will be able to successfully develop and enhance our services. In addition, successfully launching and selling a new service puts pressure on our sales and marketing resources. If we are unable to develop new or upgraded services, then our customers may choose a competitive service over ours and our revenues may decline and our profitability may be reduced. In addition, if we incur significant costs in developing new or upgraded services, are not successful in marketing and selling these new services or upgrades, or our customers fail to accept these new services, it could have a material adverse effect on our results of operations by decreasing our revenues and reducing our profitability.
Our continuing expansion into the retail real estate sector may not be completed successfully or may not result in increased revenues, which may negatively impact our business, results of operations and financial position. Expanding into the retail real estate sector imposed and continues to impose additional burdens on our research, systems development, sales, marketing and general managerial resources. During the next year, we expect to continue to expand the number of retail properties contained within our database. If we are unable to manage this expansion effectively, if this expansion effort takes longer than planned or if our costs for this effort exceed our expectations, our financial position could be adversely affected. In addition, if we incur significant costs to expand our retail sector services and we are not successful in marketing and selling these expanded services, or customers fail to accept these new services, our expansion may have a material adverse effect on our financial position by increasing our expenses without increasing our revenues, adversely affecting our profitability.
Technical problems that affect either our customers’ ability to access our services, or the software, internal applications and systems underlying our services, could lead to reduced demand for our information/information, marketing and analytic services, lower revenues and increased costs. Our business increasingly depends upon the satisfactory performance, reliability and availability of our website, the internet and our service providers. Problems with our website, the internet or the services provided by our local exchange carriers or internet service providers could result in slower connections for our customers or interfere with our customers’ access to our information/information, marketing and analytic services. If we experience technical problems in distributing our services, we could experience reduced demand for our information/information, marketing and analytic services. In addition, the software, internal applications and systems underlying our services are complex and may not be efficient or error-free. Our careful development and testing may not be sufficient to ensure that we will not encounter technical problems when we attempt to enhance our software, internal applications and systems. Any inefficiencies, errors or technical problems with our software, internal applications and systems could reduce the quality of our services or interfere with our customers’ access to our information/information, marketing and analytic services, which could reduce the demand for our services, lower our revenues and increase our costs.
If we are not able to obtain and maintain accurate, comprehensive or reliable data, we could experience reduced demand for our information/information, marketing and analytic services. Our success depends on our clients’ confidence in the comprehensiveness, accuracy and reliability of the data and analysis we provide. The task of establishing and maintaining accurate and reliable data and analysis is challenging. If our data, including the data we obtain from third parties, or analysis is not current, accurate, comprehensive or reliable, we could experience reduced demand for our services or legal claims by our customers, which could result in lower revenues and higher expenses. Our U.S. researchers use integrated internal research processes to update our database. Any inefficiencies, errors, or technical problems with this application could reduce the quality of our data, which could result in reduced demand for our services, lower revenues and higher costs.
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If we are not able to successfully identify, finance and/or integrate acquisitions, our business operations and financial position could be adversely affected. We have expanded our markets and services in part through acquisitions of complementary businesses, services, databases and technologies, and expect to continue to do so in the future. Our strategy to acquire complementary companies or assets depends on our ability to identify, and the availability of, suitable acquisition candidates. In addition, acquisitions involve numerous risks, including managing the integration of personnel and products; including those of PPR and Resolve Technology; managing geographically remote operations, such as SPN in Scotland, Grecam S.A.S. in France, CoStar U.K. Limited, Propex and PropexProperty and Portfolio Research Ltd. in the U.K.; the diversion of management’s attention from other business concerns; the inherent risks in entering markets and sectors in which we have either limited or no direct experience; and the potential loss of key employees or clients of the acquired companies. We may not successfully integrate any acquired businesses or assets and may not achieve anticipated benefits of any acquisition. Acquisitions could result in dilutive issuances of equity securities, the incurrence of debt, one-time write-offs of goodwill and substantial amortization expenses of other intangible assets. Obtaining credit in the current economic environment may be difficult and cost prohibitive. We may be unable to obtain financing on favorable terms, or at all, if necessary to finance future acquisitions making it impossible or more costly to acquire complementary businesses. If we are able to obtain financing, the terms may be onerous and more restrictive than we are willing to accept.restrict our operations.
Temporary or permanent outages of our computers, software or telecommunications equipment could lead to reduced demand for our information/information, marketing and analytic services, lower revenues and increased costs. Our operations depend on our ability to protect our database, computers and software, telecommunications equipment and facilities against damage from potential dangers such as fire, power loss, security breaches, computer viruses and telecommunications failures. Any temporary or permanent loss of one or more of these systems or facilities from an accident, equipment malfunction or some other cause could harm our business. If we experience a failure that prevents us from delivering our information/information, marketing and analytic services to clients, we could experience reduced demand for our information/information, marketing and analytic services, lower revenues and increased costs.
Changes in accounting and reporting policies or practices may affect our financial results or presentation of results, which may affect our stock price. Changes in accounting and reporting policies or practices could reduce our net income, which reductions may be independent of changes in our operations. These reductions in reported net income could cause our stock price to decline. For example, in the first quarter of 2006, we adopted the provisions of SFAS 123R,authoritative guidance for stock compensation, which required us to expense the value of granted stock options. We recorded $2.9 million in compensation charges for stock options in 2006.
Our business depends on retaining and attracting highly capable management and operating personnel. Our success depends in large part on our ability to retain and attract management and operating personnel, including our President and Chief Executive Officer, Andrew Florance, and our other officers and key employees. Our business requires highly skilled technical, sales, management, web development, marketing and research personnel, who are in high demand and are often subject to competing offers. To retain and attract key personnel, we use various measures, including employment agreements, awards under a stock incentive plan and incentive bonuses for key executive officers. These measures may not be enough to retain and attract the personnel we need or to offset the impact on our business of the loss of the services of Mr. Florance or other key officers or employees.
| Item 1B. |
None.
| Item 2. |
Our corporate headquarters currently is located in Bethesda, Maryland, where we occupy approximately 60,000 square feet of office space. This facility is used primarily by our U.S. segment. Our main lease for our Bethesda, Maryland headquarters expires on March 31,October 15, 2010.
In February 2010, we purchased a 169,429 square-foot LEED Gold certified office building located at 1331 L Street, NW in downtown Washington, D.C. together with the tenancy in the underlying ground lease for the property. This facility will be used primarily by our U.S. segment. We intend to begin relocating our Bethesda-based employees and infrastructure to our new building starting in the second quarter of 2010. We currently expect to complete our relocation by October 2010 and allow the lease for our Bethesda property to expire.
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Our principal facility in the U.K. is located in London, England, where we occupy approximately 11,000 square feet of office space. Our lease for this facility has a maximum term ending October 20, 2018, with early termination at our option on October 18, 2013, with advance notice. This facility is used primarily by our U.S.International segment.
In addition to our Bethesda, Maryland, facility,Washington, D.C. and London, England facilities, our research operations are principally run out of leased spaces in San Diego, California; Columbia, Maryland; White Marsh, Maryland; London, England; Glasgow, Scotland; and Paris, France. Additionally, we lease office space in a variety of other metropolitan areas, which generally house our field sales offices. These locations include, without limitation, the following: New York; Los Angeles; Chicago; San Francisco; Boston; Manchester, England; Orange County, California; Philadelphia; Houston; Atlanta; Phoenix; Detroit; Pittsburgh; Iselin, New Jersey; Fort Lauderdale; Denver; Dallas; Kansas City; Cleveland; Cincinnati; Tustin, California; Indianapolis; Austin; Salt Lake City; Seattle; and St. Louis.
We believe these facilities are suitable and appropriately support our business needs.
| Item 3. |
Currently, and from time to time, we are involved in litigation incidental to the conduct of our business. We are not a party to any lawsuit or proceeding that, in the opinion of our management based on consultations with legal counsel, is likely to have a material adverse effect on our financial position or results of operations.
We did not submit any matters to a vote of our security holders during the quarter ended December 31, 2008.2009.
PART II
Price Range of Common Stock. Our common stock is traded on the Nasdaq Global Select Market®Market under the symbol “CSGP.” The following table sets forth, for the periods indicated, the high and low daily closing prices per share of our common stock, as reported by the Nasdaq Global Select Market®.Market.
| High | Low | High | Low | |||||||||||||
| Year Ended December 31, 2007 | ||||||||||||||||
| First Quarter | $ | 52.15 | $ | 43.44 | ||||||||||||
| Second Quarter | $ | 55.71 | $ | 44.95 | ||||||||||||
| Third Quarter | $ | 58.49 | $ | 50.70 | ||||||||||||
| Fourth Quarter | $ | 61.65 | $ | 44.48 | ||||||||||||
| Year Ended December 31, 2008 | ||||||||||||||||
| First Quarter | $ | 45.31 | $ | 36.55 | $ | 45.31 | $ | 36.55 | ||||||||
| Second Quarter | $ | 51.36 | $ | 44.39 | $ | 51.36 | $ | 44.39 | ||||||||
| Third Quarter | $ | 56.70 | $ | 43.57 | $ | 56.70 | $ | 43.57 | ||||||||
| Fourth Quarter | $ | 45.20 | $ | 27.00 | $ | 45.20 | $ | 27.00 | ||||||||
| Year Ended December 31, 2009 | ||||||||||||||||
| First Quarter | $ | 35.93 | $ | 24.23 | ||||||||||||
| Second Quarter | $ | 40.09 | $ | 31.10 | ||||||||||||
| Third Quarter | $ | 41.57 | $ | 33.97 | ||||||||||||
| Fourth Quarter | $ | 44.43 | $ | 38.35 | ||||||||||||
As of February 1, 2009,2010, there were approximately 260359 holders of record of our common stock.
Dividend Policy. We have never declared or paid any dividends on our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors, subject to applicable limitations under Delaware law, and will be dependent upon our results of operations, financial position and other factors deemed relevant by our Board of Directors. We do not anticipate paying any dividends on our common stock during the foreseeable future, but intend to retain any earnings for future growth of our business.
Recent Issues of Unregistered Securities. On July 17, 2009, we acquired all of the issued and outstanding capital stock of PPR from DMG Information, Inc., a Delaware corporation (“DMGI”), the sole stockholder of PPR, in exchange for an aggregate of 572,999 shares of CoStar common stock, which had a value of approximately $20.9 million as of that date. On July 17, 2009, we issued 433,667 shares of common stock as initial consideration, and on September 28, 2009, we issued the remaining 139,332 shares of common stock as deferred purchase price after taking into account post-closing adjustments. We didissued the shares of common stock in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933 as issuances not issue any unregistered securities duringinvolving a public offering based upon the quarter ended December 31, 2008.fact that, among other things, PPR had only one stockholder and there was no general solicitation.
On October 19, 2009, we issued 25,886 shares of common stock to an individual as the stock portion of the consideration in exchange for all of the issued and outstanding capital stock of Resolve Technology. The stock portion of the purchase price was approximately $1.1 million, and the shares are subject to a three-year lockup period. We issued the shares of common stock in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933 as issuances not involving a public offering based upon the fact that, among other things, Resolve Technology had only one stockholder and there was no general solicitation.
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Issuer Purchases of Equity Securities. The following table is a summary of our repurchases of common stock during each of the three months in the quarter ended December 31, 2008:2009:
ISSUER PURCHASES OF EQUITY SECURITIES
| Month, 2008 | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
| October 1 through 31 | ¾ | ¾ | ¾ | ¾ |
| November 1 through 30 | ¾ | ¾ | ¾ | ¾ |
| December 1 through 31 | 4,220 (1) | $29.37 | ¾ | ¾ |
| Total | 4,220 | $29.37 | ¾ | ¾ |
Month, 2009 | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| October 1 through 31 | ¾ | ¾ | ¾ | ¾ | ||||||||||||
| November 1 through 30 | ¾ | ¾ | ¾ | ¾ | ||||||||||||
| December 1 through 31 | 4,070 | (1) | $ | 41.96 | ¾ | ¾ | ||||||||||
| Total | 4,070 | $ | 41.96 | ¾ | ¾ | |||||||||||
(1) The number of shares purchased consists of shares of common stock tendered by employees to the Company to satisfy the employees’ tax withholding obligations arising as a result of vesting of restricted stock grants under the Company’s 1998 Stock Incentive Plan, as amended, and the Company’s 2007 Stock Incentive Plan, as amended, which shares were purchased by the Company based on their fair market value on the vesting date. None of these share purchases were part of a publicly announced program to purchase common stock of the Company.
Stock Price Performance Graph
The stock performance graph below shows how an initial investment of $100 in our common stock would have compared to:
| · | An equal investment in the Standards & Poor's Stock 500 (“S&P 500”) Index. |
| · | An equal investment in the S&P 500 Application Software Index. |
The comparison covers the period beginning December 31, 2003,2004, and ending on December 31, 2008,2009, and assumes the reinvestment of any dividends. You should note that this performance is historical and is not necessarily indicative of future price performance.
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Company / Index | 12/31/03 | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 |
CoStar Group, Inc. | 100 | 110.74 | 103.53 | 128.44 | 113.31 | 78.99 |
S&P 500 Index | 100 | 110.88 | 116.33 | 134.70 | 142.10 | 89.53 |
S&P 500 Application Software Index | 100 | 111.63 | 123.57 | 130.15 | 144.57 | 79.03 |
Company / Index | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | ||||||||||||||||||
CoStar Group, Inc. | 100 | 93.48 | 115.98 | 102.32 | 71.33 | 90.45 | ||||||||||||||||||
S&P 500 Index | 100 | 104.91 | 121.48 | 128.16 | 80.74 | 102.11 | ||||||||||||||||||
S&P 500 Application Software Index | 100 | 110.69 | 116.59 | 129.51 | 70.79 | 113.14 | ||||||||||||||||||
Selected Consolidated Financial and Operating Data
(in thousands, except per share data and other operating data)
The following table provides selected consolidated financial and other operating data for the five years ended December 31, 2008.2009. The consolidated statement of operations data shown below for each of the three years ended December 31, 2006, 2007, 2008, and 20082009 and the consolidated balance sheet data as of December 31, 20072008 and 20082009 are derived from audited consolidated financial statements that are included in this report. The consolidated statement of operations data for each of the years ended December 31, 20042005 and 20052006 and the consolidated balance sheet data as of December 31, 2004, 2005, 2006, and 20062007 shown below are derived from audited consolidated financial statements for those years that are not included in this report.
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Operations Data: | 2004 | 2005 | 2006 | 2007 | 2008 | 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||
| Revenues | $ | 112,085 | $ | 134,338 | $ | 158,889 | $ | 192,805 | $ | 212,428 | $ | 134,338 | $ | 158,889 | $ | 192,805 | $ | 212,428 | $ | 209,659 | ||||||||||||||||||||
| Cost of revenues | 35,384 | 44,286 | 56,136 | 76,704 | 73,408 | 44,286 | 56,136 | 76,704 | 73,408 | 73,714 | ||||||||||||||||||||||||||||||
| Gross margin | 76,701 | 90,052 | 102,753 | 116,101 | 139,020 | 90,052 | 102,753 | 116,101 | 139,020 | 135,945 | ||||||||||||||||||||||||||||||
| Operating expenses | 69,955 | 82,710 | 88,672 | 98,249 | 99,232 | 82,710 | 88,672 | 98,249 | 99,232 | 104,110 | ||||||||||||||||||||||||||||||
| Income from operations | 6,746 | 7,342 | 14,081 | 17,852 | 39,788 | 7,342 | 14,081 | 17,852 | 39,788 | 31,835 | ||||||||||||||||||||||||||||||
| Interest and other income, net | 1,314 | 3,455 | 6,845 | 8,045 | 4,914 | 3,455 | 6,845 | 8,045 | 4,914 | 1,253 | ||||||||||||||||||||||||||||||
| Income before income taxes | 8,060 | 10,797 | 20,926 | 25,897 | 44,702 | 10,797 | 20,926 | 25,897 | 44,702 | 33,088 | ||||||||||||||||||||||||||||||
| Income tax (benefit) expense , net | (16,925 | ) | 4,340 | 8,516 | 9,946 | 20,079 | ||||||||||||||||||||||||||||||||||
| Income tax expense , net | 4,340 | 8,516 | 9,946 | 20,079 | 14,395 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 24,985 | $ | 6,457 | $ | 12,410 | $ | 15,951 | $ | 24,623 | $ | 6,457 | $ | 12,410 | $ | 15,951 | $ | 24,623 | $ | 18,693 | ||||||||||||||||||||
Net income per share - basic | $ | 1.38 | $ | 0.35 | $ | 0.66 | $ | 0.84 | $ | 1.27 | $ | 0.35 | $ | 0.66 | $ | 0.84 | $ | 1.27 | $ | 0.95 | ||||||||||||||||||||
Net income per share - diluted | $ | 1.33 | $ | 0.34 | $ | 0.65 | $ | 0.82 | $ | 1.26 | $ | 0.34 | $ | 0.65 | $ | 0.82 | $ | 1.26 | $ | 0.94 | ||||||||||||||||||||
Weighted average shares outstanding - basic | 18,165 | 18,453 | 18,751 | 19,044 | 19,372 | 18,453 | 18,751 | 19,044 | 19,372 | 19,780 | ||||||||||||||||||||||||||||||
Weighted average shares outstanding - diluted | 18,827 | 19,007 | 19,165 | 19,404 | 19,550 | 19,007 | 19,165 | 19,404 | 19,550 | 19,925 | ||||||||||||||||||||||||||||||
| As of December 31, | ||||||||||||||||||||
| Consolidated Balance Sheet Data: | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||||
| Cash, cash equivalents, short-term and long-term investments | $ | 117,069 | $ | 134,185 | $ | 158,148 | $ | 187,426 | $ | 224,590 | ||||||||||
| Working capital | 107,875 | 124,501 | 154,606 | 167,441 | 183,347 | |||||||||||||||
| Total assets | 232,691 | 248,059 | 275,437 | 321,843 | 334,384 | |||||||||||||||
| Total liabilities | 21,747 | 23,263 | 25,327 | 40,038 | 30,963 | |||||||||||||||
| Stockholders’ equity | 210,944 | 224,796 | 250,110 | 281,805 | 303,421 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| Other Operating Data: | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||||
| Number of subscription client sites | 9,489 | 11,464 | 13,257 | 14,467 | 15,920 | |||||||||||||||
| Millions of properties in database | 1.6 | 1.8 | 2.1 | 2.7 | 3.2 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| Consolidated Balance Sheet Data: | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
| Cash, cash equivalents, short-term and long-term investments | $ | 134,185 | $ | 158,148 | $ | 187,426 | $ | 224,590 | $ | 255,698 | ||||||||||
| Working capital | 124,501 | 154,606 | 167,441 | 183,347 | 203,660 | |||||||||||||||
| Total assets | 248,059 | 275,437 | 321,843 | 334,384 | 404,579 | |||||||||||||||
| Total liabilities | 23,263 | 25,327 | 40,038 | 30,963 | 45,573 | |||||||||||||||
| Stockholders’ equity | 224,796 | 250,110 | 281,805 | 303,421 | 359,006 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| Other Operating Data | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
| Number of subscription client sites | 11,464 | 13,257 | 14,467 | 15,920 | 16,020 | |||||||||||||||
| Millions of properties in database | 1.8 | 2.1 | 2.7 | 3.2 | 3.6 | |||||||||||||||