Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 20, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | COSTAR GROUP INC | |
Entity Central Index Key | 1,057,352 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 36,145,490 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Revenues | $ 247,533 | $ 212,711 | $ 711,239 | $ 619,319 |
Cost of revenues | 55,483 | 42,222 | 162,102 | 127,801 |
Gross margin | 192,050 | 170,489 | 549,137 | 491,518 |
Operating expenses: | ||||
Selling and marketing | 72,705 | 75,414 | 240,833 | 231,086 |
Software development | 21,536 | 19,357 | 67,054 | 56,539 |
General and administrative | 35,998 | 30,572 | 104,550 | 88,275 |
Customer base amortization | 4,298 | 5,550 | 13,642 | 17,602 |
Total operating expenses | 134,537 | 130,893 | 426,079 | 393,502 |
Income from operations | 57,513 | 39,596 | 123,058 | 98,016 |
Interest and other income | 555 | 344 | 1,589 | 587 |
Interest and other expense | (2,901) | (2,498) | (8,280) | (7,462) |
Income before income taxes | 55,167 | 37,442 | 116,367 | 91,141 |
Income tax expense | 20,990 | 14,241 | 37,876 | 35,643 |
Net income | $ 34,177 | $ 23,201 | $ 78,491 | $ 55,498 |
Net income per share-basic (in dollars per share) | $ 1.05 | $ 0.72 | $ 2.42 | $ 1.73 |
Net income per share-diluted (in dollars per share) | $ 1.04 | $ 0.72 | $ 2.40 | $ 1.71 |
Weighted average outstanding shares-basic (in shares) | 32,444 | 32,186 | 32,375 | 32,152 |
Weighted average outstanding shares-diluted (in shares) | 32,814 | 32,440 | 32,705 | 32,423 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 34,177 | $ 23,201 | $ 78,491 | $ 55,498 |
Other comprehensive income (loss), net of tax | ||||
Foreign currency translation adjustment | 1,190 | (596) | 3,432 | (3,054) |
Net decrease in unrealized loss on investments | 0 | 46 | 0 | 275 |
Total other comprehensive income (loss) | 1,190 | (550) | 3,432 | (2,779) |
Total comprehensive income | $ 35,367 | $ 22,651 | $ 81,923 | $ 52,719 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 622,995 | $ 567,223 |
Accounts receivable, net of allowance for doubtful accounts of approximately $6,370 and $6,344 as of September 30, 2017 and December 31, 2016, respectively | 60,871 | 48,537 |
Income tax receivable | 0 | 129 |
Prepaid expenses and other current assets | 16,215 | 11,602 |
Total current assets | 700,081 | 627,491 |
Long-term investments | 9,952 | 9,952 |
Deferred income taxes, net | 6,477 | 7,273 |
Property and equipment, net | 84,326 | 87,568 |
Goodwill | 1,283,190 | 1,254,866 |
Intangible assets, net | 191,178 | 195,965 |
Deposits and other assets | 5,392 | 1,948 |
Total assets | 2,280,596 | 2,185,063 |
Current liabilities: | ||
Current portion of long-term debt | 36,910 | 31,866 |
Accounts payable | 11,323 | 11,478 |
Accrued wages and commissions | 34,661 | 33,803 |
Accrued expenses | 33,073 | 31,092 |
Deferred gain on the sale of building | 2,523 | 2,523 |
Income taxes payable | 9,328 | 3,814 |
Deferred rent | 3,201 | 1,206 |
Deferred revenue | 45,568 | 39,164 |
Total current liabilities | 176,587 | 154,946 |
Long-term debt, less current portion | 268,586 | 306,473 |
Deferred gain on the sale of building | 16,823 | 18,715 |
Deferred rent | 30,090 | 31,589 |
Deferred income taxes, net | 22,101 | 18,386 |
Income taxes payable | 3,982 | 741 |
Total liabilities | 518,169 | 530,850 |
Stockholders' equity: | ||
Total stockholders’ equity | 1,762,427 | 1,654,213 |
Total liabilities and stockholders’ equity | $ 2,280,596 | $ 2,185,063 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Allowance for doubtful accounts | $ 6,370 | $ 6,344 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating activities: | ||
Net income | $ 78,491 | $ 55,498 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 48,277 | 53,041 |
Amortization of debt issuance costs | 2,157 | 2,407 |
Stock-based compensation expense | 29,203 | 26,981 |
Deferred income tax expense, net | 6,087 | 5,554 |
Provision for losses on accounts receivable | 3,992 | 6,462 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (15,809) | (13,808) |
Prepaid expenses and other current assets | (3,561) | (1,398) |
Deposits and other assets | (3,387) | 473 |
Accounts payable and other liabilities | 11,888 | 12,864 |
Deferred revenue | 5,969 | 386 |
Net cash provided by operating activities | 163,307 | 148,460 |
Investing activities: | ||
Proceeds from sale and settlement of investments | 0 | 4,700 |
Purchases of property and equipment and other assets | (19,754) | (11,692) |
Acquisitions, net of cash acquired | (47,767) | (10,443) |
Net cash used in investing activities | (67,521) | (17,435) |
Financing activities: | ||
Payments of long-term debt | (35,000) | (20,000) |
Payments of issuance costs | (643) | 0 |
Repurchase of restricted stock to satisfy tax withholding obligations | (14,309) | (14,573) |
Proceeds from exercise of stock options and employee stock purchase plan | 9,058 | 4,791 |
Net cash used in financing activities | (40,894) | (29,782) |
Effect of foreign currency exchange rates on cash and cash equivalents | 880 | (962) |
Net increase in cash and cash equivalents | 55,772 | 100,281 |
Cash and cash equivalents at the beginning of period | 567,223 | 421,818 |
Cash and cash equivalents at the end of period | $ 622,995 | $ 522,099 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION CoStar Group, Inc. (the “Company” or “CoStar”) provides information, analytics and online marketplace services to the commercial real estate and related business community through its comprehensive, proprietary database of commercial real estate information covering the United States (“U.S.”), the United Kingdom (“U.K.”), and parts of Canada, Spain, Germany and France. The Company provides online marketplaces for commercial real estate, apartment rentals, lands for sale and businesses for sale. The Company operates within two operating segments, North America and International, and its services are typically distributed to its clients under subscription-based license agreements that renew automatically, a majority of which have a term of one year . |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Accounting policies are consistent for each operating segment. Interim Financial Statements The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of the Company’s management, the financial statements reflect all adjustments necessary to present fairly the Company’s financial position at September 30, 2017 and December 31, 2016 , the results of its operations for the three and nine months ended September 30, 2017 and 2016 , its comprehensive income for the three and nine months ended September 30, 2017 and 2016 , and its cash flows for the nine months ended September 30, 2017 and 2016 . These adjustments are of a normal recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 . The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of future financial results. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, credit reserves, useful lives of property and equipment and intangible assets, recoverability of long-lived assets and intangible assets with definite lives, goodwill, income taxes, fair value of equity instruments, fair value of auction rate securities ("ARS"), accounting for business combinations and contingencies, among others. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ from these estimates. Revenue Recognition The Company primarily derives revenues by (i) providing access to its proprietary database of commercial real estate information, and (ii) providing an online marketplace for professional property management companies, property owners, brokers, and landlords. The Company generally charges a fixed monthly amount for its subscription-based services. The Company and its subsidiaries' subscription-based services consist primarily of information, analytics and online marketplace services offered over the internet to commercial real estate industry and related professionals. Subscription contract rates are based on the number of sites, number of users, organization size, the client’s business focus, geography, the number and types of services to which a client subscribes, the number of properties a client advertises and the prominence and placement of a client's advertised properties in the search results, as applicable. A majority of the subscription-based service agreements have a term of one year and renew automatically. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Revenue Recognition — (Continued) Revenues are recognized when (1) there is persuasive evidence of an arrangement, (2) the fee is fixed and determinable, (3) services have been rendered and payment has been contractually earned and (4) collectability is reasonably assured. Revenues from subscription-based services are recognized on a straight-line basis over the term of the agreement. Deferred revenue results from advance cash receipts from customers or amounts billed in advance to customers from the sale of subscription services and is recognized over the term of the service agreement. The Company analyzes contracts with multiple elements under the accounting guidance for multiple-element arrangements. The Company's multiple-element arrangements include information, analytics and/or online marketplace services that are generally provided to the customer over the same term. When identifying multiple-element arrangements, the Company considers multiple purchases made by the same customer within a short time frame and assesses whether the purchases were negotiated together as one overall arrangement. If a multiple-element arrangement is identified, then the arrangement consideration is allocated among the separate units of accounting based on their relative selling prices, which are estimated considering factors such as historical pricing, pricing strategy, market conditions and other factors. The Company accounts for each deliverable in the transaction separately. If the deliverables cannot be separated into multiple units of accounting, then the arrangement consideration is combined and recognition of revenue is determined for the combined unit of accounting. Multiple-element transactions require judgment to determine the selling price or fair value of the different elements. These judgments impact the amount of revenue recognized over the term of the contract, as well as the period in which they are recognized. Concentration of Credit Risk and Financial Instruments The Company maintains reserves for estimated inherent credit losses, and such losses have been within management’s expectations. The large size and widespread nature of the Company’s customer base and the Company’s lack of dependence on any individual customer mitigates the risk of nonpayment of the Company’s accounts receivable. The carrying amount of the accounts receivable approximates the net realizable value. The carrying value of the accounts receivable, accounts payable, accrued expenses and long-term debt approximates fair value. The Company holds cash at major financial institutions in amounts that often exceed Federal Deposit Insurance Corporation insured limits. The Company manages its credit risk associated with cash concentrations by concentrating its cash deposits in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions holding such deposits. The carrying value of cash approximates fair value. Historically, the Company has not experienced any losses due to such cash concentrations. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs include e-commerce, television, radio, print and other media advertising. Advertising costs were approximately $25 million and $27 million for the three months ended September 30, 2017 and 2016 , respectively. Advertising costs were approximately $87 million and $95 million for the nine months ended September 30, 2017 and 2016 , respectively. Foreign Currency Translation The Company’s functional currency of its foreign locations is the local currency. Assets and liabilities are translated into U.S. dollars using the exchange rates as of the balance sheet dates. Revenues, expenses, gains and losses are translated at the average exchange rates in effect during each period. Gains and losses resulting from translation are included in accumulated other comprehensive loss. Currency g ains and losses on the translation of intercompany loans made to foreign subsidiaries that are of a long-term investment nature are also included in accumulated other comprehensive loss. Net gains or losses resulting from foreign currency exchange transactions are included in the condensed consolidated statements of operations. There were no material gains or losses from foreign currency exchange transactions for the three and nine months ended September 30, 2017 and 2016 . 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss were as follows (in thousands): September 30, December 31, Foreign currency translation adjustment $ (8,759 ) $ (12,191 ) Accumulated net unrealized loss on investments, net of tax (848 ) (848 ) Total accumulated other comprehensive loss $ (9,607 ) $ (13,039 ) There were no amounts reclassified out of accumulated other comprehensive loss to the condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 . The foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature. Net Income Per Share Net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis. The Company’s potentially dilutive securities include stock options and unvested restricted stock. Diluted net income per share considers the impact of potentially dilutive securities except in periods in which there is a net loss, as the inclusion of the potentially dilutive common shares would have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share data): Three Months Ended Nine Months Ended Numerator: 2017 2016 2017 2016 Net income $ 34,177 $ 23,201 $ 78,491 $ 55,498 Denominator: Denominator for basic net income per share — weighted-average outstanding shares 32,444 32,186 32,375 32,152 Effect of dilutive securities: Stock options and restricted stock 370 254 330 271 Denominator for diluted net income per share — weighted-average outstanding shares 32,814 32,440 32,705 32,423 Net income per share — basic $ 1.05 $ 0.72 $ 2.42 $ 1.73 Net income per share — diluted $ 1.04 $ 0.72 $ 2.40 $ 1.71 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Net Income Per Share — (Continued) There were no anti-dilutive options for the three months ended September 30, 2017 . Stock options to purchase approximately 89,000 shares that were outstanding for the three months ended September 30, 2016 were not included in the computation of diluted net income per share because the inclusion of such shares would have an anti-dilutive effect. Stock options to purchase approximately 116,000 and 184,000 shares that were outstanding for the nine months ended September 30, 2017 and 2016 , respectively, were not included in the computation of diluted net income per share because the inclusion of the potentially dilutive common shares would have an anti-dilutive effect. Shares underlying restricted common stock awards that vest based on Company performance and service conditions that have not been achieved as of the end of the period are not included in the computation of basic or diluted earnings per share. Shares underlying restricted stock units that vest based on Company service conditions that have not been achieved as of the end of the period are not included in the computation of basic or diluted earnings per share. The following table summarizes the shares underlying the performance-based restricted stock awards and service-based restricted stock units excluded from the basic and diluted calculation (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Performance-based restricted stock awards 85 72 85 72 Service-based restricted stock units 1 1 1 1 Total shares excluded from computation 86 73 86 73 Stock-Based Compensation Equity instruments issued in exchange for services performed by officers, employees, directors and consultants of the Company are accounted for using a fair-value based method and the fair value of such equity instruments is recognized as expense in the condensed consolidated statements of operations. Stock-based compensation expense is measured at the grant date of the stock-based awards that vest over set time periods based on their fair values, and is recognized on a straight line basis as expense over the vesting periods of the awards, net of an estimated forfeiture rate. For equity instruments that vest based on performance, the Company assesses the probability of the achievement of the performance conditions at the end of each reporting period, or more frequently based upon the occurrence of events that may change the probability of whether the performance conditions would be met. If the Company's initial estimates of the achievement of the performance conditions change, the related stock-based compensation expense and timing of recognition may fluctuate from period to period based on those estimates. For equity instruments that vest based on a performance condition and a market condition, the Company estimates the fair value of each equity instrument granted on the date of grant using a Monte-Carlo simulation model. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards. Stock-based compensation expense is updated based on the expected achievement of the related performance conditions at the end of each reporting period. If the performance conditions are not met, no stock-based compensation expense will be recognized, and any previously recognized stock-based compensation expense will be reversed. Stock-based compensation expense for stock options, restricted stock, restricted stock units issued under equity incentive plans and stock purchases under the ESPP included in the Company’s results of operations were as follows (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of revenues $ 1,201 $ 1,396 $ 3,711 $ 4,209 Selling and marketing 1,862 1,676 5,401 4,920 Software development 1,665 1,684 5,315 4,902 General and administrative 5,015 4,555 14,776 12,950 Total stock-based compensation $ 9,743 $ 9,311 $ 29,203 $ 26,981 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Stock-Based Compensation — (Continued) Options to purchase 3,532 and 3,367 shares were exercised during the three months ended September 30, 2017 and 2016 , respectively. Options to purchase 81,815 and 24,078 shares were exercised during the nine months ended September 30, 2017 and 2016 , respectively. Debt Issuance Costs Costs incurred in connection with the issuance of long-term debt are capitalized and amortized as interest expense over the term of the related debt using the effective interest method. These amounts are reflected in the consolidated balance sheets as direct deductions from a combination of the current and long-term portions of debt. Upon a refinancing, previously capitalized debt issuance costs are expensed and included in loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. If the Company determines that there has not been a substantial modification of the related debt, any previously capitalized debt issuance costs are amortized as interest expense over the term of the new debt instrument using the effective interest method. The Company had capitalized debt issuance costs, net of amortization, of approximately $5 million and $7 million as of September 30, 2017 and December 31, 2016 , respectively. The debt issuance costs are associated with the financing commitment received from JPMorgan Chase Bank, N.A. (“J.P. Morgan Bank”) on April 27, 2011, the subsequent term loan facility and revolving credit facility established under a credit agreement dated February 16, 2012 (the “2012 Credit Agreement”), the financing commitment received from J.P. Morgan Bank, Bank of America, N.A., SunTrust Bank and Wells Fargo Bank, National Association on February 28, 2014, and the subsequent term loan facility and revolving credit facility established under a credit agreement dated April 1, 2014 (the “2014 Credit Agreement”). See Notes 7 and 11 for additional information regarding the term loan facility and revolving credit facility. The Company amortized debt issuance costs of approximately $670,000 and $797,000 for the three months ended September 30, 2017 and 2016 , respectively. The Company amortized debt issuance costs of approximately $2 million for each of the nine months ended September 30, 2017 and 2016 , respectively. Business Combinations The Company allocates the purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer bases, acquired database technology, and acquired trade names from a market participant's perspective, useful lives and discount rates. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed. Any adjustments to provisional amounts that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Recent Accounting Pronouncements There have been no developments to the Recent Accounting Pronouncements discussion included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 , including the expected dates of adoption and estimated effects on the Company’s condensed consolidated financial statements, except for the following: In May 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) jointly issued a new revenue recognition standard that is designed to improve financial reporting by creating common recognition guidance for GAAP and International Financial Reporting Standards (“IFRS”). This guidance provides a robust framework for addressing revenue issues, improves the comparability of revenue recognition practices across industries, provides useful information to users of financial statements through improved disclosure requirements and simplifies the presentation of financial statements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goo ds or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. From March to December 2016, amendments to the new revenue recognition standard were issued to clarify numerous accounting topics, including, but not limited to (i) the implementation guidance on principal versus agent considerations, (ii) the identification of performance obligations, (iii) the licensing implementation guidance, (iv) the objective of the collectability criterion, (v) the application o f the variable consideration guidance and modified retrospective transition method, (vi) the way in which impairment testing is performed and (vii) the disclosure requirements for revenue recognized from performance obligations. This guidance permits the use of either a full retrospective method or a modified retrospective approach. The modified retrospective approach would be applied only to the most current period presented along with a cumulative-effect adjustment at the date of adoption. This guidance will be effective for annual reporting periods beginnin g after December 15, 2017, although companies may adopt the standard as early as annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the potential impact of adopting this guidance and, although it expects significant changes to its financial statement disclosures, due to the nature of its services and current revenue recognition practices, it does not believe the new revenue recognition standard will have a material impact on its revenue recognition policies. The Company expects adoption of the new standard will change its current treatment of commissions paid to employees, which the Company currently expenses as incurred. Under the new standard, the Company expects to capitalize commission costs as an incremental cost of obtaining a contract, which may have a material impact on the Company's financial statements. The Company is currently evaluating the period over which the capitalized commission costs will be amortized. Once the amortization period is determined, the Company expects to be able to assess the impact of adopting this guidance. The Company expects to adopt the new standard on January 1, 2018 using the modified retrospective transition method. In February 2016, the FASB issued authoritative guidance to increase transparency and comparability among organizations' accounting for leases. The guidance requires a company to recognize lease assets and lease liabilities on the balance sheet, as well as disclose key information about leasing arrangements. This guidance is effective on a modified retrospective basis for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early application is permitted. The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures, and expects that the adoption of this standard may result in a material increase in assets and liabilities on its consolidated balance sheets . 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Recent Accounting Pronouncements — (Continued) In March 2016, the FASB issued authoritative guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of share-based payment transactions on the statement of cash flows. The guidance requires a company to (i) recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the statement of operations using a prospective transition method, (ii) recognize excess tax benefits in the current period regardless of whether the benefit reduces taxes payable using a modified retrospective transition method, and (iii) classify all excess tax benefits as operating activities within the statement of cash flows using either a prospective transition method or a retrospective transition method. The guidance also allows a company to (i) elect whether to estimate the number of share-based awards expected to vest or account for forfeitures when they occur, and (ii) withhold up to the maximum statutory tax rate in the applicable jurisdiction for awards, both of which should be applied using a modified retrospective transition method. Finally, the guidance requires a company to classify the cash paid by an employer when directly withholding shares for tax withholding purposes as a financing activity within the statement of cash flows using a retrospective transition method. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The adoption of the new standard resulted in a $2 million cumulative-effect adjustment as of January 1, 2017 to record a deferred tax asset with the offset to retained earnings on the balance sheet, representing the amount of the Company's net operating loss carryforwards attributable to excess tax benefits that it was not able to record under the prior guidance. The Company elected to apply the presentation requirements for statement of cash flows related to excess tax benefits retrospectively to all periods presented, which resulted in an increase to both net cash provided by operating activities and net cash used in financing activities of approximately $5 million for the nine months ended September 30, 2016 . The presentation requirements related to employee taxes paid by withholding shares had no impact to any of the periods presented in the Company's condensed consolidated cash flows statements since such cash flows have historically been presented as a financing activity. In accordance with the new standard, the Company recognized an income tax benefit of $1 million , resulting in a corresponding increase in net income and an increase of $0.02 per basic and diluted share for the three months ended September 30, 2017 . In addition, the Company recognized an income tax benefit of $8 million , resulting in a corresponding increase in net income and an increase of $0.23 per basic and diluted share for the nine months ended September 30, 2017 . These income tax benefits related to the recognition of excess tax benefits from stock options that were exercised and restricted stock that vested during the period, that prior to the adoption of the new standard were recognized as an increase to additional paid-in capital. In June 2016, the FASB issued authoritative guidance designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective on a modified retrospective basis for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. C ompanies may adopt the standard as early as annual reporting periods beginning after December 15, 2018 . The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures. In August 2016, the FASB issued authoritative guidance designed to reduce the existing diversity in how certain cash receipts and cash payments are presented and classified in the consolidated statements of cash flows. This guidance is effective on a retrospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. This guidance is not expected to have a material impact on the Company's consolidated statements of cash flows and related disclosures. In January 2017, the FASB issued authoritative guidance designed to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance indicates that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted in certain situations. This guidance is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Recent Accounting Pronouncements — (Continued) In January 2017, the FASB issued authoritative guidance designed to simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The guidance indicates that an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early application is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted this guidance during the first quarter of 2017 and the early adoption did not have a material impact on the Company's consolidated financial statements and related disclosures. In May 2017, the FASB issued authoritative guidance designed to reduce the existing diversity and complexity in the accounting for changes to terms or conditions of a share-based payment award. This guidance clarifies that an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as an equity instrument or liability instrument. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. This guidance is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. |
INVESTMENTS
INVESTMENTS | 9 Months Ended |
Sep. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENTS | INVESTMENTS The Company determines the appropriate classification of debt and equity investments at the time of purchase and re-evaluates such designation as of each balance sheet date. The Company considers all of its investments to be available-for-sale. The Company's investments consist of long-term variable rate debt instruments with an auction reset feature, referred to as ARS. Investments are carried at fair value. Scheduled maturities of investments classified as available-for-sale as of September 30, 2017 are as follows (in thousands): Maturity Fair Value Due: July 1, 2017 — June 30, 2018 $ — July 1, 2018 — June 30, 2022 — July 1, 2022 — June 30, 2027 — After June 30, 2027 9,952 Available-for-sale investments $ 9,952 The Company had no realized gains on its investments for each of the three and nine months ended September 30, 2017 and 2016 , respectively. The Company had no realized losses on its investments for each of the three and nine months ended September 30, 2017 and 2016 , respectively. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis. Changes in unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss in stockholders’ equity until realized. A decline in market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Dividend and interest income are recognized when earned. 3. INVESTMENTS — (CONTINUED) As of September 30, 2017 , the amortized cost basis and fair value of investments classified as available-for-sale were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Auction rate securities $ 10,800 $ — $ (848 ) $ 9,952 Available-for-sale investments $ 10,800 $ — $ (848 ) $ 9,952 As of December 31, 2016 , the amortized cost basis and fair value of investments classified as available-for-sale were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Auction rate securities $ 10,800 $ — $ (848 ) $ 9,952 Available-for-sale investments $ 10,800 $ — $ (848 ) $ 9,952 The unrealized losses on the Company’s investments as of September 30, 2017 and December 31, 2016 were generated primarily from changes in interest rates and ARS that failed to settle at auction, due to adverse conditions in the global credit markets. The losses are considered temporary, as the contractual terms of these investments do not permit the issuer to settle the security at a price less than the amortized cost of the investment. Because the Company does not intend to sell these instruments and it is not more likely than not that the Company will be required to sell these instruments prior to anticipated recovery, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016 . See Note 4 for further discussion of the fair value of the Company’s financial assets. The components of the Company’s investments in an unrealized loss position for twelve months or longer were as follows (in thousands): September 30, December 31, Aggregate Fair Value Gross Unrealized Losses Aggregate Fair Value Gross Unrealized Losses Auction rate securities $ 9,952 $ (848 ) $ 9,952 $ (848 ) Investments in an unrealized loss position $ 9,952 $ (848 ) $ 9,952 $ (848 ) The Company did not have any investments in an unrealized loss position for less than twelve months as of September 30, 2017 and December 31, 2016 . |
FAIR VALUE
FAIR VALUE | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | FAIR VALUE Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. There is a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. 4. FAIR VALUE — (CONTINUED) The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of September 30, 2017 (in thousands): Level 1 Level 2 Level 3 Total Assets: Money market funds $ 336,265 $ — $ — $ 336,265 Commercial paper 8,970 — — 8,970 Auction rate securities — — 9,952 9,952 Total assets measured at fair value $ 345,235 $ — $ 9,952 $ 355,187 The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2016 (in thousands): Level 1 Level 2 Level 3 Total Assets: Money market funds $ 175,344 $ — $ — $ 175,344 Commercial paper 6,383 — — 6,383 Auction rate securities — — 9,952 9,952 Total assets measured at fair value $ 181,727 $ — $ 9,952 $ 191,679 The Company’s Level 3 assets consist of ARS, whose underlying assets are primarily student loan securities supported by guarantees from the Federal Family Education Loan Program (“FFELP”) of the U.S. Department of Education. The following tables summarize changes in fair value of the Company’s Level 3 assets for the three and nine months ended September 30, 2017 and 2016 (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Balance at beginning of period $ 9,952 $ 11,036 $ 9,952 $ 15,507 Decrease in unrealized loss included in accumulated other comprehensive loss — 46 — 275 Settlements — — — (4,700 ) Balance at end of period $ 9,952 $ 11,082 $ 9,952 $ 11,082 The following table summarizes changes in fair value of the Company’s Level 3 assets from December 31, 2015 to September 30, 2017 (in thousands): Auction Rate Securities Balance at December 31, 2015 $ 15,507 Decrease in unrealized loss included in accumulated other comprehensive loss 395 Settlements (5,950 ) Balance at December 31, 2016 9,952 Decrease in unrealized loss included in accumulated other comprehensive loss — Settlements — Balance at September 30, 2017 $ 9,952 4. FAIR VALUE — (CONTINUED) ARS are variable rate debt instruments whose interest rates are reset approximately every 28 days . The majority of the underlying securities have contractual maturities greater than twenty years . The ARS are recorded at fair value. As of September 30, 2017 , the Company held ARS with $11 million par value, all of which failed to settle at auction. The majority of these investments are of high credit quality with AAA credit ratings and are primarily student loan securities supported by guarantees from the FFELP of the U.S. Department of Education. The Company may not be able to liquidate and fully recover the carrying value of the ARS in the near term. As a result, these securities are classified as long-term investments in the Company’s condensed consolidated balance sheet as of September 30, 2017 . See Note 3 for further discussion of the scheduled maturities of investments classified as available-for-sale. While the Company continues to earn interest on its ARS investments at the contractual rate, these investments are not currently actively trading and therefore do not currently have a readily determinable market value. The estimated fair value of the ARS no longer approximates par value. The Company used a discounted cash flow model to determine the estimated fair value of its investment in ARS as of September 30, 2017 . The assumptions used in preparing the discounted cash flow model include estimates for interest rates, credit spreads, timing and amount of contractual cash flows, liquidity risk premiums, expected holding periods and default risk. The Company updates the discounted cash flow model on a quarterly basis to reflect any changes in the assumptions used in the model and settlements of ARS investments that occurred during the period. The only significant unobservable input in the discounted cash flow model is the discount rate. The discount rate used represents the Company's estimate of the yield expected by a market participant from the ARS investments. The weighted average discount rate used in the discounted cash flow model as of September 30, 2017 and December 31, 2016 was approximately 5% . Selecting another discount rate within the range used in the discounted cash flow model would not result in a significant change to the fair value of the ARS. Based on this assessment of fair value, as of September 30, 2017 , the Company determined there was a decline in the fair value of its ARS investments of approximately $848,000 . The decline was deemed to be a temporary impairment and recorded as an unrealized loss in accumulated other comprehensive loss in stockholders’ equity. In addition, while a majority of the ARS are currently rated AAA, if the issuers are unable to successfully close future auctions and/or their credit ratings deteriorate, then the Company 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. |
GOODWILL
GOODWILL | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill [Abstract] | |
GOODWILL | GOODWILL The changes in the carrying amount of goodwill by operating segment consist of the following (in thousands): North America International Total Goodwill, December 31, 2015 $ 1,227,310 $ 25,635 $ 1,252,945 Acquisition 467 5,933 6,400 Effect of foreign currency translation — (4,479 ) (4,479 ) Goodwill, December 31, 2016 1,227,777 27,089 1,254,866 Acquisitions 25,717 — 25,717 Effect of foreign currency translation — 2,607 2,607 Goodwill, September 30, 2017 $ 1,253,494 $ 29,696 $ 1,283,190 5. GOODWILL — (CONTINUED) The Company recorded goodwill of approximately $467,000 during the year ended December 31, 2016 in connection with the acquisition of certain assets related to the business operations of Apartment Finder's independent distributors within various markets. The Company also recorded goodwill of approximately $6 million in connection with the May 3, 2016 acquisition of Thomas Daily GmbH (“Thomas Daily”), a commercial real estate news and information provider operating in Freiburg, Germany. The Company recorded goodwill of approximately $8 million in connection with the January 31, 2017 acquisition of Koa Lei, Inc. (doing business as Westside Rentals and now known as Westside Rentals, LLC), an online marketplace specializing in Southern California real estate rentals, and its affiliated entity Westside Credit Services, LLC, a provider of credit checks and tenant screening for landlords in the Southern California real estate rental market. The Company recorded goodwill of approximately $15 million in connection with the May 10, 2017 acquisition of certain assets and assumption of certain liabilities from Datasphere Technologies, Inc., in each case, related to the LandWatch.com ® business (collectively referred to as “LandWatch”), a leading listing site dedicated to land and rural properties. The Company recorded goodwill of approximately $ 2 million in connection with the July 18, 2017 acquisition of The Screening Pros, LLC, an online apartment leasing platform that includes tenant screening services, rental applications and payments processing and lease renewals. The purchase accounting for the acquisitions of Westside Rentals®, LandWatch®, and The Screening Pros TM is preliminary, subject to the completion of the accounting for certain tax related items and working capital adjustments. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
INTANGIBLE ASSETS | INTANGIBLE ASSETS Intangible assets consist of the following (in thousands, except amortization period data): September 30, December 31, Weighted- Average Amortization Period (in years) Capitalized product development cost $ 2,275 $ 2,275 4 Accumulated amortization (2,250 ) (2,217 ) Capitalized product development cost, net 25 58 Building photography 18,723 17,271 4 Accumulated amortization (17,777 ) (16,351 ) Building photography, net 946 920 Acquired database technology 83,424 78,151 5 Accumulated amortization (78,313 ) (72,691 ) Acquired database technology, net 5,111 5,460 Acquired customer base 225,776 220,749 10 Accumulated amortization (165,041 ) (150,445 ) Acquired customer base, net 60,735 70,304 Acquired trade names and other intangible assets 167,683 153,607 13 Accumulated amortization (43,322 ) (34,384 ) Acquired trade names and other intangible assets, net 124,361 119,223 Intangible assets, net $ 191,178 $ 195,965 |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2017 | |
Long-term Debt, Current and Noncurrent [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT On April 1, 2014 (the “Closing Date”), the Company entered into the 2014 Credit Agreement by and among the Company, as Borrower, CoStar Realty Information, Inc., as Co-Borrower, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. The 2014 Credit Agreement provides for a $400 million term loan facility and a $225 million revolving credit facility, each with a term of five years . The Company can make principal prepayments on the term loan facility and revolving credit facility at any time without penalty. In addition to regularly scheduled principal payments on the term loan made during the first quarter of 2017, the Company made a principal prepayment of $30 million . The carrying value of the term loan facility approximates fair value and can be estimated through Level 3 unobservable inputs using a valuation technique based on expected cash flows discounted using the current credit-adjusted risk-free rate, which approximates the rate of interest on the term loan facility at origination. The revolving credit facility includes a subfacility for swingline loans of up to $10 million , and up to $10 million of the revolving credit facility is available for the issuance of letters of credit. The Company has an irrevocable standby letter of credit outstanding totaling $0.2 million as of September 30, 2017 and December 31, 2016 , respectively, which was required to secure its San Francisco office lease. The letter of credit was established in 2014 related to the San Francisco office lease, and automatically renews through January 31, 2025. The term loan facility will amortize in quarterly installments in amounts resulting in an annual amortization of 5% during each of the first, second and third years, 10% during the fourth year and 15% during the fifth year after the Closing Date, with the remainder payable at final maturity. The loans under the 2014 Credit Agreement bear interest, at the Company's option, either (i) during any interest period selected by the Company, at the London interbank offered rate for deposits in U.S. dollars with a maturity comparable to such interest period, adjusted for statutory reserves (“LIBOR”), plus an initial spread of 2% per annum, subject to adjustment based on the First Lien Secured Leverage Ratio (as defined in the 2014 Credit Agreement) of the Company, or (ii) at the greatest of (x) the prime rate from time to time announced by JPMorgan Chase Bank, N.A., (y) the federal funds effective rate plus 0.5% and (z) LIBOR for a one-month interest period plus 1% , plus an initial spread of 1% per annum, subject to adjustment based on the First Lien Secured Leverage Ratio of the Company. If an event of default occurs under the 2014 Credit Agreement, the interest rate on overdue amounts will increase by 2% per annum. The obligations under the 2014 Credit Agreement are guaranteed by all material subsidiaries of the Company and are secured by a lien on substantially all of the assets of the Company and those of its material subsidiaries, in each case subject to certain exceptions, pursuant to security and guarantee documents entered into on the Closing Date. The 2014 Credit Agreement requires the Company to maintain certain leverage ratios from the Closing Date through the term of the 2014 Credit Agreement. Currently, the 2014 Credit Agreement requires the Company to maintain (i) a First Lien Secured Leverage Ratio (as defined in the 2014 Credit Agreement) not exceeding 3.5 to 1.0 during the three months ended September 30, 2017 , and each full fiscal quarter thereafter and (ii) after the incurrence of additional indebtedness under certain specified exceptions in the 2014 Credit Agreement, a Total Leverage Ratio (as defined in the 2014 Credit Agreement) not exceeding 4.5 to 1.0 during the three months ended September 30, 2017 , and each full fiscal quarter thereafter. The 2014 Credit Agreement also includes other covenants, including covenants that, subject to certain exceptions, restrict the ability of the Company and its subsidiaries to (i) incur additional indebtedness, (ii) create, incur, assume or permit to exist any liens, (iii) enter into mergers, consolidations or similar transactions, (iv) make investments and acquisitions, (v) make certain dispositions of assets, (vi) make dividends, distributions and prepayments of certain indebtedness, and (vii) enter into certain transactions with affiliates. The Company was in compliance with the covenants in the 2014 Credit Agreement as of September 30, 2017 . In connection with obtaining the term loan facility and revolving credit facility pursuant to the 2014 Credit Agreement, the Company incurred approximately $10 million in debt issuance costs as of April 1, 2014, which along with the unamortized debt issuance cost from the 2012 Credit Agreement, were capitalized and are amortized as interest expense over the term of the 2014 Credit Agreement using the effective interest method. As of September 30, 2017 and December 31, 2016 , no amounts were outstanding under the revolving credit facility. Total interest expense for the term loan facility and revolving credit facility was approximately $3 million and $2 million for the three months ended September 30, 2017 and 2016 , respectively. Total interest expense for the term loan facility and revolving credit facility was approximately $8 million and $7 million for the nine months ended September 30, 2017 and 2016 , respectively. Interest expense included amortized debt issuance costs of approximately $670,000 and $797,000 for the three months ended September 30, 2017 and 2016 , respectively. Interest expense included amortized debt issuance costs of approximately $2 million for each of the nine months ended September 30, 2017 and 2016 . Total interest paid for the term loan facility and revolving credit facility was approximately $2 million for each of the three months ended September 30, 2017 and 2016 . Total interest paid for the term loan 7. LONG-TERM DEBT — (CONTINUED) facility and revolving credit facility was approximately $5 million for each of the nine months ended September 30, 2017 and 2016 . The following table represents the Company's long-term debt (in thousands): September 30, December 31, Term loan facility $ 310,000 $ 345,000 Debt issuance costs, net (4,504 ) (6,661 ) Total debt 305,496 338,339 Current maturities of long-term debt (40,000 ) (35,000 ) Current debt issuance costs, net 3,090 3,134 Total long-term debt, less current portion $ 268,586 $ 306,473 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The income tax provision for the nine months ended September 30, 2017 and 2016 reflects an effective tax rate of approximately 33% and 39% , respectively. The decrease in the effective tax rate for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 was primarily due to the adoption of FASB issued authoritative guidance to simplify several aspects of the accounting for share-based payment transactions, which requires the recognition of excess tax benefits in income tax expense that were previously recognized as an increase to additional paid-in capital. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES The Company leases office facilities and office equipment under various non-cancelable operating leases. The leases contain various renewal options. On April 1, 2014, the Company entered into the 2014 Credit Agreement. The 2014 Credit Agreement provides for a $400 million term loan facility and a $225 million revolving credit facility, each with a term of five years . See Notes 7 and 11 for additional information regarding the term loan facility and revolving credit facility. On September 11, 2017, the Company and our wholly-owned subsidiary CoStar Realty Information, Inc., (“CRI”) entered into a Securities Purchase Agreement (the “ForRent Agreement”) with LTM Company Dominion, LLC (“LTM”), Dominion Enterprises (“Dominion”), and Landmark Media Enterprises, LLC (“Landmark” and, together with LTM and Dominion, the “Sellers”), pursuant to which CRI will acquire all of the issued and outstanding shares of common stock, no par value per share, of DE Holdings, Inc. (the “Acquisition”) for an aggregate purchase price of $385 million , payable $350 million in cash and $35 million in shares of Company common stock, subject to a customary working capital adjustment. The ForRent Agreement may be terminated by each of CRI and LTM under certain circumstances, including if the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Clearance”) has not been obtained prior to September 11, 2018 and further provides that, upon the termination of the ForRent Agreement under specified circumstances in which certain antitrust approvals are not obtained, CRI will be required to pay to LTM a cash termination fee of $40 million . Currently, and from time to time, the Company is involved in litigation incidental to the conduct of its business. In accordance with GAAP, the Company records a provision for a liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome may occur as a result of one or more of the Company’s current litigation matters, management has concluded that it is not probable that a loss has been incurred in connection with the Company’s current litigation. In addition, the Company is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in the Company’s current litigation and accordingly, the Company has not recognized any liability in the condensed consolidated financial statements for unfavorable results, if any. Legal defense costs are expensed as incurred. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING Segment Information The Company manages its business geographically in two operating segments, with the primary areas of measurement and decision-making being North America, which includes the U.S. and Canada, and International, which includes the U.K., Spain, Germany and France. The Company and its subsidiaries' subscription-based services consist primarily of information, analytics and online marketplace services offered over the internet to commercial real estate industry and related professionals. CoStar Suite ® is the Company’s primary service offering in the North America and International operating segments. Management relies on an internal management reporting process that provides revenue and operating segment net income before interest, income taxes, depreciation and amortization (“EBITDA”). Management believes that operating segment EBITDA is an appropriate measure for evaluating the operational performance of the Company’s operating segments. EBITDA is used by management to internally measure operating and management performance and to evaluate the performance of the business. However, this measure should be considered in addition to, not as a substitute for or superior to, income from operations or other measures of financial performance prepared in accordance with GAAP. 10. SEGMENT REPORTING — (CONTINUED) Segment Information — (Continued) Summarized information by operating segment consists of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Revenues North America $ 239,537 $ 205,637 $ 688,704 $ 598,757 International External customers 7,996 7,074 22,535 20,562 Intersegment revenues 5 3 27 24 Total International revenues 8,001 7,077 22,562 20,586 Intersegment eliminations (5 ) (3 ) (27 ) (24 ) Total revenues $ 247,533 $ 212,711 $ 711,239 $ 619,319 EBITDA North America $ 72,267 $ 56,305 $ 170,064 $ 148,296 International 365 1,371 1,271 2,761 Total EBITDA $ 72,632 $ 57,676 $ 171,335 $ 151,057 The reconciliation of net income to EBITDA consists of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Net income $ 34,177 $ 23,201 $ 78,491 $ 55,498 Amortization of acquired intangible assets in cost of revenues 4,200 5,736 15,089 17,119 Amortization of acquired intangible assets in operating expenses 4,298 5,550 13,642 17,602 Depreciation and other amortization 6,621 6,794 19,546 18,320 Interest and other income (555 ) (344 ) (1,589 ) (587 ) Interest and other expense 2,901 2,498 8,280 7,462 Income tax expense 20,990 14,241 37,876 35,643 EBITDA $ 72,632 $ 57,676 $ 171,335 $ 151,057 Intersegment revenues recorded were attributable to services performed for the Company’s wholly owned subsidiary, CoStar Portfolio Strategy, by Grecam S.A.S. (“Grecam”), a wholly owned subsidiary of CoStar Limited, the Company’s wholly owned U.K. holding company. Intersegment revenues are recorded at an amount the Company believes approximates fair value. North America EBITDA includes a corresponding cost for the services performed by Grecam for CoStar Portfolio Strategy. 10. SEGMENT REPORTING — (CONTINUED) Segment Information — (Continued) Summarized information by operating segment consists of the following (in thousands): September 30, December 31, Property and equipment, net North America $ 81,220 $ 84,727 International 3,106 2,841 Total property and equipment, net $ 84,326 $ 87,568 Goodwill North America $ 1,253,494 $ 1,227,777 International 29,696 27,089 Total goodwill $ 1,283,190 $ 1,254,866 Assets North America $ 2,331,852 $ 2,239,587 International 49,952 45,167 Total operating segment assets $ 2,381,804 $ 2,284,754 Reconciliation of operating segment assets to total assets Total operating segment assets $ 2,381,804 $ 2,284,754 Investment in subsidiaries (57,065 ) (57,065 ) Intersegment receivables (44,143 ) (42,626 ) Total assets $ 2,280,596 $ 2,185,063 Liabilities North America $ 507,088 $ 520,833 International 53,490 50,057 Total operating segment liabilities $ 560,578 $ 570,890 Reconciliation of operating segment liabilities to total liabilities Total operating segment liabilities $ 560,578 $ 570,890 Intersegment payables (42,409 ) (40,040 ) Total liabilities $ 518,169 $ 530,850 10. SEGMENT REPORTING — (CONTINUED) Revenues by Services The Company provides information, analytics and online marketplaces to the commercial real estate industry and related professionals. The revenues by type of service consist of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Information and analytics CoStar Suite (1) $ 117,314 $ 103,261 $ 341,087 $ 301,969 Information services (2) 18,716 19,486 55,364 58,336 Online marketplaces Multifamily (3) 72,257 57,654 204,324 164,752 Commercial property and land (4) 39,246 32,310 110,464 94,262 Total revenues $ 247,533 $ 212,711 $ 711,239 $ 619,319 (1) CoStar Suite is comprised of CoStar Property Professional; CoStar COMPS Professional; CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy. (2) Information services is comprised of LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam; Belbex; and Thomas Daily. (3) Multifamily is comprised of Apartments.com; ApartmentFinder.com; ApartmentHomeLiving.com; WestsideRentals.com; Apartamentos.com; and The Screening Pros. (4) Commercial property and land is comprised of LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica, LandAndFarm and LandWatch; and CoStar Private Sale Network. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On October 3, 2017, the Company completed a public equity offering of 3,317,308 shares of common stock for $260.00 per share. Net proceeds from the public equity offering were approximately $833.2 million , after deducting approximately $29.3 million of underwriting discounts and commissions. The Company intends to use the net proceeds from the sale of the securities to fund all or a portion of the costs of any strategic acquisitions it determines to pursue in the future, to finance the growth of its business and for working capital and other general corporate purposes. General corporate purposes may include additions to working capital, capital expenditures, repayment of debt, investments in the Company’s subsidiaries, possible acquisitions and the repurchase, redemption or retirement of securities, including the Company’s common stock. On October 19, 2017 , the Company entered into an amended and restated credit agreement (the ‘‘2017 Credit Agreement’’), which amended and restated in its entirety the existing 2014 Credit Agreement. The 2017 Credit Agreement provides for a $750 million revolving credit facility with a term of five years from a syndicate of financial institutions as lenders and issuing banks. The Company also repaid the remaining balance of $310 million and interest on its existing $400 million term loan under the 2014 Credit Agreement on October 19, 2017 from existing cash balances. The proceeds of the 2017 revolving credit facility may be used for working capital and other general corporate purposes of the Company and its subsidiaries. In connection with refinancing the revolving credit facility, the Company incurred approximately $3.4 million in debt issuance costs as of October 19, 2017. The Company is currently evaluating the transaction and will finalize the related accounting treatment in the fourth quarter. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Accounting policies are consistent for each operating segment. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, credit reserves, useful lives of property and equipment and intangible assets, recoverability of long-lived assets and intangible assets with definite lives, goodwill, income taxes, fair value of equity instruments, fair value of auction rate securities ("ARS"), accounting for business combinations and contingencies, among others. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ from these estimates. |
Revenue Recognition | Revenue Recognition The Company primarily derives revenues by (i) providing access to its proprietary database of commercial real estate information, and (ii) providing an online marketplace for professional property management companies, property owners, brokers, and landlords. The Company generally charges a fixed monthly amount for its subscription-based services. The Company and its subsidiaries' subscription-based services consist primarily of information, analytics and online marketplace services offered over the internet to commercial real estate industry and related professionals. Subscription contract rates are based on the number of sites, number of users, organization size, the client’s business focus, geography, the number and types of services to which a client subscribes, the number of properties a client advertises and the prominence and placement of a client's advertised properties in the search results, as applicable. A majority of the subscription-based service agreements have a term of one year and renew automatically. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Revenue Recognition — (Continued) Revenues are recognized when (1) there is persuasive evidence of an arrangement, (2) the fee is fixed and determinable, (3) services have been rendered and payment has been contractually earned and (4) collectability is reasonably assured. Revenues from subscription-based services are recognized on a straight-line basis over the term of the agreement. Deferred revenue results from advance cash receipts from customers or amounts billed in advance to customers from the sale of subscription services and is recognized over the term of the service agreement. The Company analyzes contracts with multiple elements under the accounting guidance for multiple-element arrangements. The Company's multiple-element arrangements include information, analytics and/or online marketplace services that are generally provided to the customer over the same term. When identifying multiple-element arrangements, the Company considers multiple purchases made by the same customer within a short time frame and assesses whether the purchases were negotiated together as one overall arrangement. If a multiple-element arrangement is identified, then the arrangement consideration is allocated among the separate units of accounting based on their relative selling prices, which are estimated considering factors such as historical pricing, pricing strategy, market conditions and other factors. The Company accounts for each deliverable in the transaction separately. If the deliverables cannot be separated into multiple units of accounting, then the arrangement consideration is combined and recognition of revenue is determined for the combined unit of accounting. Multiple-element transactions require judgment to determine the selling price or fair value of the different elements. These judgments impact the amount of revenue recognized over the term of the contract, as well as the period in which they are recognized. |
Concentration of Credit Risk and Financial Instruments | Concentration of Credit Risk and Financial Instruments The Company maintains reserves for estimated inherent credit losses, and such losses have been within management’s expectations. The large size and widespread nature of the Company’s customer base and the Company’s lack of dependence on any individual customer mitigates the risk of nonpayment of the Company’s accounts receivable. The carrying amount of the accounts receivable approximates the net realizable value. The carrying value of the accounts receivable, accounts payable, accrued expenses and long-term debt approximates fair value. The Company holds cash at major financial institutions in amounts that often exceed Federal Deposit Insurance Corporation insured limits. The Company manages its credit risk associated with cash concentrations by concentrating its cash deposits in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions holding such deposits. The carrying value of cash approximates fair value. Historically, the Company has not experienced any losses due to such cash concentrations. |
Advertising Costs | Advertising Costs The Company expenses advertising costs as incurred. Advertising costs include e-commerce, television, radio, print and other media advertising. |
Foreign Currency Translation | Foreign Currency Translation The Company’s functional currency of its foreign locations is the local currency. Assets and liabilities are translated into U.S. dollars using the exchange rates as of the balance sheet dates. Revenues, expenses, gains and losses are translated at the average exchange rates in effect during each period. Gains and losses resulting from translation are included in accumulated other comprehensive loss. Currency g ains and losses on the translation of intercompany loans made to foreign subsidiaries that are of a long-term investment nature are also included in accumulated other comprehensive loss. Net gains or losses resulting from foreign currency exchange transactions are included in the condensed consolidated statements of operations. |
Net Income Per Share | Net Income Per Share Net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis. The Company’s potentially dilutive securities include stock options and unvested restricted stock. Diluted net income per share considers the impact of potentially dilutive securities except in periods in which there is a net loss, as the inclusion of the potentially dilutive common shares would have an anti-dilutive effect. Stock options to purchase approximately 116,000 and 184,000 shares that were outstanding for the nine months ended September 30, 2017 and 2016 , respectively, were not included in the computation of diluted net income per share because the inclusion of the potentially dilutive common shares would have an anti-dilutive effect. Shares underlying restricted common stock awards that vest based on Company performance and service conditions that have not been achieved as of the end of the period are not included in the computation of basic or diluted earnings per share. |
Stock-Based Compensation | Stock-Based Compensation Equity instruments issued in exchange for services performed by officers, employees, directors and consultants of the Company are accounted for using a fair-value based method and the fair value of such equity instruments is recognized as expense in the condensed consolidated statements of operations. Stock-based compensation expense is measured at the grant date of the stock-based awards that vest over set time periods based on their fair values, and is recognized on a straight line basis as expense over the vesting periods of the awards, net of an estimated forfeiture rate. For equity instruments that vest based on performance, the Company assesses the probability of the achievement of the performance conditions at the end of each reporting period, or more frequently based upon the occurrence of events that may change the probability of whether the performance conditions would be met. If the Company's initial estimates of the achievement of the performance conditions change, the related stock-based compensation expense and timing of recognition may fluctuate from period to period based on those estimates. For equity instruments that vest based on a performance condition and a market condition, the Company estimates the fair value of each equity instrument granted on the date of grant using a Monte-Carlo simulation model. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards. Stock-based compensation expense is updated based on the expected achievement of the related performance conditions at the end of each reporting period. If the performance conditions are not met, no stock-based compensation expense will be recognized, and any previously recognized stock-based compensation expense will be reversed. |
Debt Issuance Costs | Debt Issuance Costs Costs incurred in connection with the issuance of long-term debt are capitalized and amortized as interest expense over the term of the related debt using the effective interest method. These amounts are reflected in the consolidated balance sheets as direct deductions from a combination of the current and long-term portions of debt. Upon a refinancing, previously capitalized debt issuance costs are expensed and included in loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. If the Company determines that there has not been a substantial modification of the related debt, any previously capitalized debt issuance costs are amortized as interest expense over the term of the new debt instrument using the effective interest method. |
Business Combinations | Business Combinations The Company allocates the purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer bases, acquired database technology, and acquired trade names from a market participant's perspective, useful lives and discount rates. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed. Any adjustments to provisional amounts that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements There have been no developments to the Recent Accounting Pronouncements discussion included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 , including the expected dates of adoption and estimated effects on the Company’s condensed consolidated financial statements, except for the following: In May 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) jointly issued a new revenue recognition standard that is designed to improve financial reporting by creating common recognition guidance for GAAP and International Financial Reporting Standards (“IFRS”). This guidance provides a robust framework for addressing revenue issues, improves the comparability of revenue recognition practices across industries, provides useful information to users of financial statements through improved disclosure requirements and simplifies the presentation of financial statements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goo ds or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. From March to December 2016, amendments to the new revenue recognition standard were issued to clarify numerous accounting topics, including, but not limited to (i) the implementation guidance on principal versus agent considerations, (ii) the identification of performance obligations, (iii) the licensing implementation guidance, (iv) the objective of the collectability criterion, (v) the application o f the variable consideration guidance and modified retrospective transition method, (vi) the way in which impairment testing is performed and (vii) the disclosure requirements for revenue recognized from performance obligations. This guidance permits the use of either a full retrospective method or a modified retrospective approach. The modified retrospective approach would be applied only to the most current period presented along with a cumulative-effect adjustment at the date of adoption. This guidance will be effective for annual reporting periods beginnin g after December 15, 2017, although companies may adopt the standard as early as annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the potential impact of adopting this guidance and, although it expects significant changes to its financial statement disclosures, due to the nature of its services and current revenue recognition practices, it does not believe the new revenue recognition standard will have a material impact on its revenue recognition policies. The Company expects adoption of the new standard will change its current treatment of commissions paid to employees, which the Company currently expenses as incurred. Under the new standard, the Company expects to capitalize commission costs as an incremental cost of obtaining a contract, which may have a material impact on the Company's financial statements. The Company is currently evaluating the period over which the capitalized commission costs will be amortized. Once the amortization period is determined, the Company expects to be able to assess the impact of adopting this guidance. The Company expects to adopt the new standard on January 1, 2018 using the modified retrospective transition method. In February 2016, the FASB issued authoritative guidance to increase transparency and comparability among organizations' accounting for leases. The guidance requires a company to recognize lease assets and lease liabilities on the balance sheet, as well as disclose key information about leasing arrangements. This guidance is effective on a modified retrospective basis for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early application is permitted. The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures, and expects that the adoption of this standard may result in a material increase in assets and liabilities on its consolidated balance sheets . 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Recent Accounting Pronouncements — (Continued) In March 2016, the FASB issued authoritative guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of share-based payment transactions on the statement of cash flows. The guidance requires a company to (i) recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the statement of operations using a prospective transition method, (ii) recognize excess tax benefits in the current period regardless of whether the benefit reduces taxes payable using a modified retrospective transition method, and (iii) classify all excess tax benefits as operating activities within the statement of cash flows using either a prospective transition method or a retrospective transition method. The guidance also allows a company to (i) elect whether to estimate the number of share-based awards expected to vest or account for forfeitures when they occur, and (ii) withhold up to the maximum statutory tax rate in the applicable jurisdiction for awards, both of which should be applied using a modified retrospective transition method. Finally, the guidance requires a company to classify the cash paid by an employer when directly withholding shares for tax withholding purposes as a financing activity within the statement of cash flows using a retrospective transition method. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The adoption of the new standard resulted in a $2 million cumulative-effect adjustment as of January 1, 2017 to record a deferred tax asset with the offset to retained earnings on the balance sheet, representing the amount of the Company's net operating loss carryforwards attributable to excess tax benefits that it was not able to record under the prior guidance. The Company elected to apply the presentation requirements for statement of cash flows related to excess tax benefits retrospectively to all periods presented, which resulted in an increase to both net cash provided by operating activities and net cash used in financing activities of approximately $5 million for the nine months ended September 30, 2016 . The presentation requirements related to employee taxes paid by withholding shares had no impact to any of the periods presented in the Company's condensed consolidated cash flows statements since such cash flows have historically been presented as a financing activity. In accordance with the new standard, the Company recognized an income tax benefit of $1 million , resulting in a corresponding increase in net income and an increase of $0.02 per basic and diluted share for the three months ended September 30, 2017 . In addition, the Company recognized an income tax benefit of $8 million , resulting in a corresponding increase in net income and an increase of $0.23 per basic and diluted share for the nine months ended September 30, 2017 . These income tax benefits related to the recognition of excess tax benefits from stock options that were exercised and restricted stock that vested during the period, that prior to the adoption of the new standard were recognized as an increase to additional paid-in capital. In June 2016, the FASB issued authoritative guidance designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective on a modified retrospective basis for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. C ompanies may adopt the standard as early as annual reporting periods beginning after December 15, 2018 . The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures. In August 2016, the FASB issued authoritative guidance designed to reduce the existing diversity in how certain cash receipts and cash payments are presented and classified in the consolidated statements of cash flows. This guidance is effective on a retrospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. This guidance is not expected to have a material impact on the Company's consolidated statements of cash flows and related disclosures. In January 2017, the FASB issued authoritative guidance designed to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance indicates that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted in certain situations. This guidance is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED) Recent Accounting Pronouncements — (Continued) In January 2017, the FASB issued authoritative guidance designed to simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The guidance indicates that an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early application is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted this guidance during the first quarter of 2017 and the early adoption did not have a material impact on the Company's consolidated financial statements and related disclosures. In May 2017, the FASB issued authoritative guidance designed to reduce the existing diversity and complexity in the accounting for changes to terms or conditions of a share-based payment award. This guidance clarifies that an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as an equity instrument or liability instrument. This guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. This guidance is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. |
INVESTMENTS (Policies)
INVESTMENTS (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | The Company determines the appropriate classification of debt and equity investments at the time of purchase and re-evaluates such designation as of each balance sheet date. The Company considers all of its investments to be available-for-sale. The Company's investments consist of long-term variable rate debt instruments with an auction reset feature, referred to as ARS. Investments are carried at fair value. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Currently, and from time to time, the Company is involved in litigation incidental to the conduct of its business. In accordance with GAAP, the Company records a provision for a liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Schedule of accumulated other comprehensive loss | The components of accumulated other comprehensive loss were as follows (in thousands): September 30, December 31, Foreign currency translation adjustment $ (8,759 ) $ (12,191 ) Accumulated net unrealized loss on investments, net of tax (848 ) (848 ) Total accumulated other comprehensive loss $ (9,607 ) $ (13,039 ) |
Calculation of basic and diluted net income (loss) per share | The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share data): Three Months Ended Nine Months Ended Numerator: 2017 2016 2017 2016 Net income $ 34,177 $ 23,201 $ 78,491 $ 55,498 Denominator: Denominator for basic net income per share — weighted-average outstanding shares 32,444 32,186 32,375 32,152 Effect of dilutive securities: Stock options and restricted stock 370 254 330 271 Denominator for diluted net income per share — weighted-average outstanding shares 32,814 32,440 32,705 32,423 Net income per share — basic $ 1.05 $ 0.72 $ 2.42 $ 1.73 Net income per share — diluted $ 1.04 $ 0.72 $ 2.40 $ 1.71 |
Schedule of anti-dilutive securities excluded from computation of earnings per share | The following table summarizes the shares underlying the performance-based restricted stock awards and service-based restricted stock units excluded from the basic and diluted calculation (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Performance-based restricted stock awards 85 72 85 72 Service-based restricted stock units 1 1 1 1 Total shares excluded from computation 86 73 86 73 |
Stock-based compensation expense for stock options and restricted stock | Stock-based compensation expense for stock options, restricted stock, restricted stock units issued under equity incentive plans and stock purchases under the ESPP included in the Company’s results of operations were as follows (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of revenues $ 1,201 $ 1,396 $ 3,711 $ 4,209 Selling and marketing 1,862 1,676 5,401 4,920 Software development 1,665 1,684 5,315 4,902 General and administrative 5,015 4,555 14,776 12,950 Total stock-based compensation $ 9,743 $ 9,311 $ 29,203 $ 26,981 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Scheduled maturities of investments classified as available-for-sale | Scheduled maturities of investments classified as available-for-sale as of September 30, 2017 are as follows (in thousands): Maturity Fair Value Due: July 1, 2017 — June 30, 2018 $ — July 1, 2018 — June 30, 2022 — July 1, 2022 — June 30, 2027 — After June 30, 2027 9,952 Available-for-sale investments $ 9,952 |
Schedule of available for sale securities reconciliation | As of September 30, 2017 , the amortized cost basis and fair value of investments classified as available-for-sale were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Auction rate securities $ 10,800 $ — $ (848 ) $ 9,952 Available-for-sale investments $ 10,800 $ — $ (848 ) $ 9,952 As of December 31, 2016 , the amortized cost basis and fair value of investments classified as available-for-sale were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Auction rate securities $ 10,800 $ — $ (848 ) $ 9,952 Available-for-sale investments $ 10,800 $ — $ (848 ) $ 9,952 |
Schedule of unrealized loss on investments for twelve months or longer | The components of the Company’s investments in an unrealized loss position for twelve months or longer were as follows (in thousands): September 30, December 31, Aggregate Fair Value Gross Unrealized Losses Aggregate Fair Value Gross Unrealized Losses Auction rate securities $ 9,952 $ (848 ) $ 9,952 $ (848 ) Investments in an unrealized loss position $ 9,952 $ (848 ) $ 9,952 $ (848 ) |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Summary of fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis | The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of September 30, 2017 (in thousands): Level 1 Level 2 Level 3 Total Assets: Money market funds $ 336,265 $ — $ — $ 336,265 Commercial paper 8,970 — — 8,970 Auction rate securities — — 9,952 9,952 Total assets measured at fair value $ 345,235 $ — $ 9,952 $ 355,187 The following table represents the Company's fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2016 (in thousands): Level 1 Level 2 Level 3 Total Assets: Money market funds $ 175,344 $ — $ — $ 175,344 Commercial paper 6,383 — — 6,383 Auction rate securities — — 9,952 9,952 Total assets measured at fair value $ 181,727 $ — $ 9,952 $ 191,679 |
Summary of changes in the fair value of the company's level 3 assets | The following tables summarize changes in fair value of the Company’s Level 3 assets for the three and nine months ended September 30, 2017 and 2016 (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Balance at beginning of period $ 9,952 $ 11,036 $ 9,952 $ 15,507 Decrease in unrealized loss included in accumulated other comprehensive loss — 46 — 275 Settlements — — — (4,700 ) Balance at end of period $ 9,952 $ 11,082 $ 9,952 $ 11,082 The following table summarizes changes in fair value of the Company’s Level 3 assets from December 31, 2015 to September 30, 2017 (in thousands): Auction Rate Securities Balance at December 31, 2015 $ 15,507 Decrease in unrealized loss included in accumulated other comprehensive loss 395 Settlements (5,950 ) Balance at December 31, 2016 9,952 Decrease in unrealized loss included in accumulated other comprehensive loss — Settlements — Balance at September 30, 2017 $ 9,952 |
GOODWILL (Tables)
GOODWILL (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill [Abstract] | |
Schedule of goodwill | The changes in the carrying amount of goodwill by operating segment consist of the following (in thousands): North America International Total Goodwill, December 31, 2015 $ 1,227,310 $ 25,635 $ 1,252,945 Acquisition 467 5,933 6,400 Effect of foreign currency translation — (4,479 ) (4,479 ) Goodwill, December 31, 2016 1,227,777 27,089 1,254,866 Acquisitions 25,717 — 25,717 Effect of foreign currency translation — 2,607 2,607 Goodwill, September 30, 2017 $ 1,253,494 $ 29,696 $ 1,283,190 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Schedule of acquired finite-lived intangible assets by major class | Intangible assets consist of the following (in thousands, except amortization period data): September 30, December 31, Weighted- Average Amortization Period (in years) Capitalized product development cost $ 2,275 $ 2,275 4 Accumulated amortization (2,250 ) (2,217 ) Capitalized product development cost, net 25 58 Building photography 18,723 17,271 4 Accumulated amortization (17,777 ) (16,351 ) Building photography, net 946 920 Acquired database technology 83,424 78,151 5 Accumulated amortization (78,313 ) (72,691 ) Acquired database technology, net 5,111 5,460 Acquired customer base 225,776 220,749 10 Accumulated amortization (165,041 ) (150,445 ) Acquired customer base, net 60,735 70,304 Acquired trade names and other intangible assets 167,683 153,607 13 Accumulated amortization (43,322 ) (34,384 ) Acquired trade names and other intangible assets, net 124,361 119,223 Intangible assets, net $ 191,178 $ 195,965 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Long-term Debt, Current and Noncurrent [Abstract] | |
Components of long-term debt | The following table represents the Company's long-term debt (in thousands): September 30, December 31, Term loan facility $ 310,000 $ 345,000 Debt issuance costs, net (4,504 ) (6,661 ) Total debt 305,496 338,339 Current maturities of long-term debt (40,000 ) (35,000 ) Current debt issuance costs, net 3,090 3,134 Total long-term debt, less current portion $ 268,586 $ 306,473 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Summarized information by operating segment | Summarized information by operating segment consists of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Revenues North America $ 239,537 $ 205,637 $ 688,704 $ 598,757 International External customers 7,996 7,074 22,535 20,562 Intersegment revenues 5 3 27 24 Total International revenues 8,001 7,077 22,562 20,586 Intersegment eliminations (5 ) (3 ) (27 ) (24 ) Total revenues $ 247,533 $ 212,711 $ 711,239 $ 619,319 EBITDA North America $ 72,267 $ 56,305 $ 170,064 $ 148,296 International 365 1,371 1,271 2,761 Total EBITDA $ 72,632 $ 57,676 $ 171,335 $ 151,057 |
Reconciliation of net income to EBITDA | The reconciliation of net income to EBITDA consists of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Net income $ 34,177 $ 23,201 $ 78,491 $ 55,498 Amortization of acquired intangible assets in cost of revenues 4,200 5,736 15,089 17,119 Amortization of acquired intangible assets in operating expenses 4,298 5,550 13,642 17,602 Depreciation and other amortization 6,621 6,794 19,546 18,320 Interest and other income (555 ) (344 ) (1,589 ) (587 ) Interest and other expense 2,901 2,498 8,280 7,462 Income tax expense 20,990 14,241 37,876 35,643 EBITDA $ 72,632 $ 57,676 $ 171,335 $ 151,057 |
Summarized information by operating segment, assets and liabilities | Summarized information by operating segment consists of the following (in thousands): September 30, December 31, Property and equipment, net North America $ 81,220 $ 84,727 International 3,106 2,841 Total property and equipment, net $ 84,326 $ 87,568 Goodwill North America $ 1,253,494 $ 1,227,777 International 29,696 27,089 Total goodwill $ 1,283,190 $ 1,254,866 Assets North America $ 2,331,852 $ 2,239,587 International 49,952 45,167 Total operating segment assets $ 2,381,804 $ 2,284,754 Reconciliation of operating segment assets to total assets Total operating segment assets $ 2,381,804 $ 2,284,754 Investment in subsidiaries (57,065 ) (57,065 ) Intersegment receivables (44,143 ) (42,626 ) Total assets $ 2,280,596 $ 2,185,063 Liabilities North America $ 507,088 $ 520,833 International 53,490 50,057 Total operating segment liabilities $ 560,578 $ 570,890 Reconciliation of operating segment liabilities to total liabilities Total operating segment liabilities $ 560,578 $ 570,890 Intersegment payables (42,409 ) (40,040 ) Total liabilities $ 518,169 $ 530,850 |
Revenues by services | The revenues by type of service consist of the following (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Information and analytics CoStar Suite (1) $ 117,314 $ 103,261 $ 341,087 $ 301,969 Information services (2) 18,716 19,486 55,364 58,336 Online marketplaces Multifamily (3) 72,257 57,654 204,324 164,752 Commercial property and land (4) 39,246 32,310 110,464 94,262 Total revenues $ 247,533 $ 212,711 $ 711,239 $ 619,319 (1) CoStar Suite is comprised of CoStar Property Professional; CoStar COMPS Professional; CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy. (2) Information services is comprised of LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam; Belbex; and Thomas Daily. (3) Multifamily is comprised of Apartments.com; ApartmentFinder.com; ApartmentHomeLiving.com; WestsideRentals.com; Apartamentos.com; and The Screening Pros. (4) Commercial property and land is comprised of LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica, LandAndFarm and LandWatch; and CoStar Private Sale Network. |
ORGANIZATION (Details)
ORGANIZATION (Details) | 9 Months Ended |
Sep. 30, 2017operating_segments | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of business segments (in segments) | 2 |
Term of subscription-based license agreements (in years) | 1 year |
SUMMARY OF SIGNIFICANT ACCOUN29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, REVENUE RECOGNITION AND ADVERTISING COSTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Accounting Policies [Abstract] | ||||
Term of subscription-based license agreements (in years) | 1 year | |||
Advertising expense | $ 25 | $ 27 | $ 87 | $ 95 |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, FOREIGN CURRENCY AND ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||||
Material gains or losses from foreign currency transactions | $ 0 | $ 0 | $ 0 | $ 0 | |
Accumulated Other Comprehensive Loss Net of Tax [Abstract] | |||||
Foreign currency translation adjustment | (8,759,000) | (8,759,000) | $ (12,191,000) | ||
Accumulated net unrealized loss on investments, net of tax | (848,000) | (848,000) | (848,000) | ||
Total accumulated other comprehensive loss | (9,607,000) | (9,607,000) | $ (13,039,000) | ||
Reclassification out of accumulated other comprehensive loss | $ 0 | $ 0 | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NET INCOME PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 86 | 73 | 86 | 73 |
Numerator: [Abstract] | ||||
Net income | $ 34,177 | $ 23,201 | $ 78,491 | $ 55,498 |
Denominator: [Abstract] | ||||
Denominator for basic net income per share - weighted-average outstanding shares (in shares) | 32,444 | 32,186 | 32,375 | 32,152 |
Effect of dilutive securities: [Abstract] | ||||
Stock options and restricted stock | 370 | 254 | 330 | 271 |
Denominator for diluted net income per share - weighted-average outstanding shares (in shares) | 32,814 | 32,440 | 32,705 | 32,423 |
Net income per share - basic (in dollars per share) | $ 1.05 | $ 0.72 | $ 2.42 | $ 1.73 |
Net income per share - diluted (in dollars per share) | $ 1.04 | $ 0.72 | $ 2.40 | $ 1.71 |
Employee Stock Option [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 0 | 89 | 116 | 184 |
Restricted Stock [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 85 | 72 | 85 | 72 |
Restricted Stock Units (RSUs) [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 1 | 1 | 1 | 1 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, STOCK BASED COMPENSATION EXPENSE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock-Based Compensation Expense [Abstract] | ||||
Compensation expense | $ 9,743 | $ 9,311 | $ 29,203 | $ 26,981 |
Exercise of stock options (in shares) | 3,532 | 3,367 | 81,815 | 24,078 |
Cost of Revenues [Member] | ||||
Stock-Based Compensation Expense [Abstract] | ||||
Compensation expense | $ 1,201 | $ 1,396 | $ 3,711 | $ 4,209 |
Selling and Marketing [Member] | ||||
Stock-Based Compensation Expense [Abstract] | ||||
Compensation expense | 1,862 | 1,676 | 5,401 | 4,920 |
Software Development [Member] | ||||
Stock-Based Compensation Expense [Abstract] | ||||
Compensation expense | 1,665 | 1,684 | 5,315 | 4,902 |
General and Administrative [Member] | ||||
Stock-Based Compensation Expense [Abstract] | ||||
Compensation expense | $ 5,015 | $ 4,555 | $ 14,776 | $ 12,950 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, DEBT ISSUANCE COSTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Deferred Finance Costs, Own-share Lending Arrangement, Issuance Costs, Net [Abstract] | |||||
Capitalized debt issuance costs | $ 4,504 | $ 4,504 | $ 6,661 | ||
Amortization of debt issuance costs | $ 670 | $ 797 | $ 2,000 | $ 2,000 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIG ACCOUNTING POLICIES, RECENT ACCOUNTING PRONOUCEMENTS (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Jan. 01, 2017 | |
Adjustments for New Accounting Pronouncement [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative-effect of new accounting principle on retained earnings and deferred tax assets | $ 2 | |||
Increase in net cash provided by operating activities from excess tax benefit | $ 5 | |||
Increase in net cash used in financing activities from excess tax benefit | $ 5 | |||
Accounting Standards Update 2016-09 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Share-based payment tax benefit | $ 1 | $ 8 | ||
Share-based payment change effect on basic earnings per share | $ 0.02 | $ 0.23 | ||
Share-based payment change effect on diluted earnings per share | $ 0.23 |
INVESTMENTS, SCHEDULED MATURITI
INVESTMENTS, SCHEDULED MATURITIES AND REALIZED GAINS AND LOSSES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Debt Maturities Fair Value [Abstract] | |||||
July 1, 2017 — June 30, 2018 | $ 0 | $ 0 | |||
July 1, 2018 — June 30, 2022 | 0 | 0 | |||
July 1, 2022 — June 30, 2027 | 0 | 0 | |||
After June 30, 2027 | 9,952,000 | 9,952,000 | |||
Available-for-sale investments | 9,952,000 | 9,952,000 | $ 9,952,000 | ||
Available-for-sale securities, gross realized gains | 0 | $ 0 | 0 | $ 0 | |
Available-for-sale securities, gross realized losses | $ 0 | $ 0 | $ 0 | $ 0 |
INVESTMENTS, AVAILABLE-FOR-SALE
INVESTMENTS, AVAILABLE-FOR-SALE SECURITIES (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Available-for-sale Securities Reconciliation [Abstract] | ||
Amortized cost | $ 10,800,000 | $ 10,800,000 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (848,000) | (848,000) |
Fair value | 9,952,000 | 9,952,000 |
Available-For-Sale Securities, Unrealized Loss Positions [Abstract] | ||
Continuous unrealized loss position, 12 months or more, aggregated fair value | 9,952,000 | 9,952,000 |
Continuous unrealized loss position, 12 months or more, gross unrealized losses | (848,000) | (848,000) |
Continuous unrealized loss position, less than 12 months, accumulated loss | 0 | 0 |
Auction Rate Securities [Member] | ||
Available-for-sale Securities Reconciliation [Abstract] | ||
Amortized cost | 10,800,000 | 10,800,000 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (848,000) | (848,000) |
Fair value | 9,952,000 | 9,952,000 |
Available-For-Sale Securities, Unrealized Loss Positions [Abstract] | ||
Continuous unrealized loss position, 12 months or more, aggregated fair value | 9,952,000 | 9,952,000 |
Continuous unrealized loss position, 12 months or more, gross unrealized losses | $ (848,000) | $ (848,000) |
FAIR VALUE (Details)
FAIR VALUE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Unobservable inputs assets (level 3) [Roll forward] | |||||
Beginning balance | $ 9,952 | $ 11,036 | $ 9,952 | $ 15,507 | $ 15,507 |
Change in unrealized gain (loss) included in accumulated other comprehensive loss | 0 | 46 | 0 | 275 | |
Settlements | 0 | 0 | 0 | (4,700) | |
Ending balance | 9,952 | $ 11,082 | 9,952 | 11,082 | 9,952 |
Temporary impairment of the auction rates security investments, net of unrealized gain | (848) | (848) | (848) | ||
Fair Value, Measurements, Recurring [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 355,187 | 355,187 | 191,679 | ||
Fair Value, Measurements, Recurring [Member] | Money Market Funds [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 336,265 | 336,265 | 175,344 | ||
Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 8,970 | 8,970 | 6,383 | ||
Fair Value, Measurements, Recurring [Member] | Auction Rate Securities [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 9,952 | 9,952 | 9,952 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 345,235 | 345,235 | 181,727 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 336,265 | 336,265 | 175,344 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Paper [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 8,970 | 8,970 | 6,383 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Auction Rate Securities [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Money Market Funds [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Paper [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Auction Rate Securities [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 9,952 | 9,952 | 9,952 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Money Market Funds [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Paper [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Auction Rate Securities [Member] | |||||
Assets: | |||||
Total assets measured at fair value | 9,952 | 9,952 | 9,952 | ||
Auction Rate Securities [Member] | |||||
Unobservable inputs assets (level 3) [Roll forward] | |||||
Beginning balance | 9,952 | $ 15,507 | 15,507 | ||
Change in unrealized gain (loss) included in accumulated other comprehensive loss | 0 | 395 | |||
Settlements | 0 | (5,950) | |||
Ending balance | 9,952 | $ 9,952 | $ 9,952 | ||
Auction rate securities variable rate debt instruments interest rate reset period | 28 days | ||||
The minimum contractual maturities on underlying securities involved in auction rate securities | 20 years | ||||
Par value of company held auction rate securities | 11,000 | $ 11,000 | |||
Discount rate (in percent) | 5.00% | 5.00% | |||
Temporary impairment of the auction rates security investments, net of unrealized gain | $ (848) | $ (848) |
GOODWILL (Details)
GOODWILL (Details) - USD ($) $ in Thousands | May 10, 2017 | Jan. 31, 2017 | May 03, 2016 | Sep. 30, 2017 | Dec. 31, 2016 |
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | $ 1,254,866 | $ 1,252,945 | |||
Goodwill acquired | 25,717 | 6,400 | |||
Effect of foreign currency translation | 2,607 | (4,479) | |||
Goodwill, ending balance | 1,283,190 | 1,254,866 | |||
Independent Distributor Buyout [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill acquired | 467 | ||||
Thomas Daily [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill acquired | $ 6,000 | ||||
Westside Rentals [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill acquired | $ 8,000 | ||||
LandWatch [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill acquired | $ 15,000 | ||||
North America [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | 1,227,777 | 1,227,310 | |||
Goodwill acquired | 25,717 | 467 | |||
Effect of foreign currency translation | 0 | 0 | |||
Goodwill, ending balance | 1,253,494 | 1,227,777 | |||
International [Member] | |||||
Goodwill [Roll Forward] | |||||
Goodwill, beginning balance | 27,089 | 25,635 | |||
Goodwill acquired | 0 | 5,933 | |||
Effect of foreign currency translation | 2,607 | (4,479) | |||
Goodwill, ending balance | $ 29,696 | $ 27,089 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | $ 191,178 | $ 195,965 |
Capitalized Product Development Costs [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross | 2,275 | 2,275 |
Finite-lived intangible assets, accumulated amortization | (2,250) | (2,217) |
Finite-lived intangible assets, net | $ 25 | 58 |
Weighted-average amortization period (in years} | 4 years | |
Building Photography [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross | $ 18,723 | 17,271 |
Finite-lived intangible assets, accumulated amortization | (17,777) | (16,351) |
Finite-lived intangible assets, net | $ 946 | 920 |
Weighted-average amortization period (in years} | 4 years | |
Developed Technology Rights [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross | $ 83,424 | 78,151 |
Finite-lived intangible assets, accumulated amortization | (78,313) | (72,691) |
Finite-lived intangible assets, net | $ 5,111 | 5,460 |
Weighted-average amortization period (in years} | 5 years | |
Acquired Customer Base [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross | $ 225,776 | 220,749 |
Finite-lived intangible assets, accumulated amortization | (165,041) | (150,445) |
Finite-lived intangible assets, net | $ 60,735 | 70,304 |
Weighted-average amortization period (in years} | 10 years | |
Trade Names and Other Intangible Assets [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, gross | $ 167,683 | 153,607 |
Finite-lived intangible assets, accumulated amortization | (43,322) | (34,384) |
Finite-lived intangible assets, net | $ 124,361 | $ 119,223 |
Weighted-average amortization period (in years} | 13 years |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) - USD ($) | Apr. 02, 2014 | Mar. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Apr. 01, 2014 |
Debt Instrument [Line Items] | |||||
Prepayment on term loan | $ 30,000,000 | ||||
Debt outstanding | $ 305,496,000 | $ 338,339,000 | |||
LIBOR maturity period (in months) | 1 month | ||||
Default interest rate per annum on overdue amounts (in percent) | 2.00% | ||||
Credit facility, collateral | The obligations under the 2014 Credit Agreement are guaranteed by all material subsidiaries of the Company and are secured by a lien on substantially all of the assets of the Company and those of its material subsidiaries, in each case subject to certain exceptions, pursuant to security and guarantee documents entered into on the Closing Date. | ||||
Capitalized debt issuance costs | $ 10,000,000 | ||||
Letter of Credit [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt outstanding | $ 200,000 | $ 200,000 | |||
CoStar Group [Member] | Term Loan [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument borrowing capacity | 400,000,000 | ||||
Term of loan (in years) | 5 years | ||||
CoStar Group [Member] | Revolving Credit Facility [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument borrowing capacity | 225,000,000 | ||||
Term of loan (in years) | 5 years | ||||
CoStar Group [Member] | Swingline Loan [Member] | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 10,000,000 | ||||
CoStar Group [Member] | Letter of Credit [Member] | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 10,000,000 | ||||
CoStar Group [Member] | Notes Payable to Banks [Member] | |||||
Debt Instrument [Line Items] | |||||
Annual amortization, first year after closing (in percent) | 5.00% | ||||
Annual amortization, second year after closing (in percent) | 5.00% | ||||
Annual amortization, third year after closing (in percent) | 5.00% | ||||
Annual amortization, fourth year after closing (in percent) | 10.00% | ||||
Annual amortization, fifth year after closing (in percent) | 15.00% | ||||
Federal Funds Rate [Member] | |||||
Debt Instrument [Line Items] | |||||
Basis spread on federal funds rate (in percent) | 0.50% | ||||
LIBOR [Member] | |||||
Debt Instrument [Line Items] | |||||
Basis spread on federal funds rate (in percent) | 2.00% | ||||
Debt instrument, basis spread on variable rate, one month interest period (in percent) | 1.00% | ||||
Debt instrument, basis spread on variable rate, per annum (in percent) | 1.00% | ||||
Term Loan [Member] | 2014 Credit Agreement [Member] | CoStar Group [Member] | Line of Credit [Member] | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 400,000,000 |
LONG-TERM DEBT, COVENANT CALCUL
LONG-TERM DEBT, COVENANT CALCULATIONS (Details) | Apr. 01, 2014 |
Debt Disclosure [Abstract] | |
Maximum first lien secured leverage ratio after eight fiscal quarters after closing date (in percent) | 350.00% |
Maximum total leverage ratio after eight fiscal quarters after closing date (in percent) | 450.00% |
LONG-TERM DEBT, INTEREST EXPENS
LONG-TERM DEBT, INTEREST EXPENSE AND AMORTIZATION OF DEBT ISSUANCE COSTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Debt Instrument [Line Items] | |||||
Interest expense, debt | $ 3,000,000 | $ 2,000,000 | $ 8,000,000 | $ 7,000,000 | |
Amortization of debt issuance costs | 670,000 | 797,000 | 2,000,000 | 2,000,000 | |
Interest paid | 2,000,000 | $ 2,000,000 | 5,000,000 | $ 5,000,000 | |
Revolving Credit Facility [Member] | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, amount outstanding | $ 0 | $ 0 | $ 0 |
LONG-TERM DEBT, COMPONENTS OF L
LONG-TERM DEBT, COMPONENTS OF LONG-TERM DEBT (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Term loan facility | $ 310,000 | $ 345,000 |
Debt issuance costs, net | (4,504) | (6,661) |
Total debt | 305,496 | 338,339 |
Current maturities of long-term debt | (40,000) | (35,000) |
Current debt issuance costs, net | 3,090 | 3,134 |
Total long-term debt, less current portion | $ 268,586 | $ 306,473 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate (in percent) | 33.00% | 39.00% |
COMMITMENTS AND CONTINGENCIES45
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | Sep. 11, 2017 | Apr. 02, 2014 | Apr. 01, 2014 |
Term Loan [Member] | CoStar Group [Member] | |||
Business Acquisition [Line Items] | |||
Debt instrument borrowing capacity | $ 400,000,000 | ||
Term of loan (in years) | 5 years | ||
Revolving Credit Facility [Member] | CoStar Group [Member] | |||
Business Acquisition [Line Items] | |||
Debt instrument borrowing capacity | $ 225,000,000 | ||
Term of loan (in years) | 5 years | ||
Common Stock [Member] | Securities Purchase Agreement, DE Holdings, Inc. [Member] | |||
Business Acquisition [Line Items] | |||
Aggregate purchase price | $ 385,000,000 | ||
Cash payment | 350,000,000 | ||
Purchase price, shares issued | 35,000,000 | ||
Early termination fee | $ 40,000,000 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)operating_segments | Sep. 30, 2016USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of business segments (in segments) | operating_segments | 2 | |||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | $ 247,533 | $ 212,711 | $ 711,239 | $ 619,319 |
Reconciliation of EBITDA to net income (loss) [Abstract] | ||||
Net income | 34,177 | 23,201 | 78,491 | 55,498 |
Amortization of acquired intangible assets in cost of revenues | 4,200 | 5,736 | 15,089 | 17,119 |
Amortization of acquired intangible assets in operating expenses | 4,298 | 5,550 | 13,642 | 17,602 |
Depreciation and other amortization | 6,621 | 6,794 | 19,546 | 18,320 |
Interest and other income | (555) | (344) | (1,589) | (587) |
Interest and other expense | 2,901 | 2,498 | 8,280 | 7,462 |
Income tax expense | 20,990 | 14,241 | 37,876 | 35,643 |
EBITDA | 72,632 | 57,676 | 171,335 | 151,057 |
Intersegment Revenue [Member] | ||||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | 5 | 3 | 27 | 24 |
Operating Segments [Member] | North America [Member] | ||||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | 239,537 | 205,637 | 688,704 | 598,757 |
Reconciliation of EBITDA to net income (loss) [Abstract] | ||||
EBITDA | 72,267 | 56,305 | 170,064 | 148,296 |
Operating Segments [Member] | International [Member] | ||||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | 8,001 | 7,077 | 22,562 | 20,586 |
Reconciliation of EBITDA to net income (loss) [Abstract] | ||||
EBITDA | 365 | 1,371 | 1,271 | 2,761 |
Operating Segments [Member] | International [Member] | External Customers [Member] | ||||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | 7,996 | 7,074 | 22,535 | 20,562 |
Intersegment Eliminations [Member] | ||||
Segment Reporting Information, Revenue [Abstract] | ||||
Revenues | $ (5) | $ (3) | $ (27) | $ (24) |
SEGMENT REPORTING, ASSETS AND L
SEGMENT REPORTING, ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Segment Reporting Information [Line Items] | |||
Property and equipment, net | $ 84,326 | $ 87,568 | |
Goodwill | 1,283,190 | 1,254,866 | $ 1,252,945 |
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | 2,280,596 | 2,185,063 | |
Reconciliation of operating segment liabilities to total liabilities [Abstract] | |||
Total liabilities | 518,169 | 530,850 | |
North America [Member] | |||
Segment Reporting Information [Line Items] | |||
Goodwill | 1,253,494 | 1,227,777 | 1,227,310 |
International [Member] | |||
Segment Reporting Information [Line Items] | |||
Goodwill | 29,696 | 27,089 | $ 25,635 |
Operating Segments [Member] | |||
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | 2,381,804 | 2,284,754 | |
Reconciliation of operating segment liabilities to total liabilities [Abstract] | |||
Total liabilities | 560,578 | 570,890 | |
Operating Segments [Member] | North America [Member] | |||
Segment Reporting Information [Line Items] | |||
Property and equipment, net | 81,220 | 84,727 | |
Goodwill | 1,253,494 | 1,227,777 | |
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | 2,331,852 | 2,239,587 | |
Reconciliation of operating segment liabilities to total liabilities [Abstract] | |||
Total liabilities | 507,088 | 520,833 | |
Operating Segments [Member] | International [Member] | |||
Segment Reporting Information [Line Items] | |||
Property and equipment, net | 3,106 | 2,841 | |
Goodwill | 29,696 | 27,089 | |
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | 49,952 | 45,167 | |
Reconciliation of operating segment liabilities to total liabilities [Abstract] | |||
Total liabilities | 53,490 | 50,057 | |
Consolidation, Eliminations [Member] | |||
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | (57,065) | (57,065) | |
Intersegment Eliminations [Member] | |||
Reconciliation of operating segment assets to total assets [Abstract] | |||
Total assets | (44,143) | (42,626) | |
Reconciliation of operating segment liabilities to total liabilities [Abstract] | |||
Total liabilities | $ (42,409) | $ (40,040) |
SEGMENT REPORTING, REVENUES BY
SEGMENT REPORTING, REVENUES BY SERVICES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Revenue from External Customer [Line Items] | |||||
Revenues | $ 247,533 | $ 212,711 | $ 711,239 | $ 619,319 | |
CoStar Suite [Member] | |||||
Revenue from External Customer [Line Items] | |||||
Revenues | [1] | 117,314 | 103,261 | 341,087 | 301,969 |
Information services [Member] | |||||
Revenue from External Customer [Line Items] | |||||
Revenues | [2] | 18,716 | 19,486 | 55,364 | 58,336 |
Multifamily [Member] | |||||
Revenue from External Customer [Line Items] | |||||
Revenues | [3] | 72,257 | 57,654 | 204,324 | 164,752 |
Commercial property and land [Member] | |||||
Revenue from External Customer [Line Items] | |||||
Revenues | [4] | $ 39,246 | $ 32,310 | $ 110,464 | $ 94,262 |
[1] | CoStar Suite is comprised of CoStar Property Professional; CoStar COMPS Professional; CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy. | ||||
[2] | Information services is comprised of LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam; Belbex; and Thomas Daily. | ||||
[3] | Multifamily is comprised of Apartments.com; ApartmentFinder.com; ApartmentHomeLiving.com; WestsideRentals.com; Apartamentos.com; and The Screening Pros. | ||||
[4] | Commercial property and land is comprised of LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica, LandAndFarm and LandWatch; and CoStar Private Sale Network. |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Oct. 19, 2017 | Oct. 03, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Apr. 01, 2014 |
Subsequent Event [Line Items] | |||||
Repayments of debt | $ 35,000,000 | $ 20,000,000 | |||
Public Equity Offering [Member] | Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Number of shares issued (in shares) | 3,317,308 | ||||
Price per share (in dollars per share) | $ 260 | ||||
Net proceeds from public equity offering | $ 833,200,000 | ||||
Payments of stock issuance costs | $ 29,300,000 | ||||
2014 Credit Agreement [Member] | Parent Company [Member] | Line of Credit [Member] | Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Repayments of debt | $ 310,000,000 | ||||
Revolving Credit Facility [Member] | 2017 Credit Agreement [Member] | Parent Company [Member] | Line of Credit [Member] | Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Maximum borrowing capacity | $ 750,000,000 | ||||
Term of loan (in years) | 5 years | ||||
Debt issuance costs | $ 3,400,000 | ||||
Term Loan [Member] | 2014 Credit Agreement [Member] | Parent Company [Member] | Line of Credit [Member] | |||||
Subsequent Event [Line Items] | |||||
Maximum borrowing capacity | $ 400,000,000 |