COSTAR GROUP, INC.

CoStar Group is a leading provider of online real estate marketplaces, information, analytics, and 3D digital twin technology in the property markets, based on the numbers of unique visitors and site visits per month. The company operates in the commercial and residential real estate information and online marketplace industry, which is described as highly competitive, dynamic, and constantly evolving as a result of technological advancements, customer preferences, and new products and offerings. The company has spent more than 35 years building and acquiring databases of real estate information, which includes information on homes, schools, communities, commercial properties, leasing, sales, comparable sales, tenants, and demand statistics, as well as digital images, drone videos, and 3D tours, plot maps, and floor plans.

The company competes with a variety of companies that provide online real estate-focused marketplace and internet listing services, publish and distribute information, benchmarks, and analytics, and provide marketing, real estate portfolio and lease management, and administrative software solutions. Many competitors, especially in the Residential Real Estate segment, are incumbent players that may have greater name recognition, resources, and increased adoption of AI services. CoStar Group believes it primarily competes on the basis of quality and depth of the underlying databases, quality and quantity of leads and leases delivered, ease of use, flexibility, and functionality of the software, intuitiveness and appeal of the user interface, timeliness of the data, breadth of geographic coverage and services offered, completeness and accuracy of content, client service and support, perception that the service offered is the industry standard, price, effectiveness of marketing and sales efforts, proprietary nature of methodologies, databases, and technical resources, vendor reputation, brand awareness and reputation, adaptive and advanced technology, capital resources, quality and size of real, authenticated and intent-driven unique platform visitors, and use of AI both in products and internal operations. The company states it provides more information, analytics, and marketing services than many of its competitors, offers the most comprehensive commercial real estate database available, and has the largest commercial real estate research department in the industry.

The company generates revenue primarily through subscription-based license agreements that typically renew automatically, a majority of which have a term of at least one year. To encourage regular use of services, the company generally charges a fixed monthly subscription fee rather than fees based on actual platform usage or number of paid clicks. Revenue from subscription-based contracts was approximately 93% ¹ of total revenue for the year ended December 31, 2025. Transaction-based services primarily consist of providing premium listings for individual properties on marketplaces, providing data capture services to create digital twins, the sale of Matterport cameras and capture equipment, and auction fees from the Ten-X online auction platform for commercial real estate, which are generally calculated as a percentage of the final sales price for the commercial real estate property sold and recognized as revenue upon the successful closing of the sale of the auctioned property. Subscription customers generally pay contract fees on a monthly basis, but in some cases may pay on a quarterly or annual basis. The company's revenue streams are highly diversified, and it is not presently dependent upon any one customer or a small number of customers.

The Commercial Real Estate segment offers commercial real estate information and analytics, online marketplaces, and 3D digital twin technology. Its principal brands are CoStar, which offers subscription-based access to a platform of commercial real estate intelligence with features including Properties, Leasing, Sales, Tenants, Owners, Markets, STR Benchmarking, and Debt Solutions, as well as SaaS platforms under the CoStar Real Estate Manager and Visual Lease brands for lease administration, lease accounting, and transaction management. LoopNet is the flagship brand of the network of commercial property marketing sites, offering a variety of subscription-based ad packages and enhancements including LoopNet Silver, Gold, Platinum, and Diamond Ads. Other Commercial Real Estate offerings include Matterport's 3D digital twins, which allow users to capture and share spaces in immersive 3D and access AI powered property insights, sold on a subscription basis, along with capture services and 3D capture cameras; BizBuySell, a marketplace for operating businesses and franchises for sale; and Ten-X, a commercial real estate auction platform. Total Commercial Real Estate revenue was $1,787 million ² for the year ended December 31, 2025.

The Residential Real Estate segment hosts marketplaces which aggregate consumer demand for homes that can be rented or bought, and the company sells marketing and leads to agents, owners, landlords, and property management companies. The flagship brands in the U.S. are Apartments.com, Homes.com, and Land.com. Apartments.com is the flagship brand of the network of apartment marketing sites. Homes.com allows property owners and real estate agents to reach renters and buyers on a your-listing your lead basis, powered by Homes AI which draws from property data, Matterport 3D digital twin technology, images, proprietary school data, neighborhood insights, and market intelligence. Land.com is a premier marketplace to discover, buy, and sell rural real estate. Domain and OnTheMarket are the leading marketplaces in Australia and the U.K., respectively, allowing real estate agents to advertise their listings. Total Residential Real Estate revenue was $1,460 million ³ for the year ended December 31, 2025.

During the fiscal year, the company completed several significant acquisitions. On February 28, 2025, the company completed the Matterport Acquisition, acquiring Matterport, a leader in the digitization and datafication of the built world, for total purchase consideration of $1,927 million ⁴, consisting of $902 million ⁵ in cash, 11.7 million ⁶ CoStar Group Shares valued at $881 million ⁷, and $144 million ⁸ in fair value of rollover awards. On August 27, 2025, the company completed the Domain Acquisition, acquiring Domain, one of Australia's leading property marketplaces, for total purchase consideration of $1,612 million ⁹ in cash, plus the fair value of previously held equity interests of $300 million ¹⁰, for a total of $1,912 million ¹¹. In February 2025, the Board of Directors approved the Prior Stock Repurchase Program authorizing the repurchase of up to $500 million ¹² of CoStar Group Shares, which was completed in December 2025. In December 2025, the Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to $1.5 billion ¹³ of CoStar Group Shares. During the year ended December 31, 2025, the company repurchased 7.1 million ¹⁴ CoStar Group Shares for an aggregate cost of $500 million ¹⁵ under the Prior Stock Repurchase Program. The company also entered into deal-contingent foreign currency forward contracts with an aggregate notional amount of A$2.4 billion ¹⁶ ($1.5 billion ¹⁷) to manage the risk of appreciation of the Australian dollar-denominated purchase price related to the Domain Transaction, which were settled on August 22, 2025, resulting in a recognized loss of $10 million ¹⁸.

Total revenue for the fiscal year ended December 31, 2025 was $3,247 million ¹⁹, compared to $2,736 million ²⁰ in fiscal 2024, representing an increase of $511 million ²¹, or 19% ²². Net income was $7 million ²³, compared to $139 million ²⁴ in the prior year. Diluted earnings per share was $0.02 ²⁵ versus $0.34 ²⁶ in the prior year. Gross profit was $2,561 million ²⁷ with a gross margin of 79% ²⁸, compared to $2,178 million ²⁹ and 80% ³⁰ in the prior year. Income from operations was a loss of $72 million ³¹ compared to income of $5 million ³² in the prior year. Net cash provided by operating activities was $430 million ³³ compared to $393 million ³⁴ in the prior year.

The company expects Commercial Real Estate's revenue growth rate for the year ending December 31, 2026 to moderate compared to the revenue growth rate for the year ended December 31, 2025, due to the lack of benefit from the Matterport Acquisition realized in 2025. The company expects Residential Real Estate's revenue growth rate for the year ending December 31, 2026 to accelerate compared to the revenue growth rate for the year ended December 31, 2025, due to a full year's benefit of the Domain Acquisition completed in August 2025 and an increase in the number of Homes.com members.

A key growth vector is the integration of residential platforms, including deploying Homes.com in Australia and the U.K. through the integrations of the Domain and OnTheMarket businesses, leveraging rentals marketing and lead generation across platforms, in particular Apartments.com and Homes.com, and scaling Homes.com through new product releases including depth advertising and the new homes builder program. Another major growth vector is the international expansion of LoopNet and CoStar, with the company having launched LoopNet branded advertising products in Spain and France, continuing to expand its footprint of commercial listings in those markets, planning to continue integrating Domain and expecting to launch LoopNet into the Australian market, and expecting to launch CoStar in France and Australia.

The company plans to continue to invest in its business and services, which may place downward pressure on operating margins in the short term. The company expects to continue its software development efforts to improve existing services, introduce new services, integrate and cross-sell services, integrate recently completed acquisitions, and expand and develop supporting technologies for its research, sales, and marketing organizations. The company may reevaluate its priorities as economic conditions continue to evolve.

The company plans to continue to invest in its business and services, evaluate strategic growth opportunities, and pursue key priorities including launching additional AI-enabled features across its products, extending the capability of Homes AI across the company's portfolio of platforms including Apartments.com, CoStar, LoopNet, Land.com and BizBuySell.com. The company is using advanced technology, including AI, to improve data collection, data generation, and data quality, driving research efficiencies, improving data quality, and increasing the pace of product development. The company intends to continue to assess the need for additional investments in its business in order to develop and distribute new services and functionality within its current platform or expand the reach of, or otherwise improve, its current service offerings.

The company expects to repurchase approximately $700 million ³⁵ of CoStar Group Shares during 2026, including a planned $500 million ³⁶ accelerated share repurchase of CoStar Group Shares to be executed in the first quarter of 2026, followed by approximately $200 million ³⁷ of additional open-market repurchases during the remainder of the year. As of December 31, 2025, $1.5 billion ³⁸ remained available for repurchases under the Stock Repurchase Program. The company does not anticipate paying any dividends on its common stock during the foreseeable future, but intends to invest its future earnings, if any, to finance its growth and share repurchases.

The company is expanding its Richmond, Virginia campus, which is expected to result in a material cash requirement in 2026. Construction is expected to be substantially completed in the first half of 2026. As of December 31, 2025, the company is obligated to spend an additional $155 million ³⁹ as further work is performed under construction contracts. The company intends to fund these expenditures with cash on hand. The company estimates the value of the allowance to use market-based income apportionment for income taxes for tax years 2023 to 2032 and partial reimbursements of property tax assessments related to the value of the campus expansion to be in the range of $275 million ⁴⁰ to $285 million ⁴¹.

Global economic uncertainties and downturns or a downturn or consolidation in the real estate industry may decrease customer demand for services and adversely affect the business. The real estate market may be adversely impacted by many different factors, including lower than expected job growth or job losses resulting in reduced real estate demand, reduced real estate demand due to continued remote work policies or a period of rising elevated interest rates, elevated inflation, slowing transaction volumes, and other macroeconomic trends that negatively impact investment returns. A depressed real estate market has a negative impact on the core customer base, which could decrease demand for online marketplaces, information, and analytics. Additionally, tariffs, trade barriers and restrictions, and other acts by governments to protect domestic markets or to retaliate against the trade tariffs and restrictions of other nations could negatively affect business operations.

The company faces risks related to its ability to successfully integrate acquired businesses, including OnTheMarket, Visual Lease, Matterport, and Domain, and may be unable to realize the anticipated benefits of these acquisitions. The company may be unable to realize the benefits of the Matterport Acquisition or the Domain Acquisition, and does not have experience in Matterport's business in 3D digital technology or in manufacturing cameras. The company also faces risks related to its significant indebtedness, with $1.0 billion ⁴² of Senior Notes outstanding and approximately $1.1 billion ⁴³ available to be drawn under the 2024 Credit Agreement as of December 31, 2025, which could decrease its flexibility and adversely affect its business, financial condition, and results of operations.

The company faces material risks from its inability to successfully integrate and realize the anticipated benefits of the Matterport Acquisition and Domain Acquisition, which had an aggregate purchase price of approximately $3.9 billion ⁴⁴ and resulted in approximately $6.7 billion ⁴⁵ of goodwill and intangibles as of December 31, 2025. The company does not have experience in Matterport's business in 3D digital technology or in manufacturing cameras, and Matterport relies on a limited number of suppliers for hardware components, including in some cases only a single supplier, with some suppliers located in China where access may be limited or impaired as a result of tariffs. The company's significant indebtedness, including $1.0 billion ⁴⁶ of Senior Notes outstanding and approximately $1.1 billion ⁴⁷ available under the 2024 Credit Agreement, could decrease its flexibility, and the 2024 Credit Agreement requires compliance with a total net leverage ratio of 4.50 to 1.00 ⁴⁸. The company is subject to a putative antitrust class action filed on February 20, 2024, alleging that through CoStar's STR hospitality industry benchmarking products, hotel defendants agreed to share competitively sensitive price and supply information, and the company has recorded a litigation accrual of $99 million ⁴⁹ as of December 31, 2025. The company faces risks related to its ability to maintain or increase internet traffic to its marketplaces, as its ability to generate revenue from its marketplace business depends in part on its ability to attract users to its websites, and internet search engines could revise algorithms or ranking methodologies in ways that would adversely affect search result rankings.

Management's message emphasizes the company's strategy to provide real estate industry professionals and consumers with critical knowledge to explore and complete transactions by offering the most comprehensive, timely, and standardized information on real estate, and the right tools to be able to effectively utilize that information. The key priorities for 2026 include integration of residential platforms, launching additional AI-enabled features across products, continuing to expand CoStar offerings with additional modules, international expansion of LoopNet and CoStar, and leveraging technology and AI capabilities in internal processes. Management expects Commercial Real Estate's revenue growth rate for the year ending December 31, 2026 to moderate compared to the revenue growth rate for the year ended December 31, 2025, due to the lack of benefit from the Matterport Acquisition realized in 2025, and expects Residential Real Estate's revenue growth rate for the year ending December 31, 2026 to accelerate compared to the revenue growth rate for the year ended December 31, 2025, due to a full year's benefit of the Domain Acquisition and an increase in the number of Homes.com members. The company currently expects to repurchase approximately $700 million ⁵⁰ of CoStar Group Shares during 2026, including a planned $500 million ⁵¹ accelerated share repurchase to be executed in the first quarter of 2026, followed by approximately $200 million ⁵² of additional open-market repurchases during the remainder of the year.