COSTAR GROUP, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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

All forward-looking statements are based on information available to us on the
date of this filing, and we assume no obligation to update such statements,
whether as a result of new information, future events or otherwise, except as
required by law. The following discussion should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form
10-K"), our subsequent Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K and other filings with the Securities and Exchange Commission and the
condensed consolidated financial statements and related notes included in this
Quarterly Report on Form 10-Q.

Insight

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

We manage our business geographically in two operating segments, with our
primary areas of measurement and decision-making being North America, which
includes the U.S. and Canada, and International, which primarily includes
Europe, Asia-Pacific and Latin America. Our most recent strategic acquisitions
include Homes.com; ComReal Info, the owner and operator of BureauxLocaux in
France and BIH the owner and operator of Business Immo, a leading commercial
real estate news service provider in France. See Notes 5 and 8 to the
accompanying Notes to the condensed consolidated financial statements included
in Part I of this Quarterly Report on Form 10-Q for further discussion of these
acquisitions.

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

Our primary brands include CoStar®, LoopNet®, Apartments.comTM, STR®, Ten-X®,
BizBuySell®, LandsofAmericaTM, HomeSnap®, and Homes.com®, which are accessible
via the Internet and through our mobile applications. Our principal service
offerings are discussed in more detail below.

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Impacts of the COVID-19 pandemic and current economic conditions

The COVID-19 pandemic has created significant economic volatility, uncertainty
and disruption around the world. Further, in response to the concerns over
inflation risk, the U.S. Federal Reserve has raised interest rates in the first,
second and third quarters of 2022 and signaled it expects additional rate
increases. While the impacts of the COVID-19 pandemic and current economic
conditions continue to evolve, they have not materially affected our
consolidated financial statements during 2021 or our condensed consolidated
financial statements for September 30, 2022. It is currently unclear how the
commercial real estate industry will ultimately be impacted by the COVID-19
pandemic as businesses formulate and execute plans for employees to return to
the office, implement hybrid work arrangements - allowing work from the office
or home, or switch to all work from home. These activities may result in reduced
demand for office space and rising interest rates may reduce demand for all
types of real estate. If the demand for office space or other real estate
decreases significantly, there could be a downturn in the commercial real estate
market that may materially adversely affect many of our clients. A depressed
commercial real estate market would have a negative impact on our core customer
base, which could impact our customers' ability to subscribe and pay for our
services and reduce demand for our services. Reduced demand and increased
cancellations could cause our revenues or our revenue growth rates to decline
and reduce our profitability.

Service offerings

Our portfolio of information, analytics and online marketplace services are
branded and marketed to our customers and marketplace end users. Our services
are primarily derived from a database of building-specific information and
offering customers specialized tools for accessing, analyzing and using our
information. Over time, we enhanced and expanded, and we expect to continue to
enhance and expand, our existing information, analytics and online marketplace
services and we have developed, and we expect to continue to develop, additional
services that use our comprehensive database to meet the needs of our existing
customers as well as potential new categories of customers.

Our main online information, analysis and marketplace services are described in the following paragraphs by type of service:

CoStar

CoStar® is our subscription-based integrated platform for commercial real estate
intelligence, which includes information about office, industrial, retail,
multifamily and student housing properties, properties for sale, comparable
sales, tenants, space available for lease, industry professionals and their
business relationships, industry news, and market and lease analytical
capabilities. CoStar's year-over-year revenue growth rate for the third quarter
of 2022 increased compared to the third quarter of 2021. The number of
subscribers has increased year-over-year and we have also realized the impact of
price increases and existing customers upgrading to our global service offering.
We began applying price increases in late 2021, which had been temporarily
suspended earlier in the COVID-19 pandemic. We expect CoStar's revenue growth
rate for 2022 to increase compared to the revenue growth rate for 2021 as a
result of expected increases in subscriber counts and price increases and
customer upgrades for renewing contracts.

Information services

We provide real estate and lease management technology solutions, including
lease administration, lease accounting and abstraction services, through our
CoStar Real Estate Manager® service offerings, as well as portfolio and debt
analysis, management and reporting capabilities through our CoStar Investment
Analysis and CoStar Risk Analytics® service offerings. We also provide
benchmarking reports for the hospitality industry. STARTM reports are provided
on a subscription basis and we also provide one-time or ad hoc reports or
analysis on a transaction basis. We provide information services
internationally, through our Grecam, Belbex and Thomas Daily businesses in
France, Spain and Germany, respectively. Information Services' year-over-year
revenue growth rate for the third quarter of 2022 increased compared to the
third quarter of 2021 as a result of increased revenue from CoStar Real Estate
Manager services. We expect the Information Services revenue growth rate for
2022 to be consistent with the revenue growth rate for 2021.

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Several families

Apartments.com™ is part of our network of apartment marketing sites, which
primarily includes ApartmentFinder®, ForRent.com®, ApartmentHomeLiving.com™,
Apartamentos.com™, Westside Rentals, and Off Campus Partners, LLC. Our network
of subscription-based advertising services provides property management
companies and landlords with a comprehensive advertising destination for their
available rental units and offers renters a platform for searching for available
rentals. Apartments.com also receives transaction-based revenue for tenant
processing fees. Multifamily's year-over-year revenue growth rate in the third
quarter of 2022 increased compared to the third quarter of 2021 as a result of
the new pricing structure implemented in late 2021. We expect Multifamily's
year-over-year revenue growth rate for 2022 to decrease compared to the revenue
growth rate for 2021 primarily due to pricing of contracts executed prior to new
pricing structure.

LoopNet

Our LoopNet.com network of commercial real estate websites offer
subscription-based online marketplace services that enable commercial property
owners, landlords and real estate agents working on their behalf to advertise
properties for sale or for lease and to submit detailed information about
property listings. Commercial real estate agents, buyers and tenants use the
LoopNet.com network of online marketplace services to search for available
property listings that meet their criteria. LoopNet's year-over-year revenue
growth rate for the third quarter of 2022 decreased compared to the third
quarter of 2021. We expect LoopNet's year-over-year revenue growth rate for 2022
to decrease compared to the revenue growth rate for 2021 as we continue to
develop a dedicated sales force for LoopNet.

Residential

On December 22, 2020, we acquired Homesnap, an online and mobile software
platform that provides subscription-based access to applications that manage
residential real estate agent workflow and marketing campaigns delivered on
third-party platforms. Homesnap also receives transaction-based revenue for
short-term advertising delivered on third-party platforms. On May 24, 2021, we
acquired Homes.com, a residential advertising and marketing services company
primarily operating through its portal, Homes.com. Residential's third quarter
2022 revenue decreased compared to the third quarter of 2021 due to the
discontinuation of certain Homes.com products and services that were
inconsistent with our long-term business strategy, partially offset by increased
sales of Homesnap products and services. We expect Residential's revenue for the
year ended December 31, 2022 to decline when compared to the year ended December
31, 2021 due to the same factors.

Other marketplaces

On June 24, 2020, we acquired Ten-X, an online auction platform for commercial
real estate. Our BizBuySell network, which includes BizQuest® and
FindaFranchise, and our Land.com network of sites, which includes
LandsofAmerica, LandAndFarm and LandWatch®, are also included in Other
Marketplaces revenue. The BizBuySell network provides online marketplaces for
businesses for-sale and our Land.com network of sites provides online
marketplaces for rural lands for-sale. Other Marketplaces' third quarter 2022
revenue growth rate decreased compared to the third quarter of 2021 due to the
impact of the Ten-X acquisition in 2020. Other Marketplaces' revenue growth rate
is expected to be lower in 2022 compared to 2021 given the impact of the Ten-X
acquisition in 2020.

Subscription-based Services

The majority of our revenue comes from service offerings, which are distributed to our customers under subscription contracts that generally renew automatically and have a term of at least one year. We recognize subscription revenue on a straight-line basis over the term of the contract.

For the three months ended September 30, 2022 and September 30, 2021, our
annualized net new bookings of subscription-based services on all contracts were
approximately $76 million and $47 million, respectively. Net new bookings is
calculated based on the annualized amount of change in our sales bookings
resulting from all new subscription-based contracts or upgrades on existing
subscription-based contracts, less downgrades and cancellations for the period
reported. Net new bookings is considered an operating metric that is an
indicator of future subscription revenue growth and is also used as a metric of
sales force productivity by us and investors. However, information regarding net
new bookings is not comparable to, nor should it be substituted for, an analysis
of our revenues over time. Revenue from our subscription-based contracts was
approximately 92% and 90% of total revenue for the three months ended September
30, 2022 and September 30, 2021, respectively.

For the last twelve months ended September 30, 2022 and 2021, our contract renewal rates for the CoStar Group subscription services for contracts lasting at least one year were approximately 91% and 92%, respectively, and

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therefore our cancellation rates for those services for the same periods were
approximately 9% and 8% respectively. Our contract renewal rate is a
quantitative measurement that is typically closely correlated with our revenue
results. As a result, we believe that the rate may be a reliable indicator of
short-term and long-term performance absent extraordinary circumstances. Our
trailing twelve-month contract renewal rate may decline as a result of negative
economic conditions, consolidations among our clients, reductions in customer
spending, or decreases in our customer base. Revenue from our subscription-based
contracts with a term of at least one year was approximately 79% and 77% of
total revenue for the trailing twelve months ended September 30, 2022 and
September 30, 2021, respectively.

Development, investments and expansion

We plan to continue to invest in our business and our services, evaluate
strategic growth opportunities, and pursue our key priorities as described
below, while we closely monitor the economic impacts of the COVID-19 pandemic
and manage our response. We are committed to supporting, improving and enhancing
our information, analytics and online marketplace solutions, including expanding
and improving our offerings for our client base and site users, including
property owners, property managers, buyers, commercial tenants, brokers, agents
and residential renters. We expect to continue our software development efforts
to improve existing services, introduce new services, integrate and cross-sell
services, integrate recently completed acquisitions and expand and develop
supporting technologies for our research, sales and marketing organizations. We
reevaluate our priorities on a regular basis and may reevaluate our priorities
as the COVID-19 pandemic continues to evolve.

Our top priorities for the remainder of 2022 currently include:

•Continuing to develop and invest in residential marketplaces. Our residential
team is creating new and improved tools to help consumers have a highly
contextual experience when searching for homes supported by high quality media
and in-depth attributes of homes and details of the surrounding neighborhoods,
parks and schools and to help consumers collaborate with their agent and
co-buyers. We are also creating new and improved tools to help agents promote
their residential listings, connect with buyers and sellers and streamline their
daily workflow. In the second quarter of 2022, we launched Citysnap™, a
consumer-facing search website and mobile app specifically for the five boroughs
of New York City in conjunction with the Real Estate Board of New York. To
support the expanded product offerings, we expect to increase our investment in
residential products in 2022 by approximately $125 million compared to 2021
levels. The most significant components of our investment are expected to be
content development, marketing costs and technology resources. The increase in
our investment in residential products in 2022 is expected to reduce our results
of operations and cash flow from operations for the year ended December 31,
2022. We plan to continue to monitor and evaluate these investments and adjust
our residential business strategy and level of investment as we determine
appropriate.

•Continuing to invest in our international business. We plan to enhance our
international commercial real estate marketplaces leveraging our LoopNet brand
in the United Kingdom, Spain, France and Germany and to expand our international
presence by hiring managers and teams of field researchers in certain European
markets.

•Continuing to expand our sales forces. We have implemented initiatives to
improve our retention and new employee training and have increased the size of
our sales recruiting team. These actions have resulted in a net increase in our
sales force headcount. We plan further increases in our sales force headcount
and further development of sales teams dedicated to our key products.

• Continue to invest in CoStar, including:

• Improve benchmarking capabilities. We integrated STR data into CoStar in 2021 and plan to apply STR’s benchmarking expertise within CoStar. We will continue to integrate STR products into our core platform.

•Continuing to develop and market a solution for lenders that leverages CoStar's
Risk Analytics capabilities to support lenders with risk management,
underwriting, surveillance and compliance reporting. We released our new Lender
product in the first quarter of 2022. This solution provides a focus on
portfolio risk analytics and surveillance to help lenders meet regulatory and
accounting requirements. Subsequent product releases are expected to focus on
loan origination and underwriting.

•Enhancing analytics capabilities. We are adding information on commercial
property investment funds and linking property data to to allow fund investors
to perform detailed analysis on their property portfolios directly in the CoStar
platform.
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We intend to continue to assess the need for additional investments in our
business in order to develop and distribute new services and functionality
within our current platform or expand the reach of, or otherwise improve, our
current service offerings. Any future product development or expansion of
services, combination and coordination of services or elimination of services or
corporate expansion, development or restructuring efforts could reduce our
profitability and increase our capital expenditures. Any new investments,
changes to our service offerings or other unforeseen events could cause us to
experience reduced revenues or generate losses and negative cash flow from
operations in the future. Any development efforts must comply with our credit
facility, which contains restrictive covenants that restrict our operations and
use of our cash flow and may prevent us from taking certain actions that we
believe could increase our profitability or otherwise enhance our business.

Non-GAAP Financial Measures

We prepare and publicly release quarterly unaudited financial statements
prepared in accordance with generally accepted accounting principles ("GAAP").
We also disclose and discuss certain non-GAAP financial measures in our public
releases, investor conference calls and filings with the Securities and Exchange
Commission. The non-GAAP financial measures that we may disclose include net
income before interest (expense) income, other (expense) income, loss on debt
extinguishment, income taxes, depreciation and amortization ("EBITDA"), adjusted
EBITDA, adjusted EBITDA margin, non-GAAP net income and non-GAAP net income per
diluted share. EBITDA is our net income before interest (expense) income, other
(expense) income, loss on debt extinguishment, income taxes, depreciation and
amortization. We typically disclose EBITDA on a consolidated and an operating
segment basis in our earnings releases, investor conference calls and filings
with the Securities and Exchange Commission. Adjusted EBITDA is different from
EBITDA because we further adjust EBITDA for stock-based compensation expense,
acquisition- and integration-related costs, restructuring costs and settlements
and impairments incurred outside our ordinary course of business. Adjusted
EBITDA margin represents adjusted EBITDA divided by revenues for the period.
Non-GAAP net income is determined by adjusting our net income for stock-based
compensation expense, acquisition- and integration-related costs, restructuring
costs, settlement and impairment costs incurred outside our ordinary course of
business and loss on debt extinguishment, as well as amortization of acquired
intangible assets and other related costs, and then subtracting an assumed
provision for income taxes. Non-GAAP net income per diluted share is a non-GAAP
financial measure that represents non-GAAP net income divided by the number of
diluted shares outstanding for the period used in the calculation of GAAP net
income per diluted share.

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

We view EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income and
non-GAAP net income per diluted share as operating performance measures. We
believe that the most directly comparable GAAP financial measure to EBITDA,
adjusted EBITDA and non-GAAP net income is net income. We believe the most
directly comparable GAAP financial measures to non-GAAP net income per diluted
share and adjusted EBITDA margin are net income per diluted share and net income
divided by revenue, respectively. In calculating EBITDA, adjusted EBITDA,
adjusted EBITDA margin, non-GAAP net income and non-GAAP net income per diluted
share, we exclude from net income the financial items that we believe should be
separately identified to provide additional analysis of the financial components
of the day-to-day operation of our business. We have outlined below the type and
scope of these exclusions and the material limitations on the use of these
non-GAAP financial measures as a result of these exclusions. EBITDA, adjusted
EBITDA, adjusted EBITDA margin, non-GAAP net income and non-GAAP net income per
diluted share are not measurements of financial performance under GAAP and
should not be considered as a measure of liquidity, as an alternative to net
income or as an indicator of any other measure of performance derived in
accordance with GAAP. Investors and potential investors in our securities should
not rely on EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income
and non-GAAP net income per diluted share as a substitute for any GAAP financial
measure, including net income and net income per diluted share. In addition, we
urge investors and potential investors in our securities to carefully review the
GAAP financial information included as part of our Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q that are filed with the Securities and
Exchange Commission, as well as our quarterly earnings releases, and compare the
GAAP financial information with our EBITDA, adjusted EBITDA, adjusted EBITDA
margin, non-GAAP net income and non-GAAP net income per diluted share.

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EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income and
non-GAAP net income per diluted share may be used by management to internally
measure our operating and management performance and may be used by investors as
supplemental financial measures to evaluate the performance of our business. We
believe that these non-GAAP measures, when viewed with our GAAP results and
accompanying reconciliations, provide additional information to investors that
is useful to understand the factors and trends affecting our business without
the impact of certain acquisition-related items. We have spent more than 30
years building our database of commercial real estate information and expanding
our markets and services partially through acquisitions of complementary
businesses. Due to these acquisitions, our net income has included significant
charges for amortization of acquired intangible assets, depreciation and other
amortization, acquisition- and integration-related costs, restructuring costs,
and loss on debt extinguishment. Adjusted EBITDA, adjusted EBITDA margin,
non-GAAP net income and non-GAAP net income per diluted share exclude these
charges and provide meaningful information about the operating performance of
our business, apart from charges for amortization of acquired intangible assets,
depreciation and other amortization, acquisition- and integration-related costs,
restructuring costs; settlement and impairment costs incurred outside our
ordinary course of business. We believe the disclosure of non-GAAP measures can
help investors meaningfully evaluate and compare our performance from quarter to
quarter and from year to year without the impact of these items. We also believe
the non-GAAP measures we disclose are measures of our ongoing operating
performance because the isolation of non-cash charges, such as amortization and
depreciation, and other items, such as interest (expense) income and other
(expense) income, income taxes, stock-based compensation expenses, acquisition-
and integration-related costs, restructuring costs, loss on debt extinguishment
and settlement and impairment costs incurred outside our ordinary course of
business, provides additional information about our cost structure, and, over
time, helps track our operating progress. In addition, investors, securities
analysts and others have regularly relied on EBITDA and may rely on adjusted
EBITDA, adjusted EBITDA margin, non-GAAP net income or non-GAAP net income per
diluted share to provide a financial measure by which to compare our operating
performance against that of other companies in our industry.

Below is a description of the financial items that have been excluded from net income to calculate EBITDA and the important limitations associated with the use of this non-GAAP financial measure in relation to net income:

•Amortization of acquired intangible assets in cost of revenues may be useful
for investors to consider because it represents the diminishing value of any
acquired trade names and other intangible assets and the use of our acquired
technology, which is one of the sources of information for our database of
commercial real estate information. We do not believe these charges necessarily
reflect the current and ongoing cash charges related to our operating cost
structure.

•Amortization of acquired intangible assets in operating expenses may be useful
for investors to consider because it represents the estimated attrition of our
acquired customer base. We do not believe these charges necessarily reflect the
current and ongoing cash charges related to our operating cost structure.

•Depreciation and other amortization may be useful for investors to consider
because they generally represent the wear and tear on our property and equipment
used in our operations. We do not believe these charges necessarily reflect the
current and ongoing cash charges related to our operating cost structure.

•The amount of interest (expense) income and other (expense) income we generate
and incur may be useful for investors to consider and may result in current cash
inflows and outflows. However, we do not consider the amount of interest
(expense) income and other (expense) income to be a representative component of
the day-to-day operating performance of our business.

•Income tax expense may be useful for investors to consider because it generally
represents the taxes which may be payable for the period and the change in
deferred income taxes during the period and may reduce the amount of funds
otherwise available for use in our business. However, we do not consider the
amount of income tax expense to be a representative component of the day-to-day
operating performance of our business.

•The amount of loss on our debt extinguishment may be useful for investors to
consider because it generally represents losses from the early extinguishment of
debt. However, we do not consider the amount of the loss on debt extinguishment
to be a representative component of the day-to-day operating performance of our
business.

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

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•Stock-based compensation expense may be useful for investors to consider
because it represents a portion of the compensation of our employees and
executives. Determining the fair value of the stock-based instruments involves a
high degree of judgment and estimation and the expenses recorded may bear little
resemblance to the actual value realized upon the future exercise or termination
of the related stock-based awards. Therefore, we believe it is useful to exclude
stock-based compensation in order to better understand the long-term performance
of our core business.

•The amount of acquisition- and integration-related costs incurred may be useful
for investors to consider because such costs generally represent professional
service fees and direct expenses related to acquisitions. Because we do not
acquire businesses on a predictable cycle, we do not consider the amount of
acquisition- and integration-related costs to be a representative component of
the day-to-day operating performance of our business.

•The amount of settlement and impairment costs incurred outside of our ordinary
course of business may be useful for investors to consider because they
generally represent gains or losses from the settlement of litigation matters or
impairments on acquired intangible assets. We do not believe these charges
necessarily reflect the current and ongoing cash charges related to our
operating cost structure.

•The amount of restructuring costs incurred may be useful for investors to
consider because they generally represent costs incurred in connection with a
change in a contract or a change in the makeup of our properties or personnel.
We do not consider the amount of restructuring related costs to be a
representative component of the day-to-day operating performance of our
business.

The financial items that have been excluded from our net income to calculate
non-GAAP net income and non-GAAP net income per diluted share are amortization
of acquired intangible assets and other related costs, stock-based compensation,
acquisition- and integration-related costs, restructuring and related costs and
settlement and impairment costs incurred outside our ordinary course of
business. These items are discussed above with respect to the calculation of
adjusted EBITDA together with the material limitations associated with using
this non-GAAP financial measure as compared to net income. In addition to these
exclusions from net income, we subtract an assumed provision for income taxes to
calculate non-GAAP net income. In 2022 and 2021, we assumed a 26% and 25% tax
rate, respectively, which approximated our historical long-term statutory
corporate tax rate, excluding the impact of discrete items.

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

The following table shows our net income reconciled to our EBITDA and our net
cash flows from operating, investing and financing activities for the indicated
periods (in thousands):
                                                    Three Months Ended                     Nine Months Ended
                                                       September 30,                         September 30,
                                                  2022               2021               2022               2021
Net income                                    $  72,290          $  64,304          $ 245,081          $  199,664
Amortization of acquired intangible assets in
cost of revenues                                  6,945              7,209             21,980              21,565
Amortization of acquired intangible assets in
operating expenses                               29,651             19,121             60,621              55,885
Depreciation and other amortization               7,224              6,610             21,199              22,138
Interest (income) expense, net                  (10,656)             7,943                461              23,698
Other income, net                                (1,389)            (1,546)            (3,596)             (2,343)
Income tax expense                               25,084             19,031             81,841              70,933
EBITDA                                        $ 129,149          $ 122,672          $ 427,587          $  391,540

Net cash flows provided by (used in)
Operating activities                          $  81,490          $  98,929          $ 293,589          $  319,218
Investing activities                          $ (18,779)         $ (12,715)         $ (76,486)         $ (297,505)
Financing activities                          $ 749,103          $   1,800          $ 734,533          $  (14,338)




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Comparison of the three months ended September 30, 2022 and three months ended
September 30, 2021

The following table provides a comparison of our selected consolidated results
of operations for the three months ended September 30, 2022 and September 30,
2021 (in thousands):

                                                                  Three Months Ended
                                                                     September 30,
                                                                                                     Increase           Increase (Decrease)
                                                                2022               2021           (Decrease) ($)                (%)
Revenues:
CoStar                                                      $ 212,690          $ 183,265          $     29,425                        16  %
Information Services                                           41,013             35,926                 5,087                        14
Multifamily                                                   189,536            171,125                18,411                        11
LoopNet                                                        58,901             52,527                 6,374                        12
Residential                                                    19,351             24,747                (5,396)                        (22)
Other Marketplaces                                             35,430             31,729                 3,701                        12
Total revenues                                                556,921            499,319                57,602                        12
Cost of revenues                                              108,364             92,597                15,767                        17
Gross profit                                                  448,557            406,722                41,835                        10
Operating expenses:
Selling and marketing (excluding customer base
amortization)                                                 185,395            180,055                 5,340                         3
Software development                                           56,912             53,143                 3,769                         7
General and administrative                                     91,270             64,671                26,599                        41
Customer base amortization                                     29,651             19,121                10,530                        55
Total operating expenses                                      363,228            316,990                46,238                        15
Income from operations                                         85,329             89,732                (4,403)                       (5)
Interest income (expense), net                                 10,656             (7,943)              (18,599)                 NM
Other income, net                                               1,389              1,546                  (157)                        (10)
Income before income taxes                                     97,374             83,335                14,039                        17
Income tax expense                                             25,084             19,031                 6,053                        32
Net income                                                  $  72,290          $  64,304          $      7,986                        12
__________________________
NM - Not meaningful



Revenues. Revenues increased to $557 million for the three months ended
September 30, 2022, from $499 million for the three months ended September 30,
2021. The $58 million increase was attributable to increases in revenues for
several of our service offerings. CoStar revenues increased $29 million, or 16%,
due to higher sales volume driven by an increase in subscribers, as well as, the
impact of annual price increases and customer upgrades on contract renewals.
Multifamily revenues increased $18 million, or 11%, due to increases in pricing
on renewals, partially offset by a less favorable mix of ad packages purchased.
LoopNet revenue increased $6 million or 12%, primarily as a result of an
increase in average prices, and to a lesser extent, due to the acquisition of
BureauxLocaux. Information Services revenues increased $5 million, or 14%,
primarily attributable to increased revenue for our CoStar Real Estate Manager
product and STR service offerings. Other Marketplaces revenues increased
$4 million, or 12%, driven by an increase of Land for Sale revenue and to a
lesser extent, an increase in revenue for BizBuySell, and Ten-X. Residential
revenues decreased $5 million, or 22%, due to the discontinuation of certain
Homes.com products and services that were inconsistent with our long-term
business strategy, partially offset by an increase in sales of Homesnap's
products and services.

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Gross Profit. Gross profit increased to $449 million for the three months ended
September 30, 2022, from $407 million for the three months ended September 30,
2021, and the gross profit percentage was consistent at 81% for both the three
months ended September 30, 2022 and 2021, The increase in gross profit was due
to higher revenues, partially offset by, an increase in cost of revenues of $16
million, or 17%. The increase in cost of revenues was primarily due to an
increase of $11 million in personnel costs, driven by a $5 million increase in
salaries attributable to an increase in headcount and a $3 million increase in
bonus and severance expenses. In addition, there was an increase of $4 million
in software and equipment, to support our researchers and investment and further
development of our residential marketplaces.

Selling and Marketing Expenses. Selling and marketing expenses increased to $185
million for the three months ended September 30, 2022, from $180 million for the
three months ended September 30, 2021. The $5 million increase was primarily
attributable to a $9 million increase in personnel costs driven by a $6 million
increase in salaries, primarily attributable to an increase in headcount, and an
increase in commissions of $2 million, as well as, a $2 million increase in
travel spend. These increases were partially offset by a $7 million decrease in
marketing costs, primarily attributable to an $18 million decrease in marketing
spend for products, excluding our residential marketplaces, mostly due to lower
agency fees for LoopNet and multifamily. The decrease in marketing costs was
partially offset by, an $11 million increase in marketing for our residential
marketplace products, lead by increases in spending on search engine marketing,
agency fees, digital marketing, and events spending.

Software Development Expenses. Software development expenses increased to $57
million for the three months ended September 30, 2022, from $53 million for the
three months ended September 30, 2021, and decreased as a percentage of revenues
to 10% for the three months ended September 30, 2022 from 11% from the three
months ended September 30, 2021. The $4 million increase was primarily due to an
increase of $3 million in personnel costs, driven by an increase in headcount to
support the development of our products, and to lesser extent, an increase
of $1 million in occupancy expense.

General and Administrative Expenses. General and administrative expenses
increased to $91 million for the three months ended September 30, 2022, from $65
million, for the three months ended September 30, 2021 and increased as a
percentage of revenues to 16% for the three months ended September 30, 2022 from
13% for the three months ended September 30, 2021. The increase of $27 million
was due to a $5 million increase in personnel costs, driven by a $3 million
increase in salaries, as well as, a $1 million increase in stock-based
compensation expense, and increases of $5 million in professional services fees,
$5 million in bad debt expense, a $4 million increase in travel and
entertainment and conference costs, and a $4 million fee to terminate a
contract.

Customer Base Amortization Expense. Customer base amortization expense increased
to $30 million for the three months ended September 30, 2022 from $19 million
for the three months ended September 30, 2021, and increased as a percentage of
revenues at 5% for the three months ended September 30, 2022 from 4% for the
three months ended September 30, 2021. The increase was primarily attributable
to an increase of $15 million in amortization expense driven by intangible
assets related to a Homesnap product for which we decided to eliminate usage
fees in the third quarter of 2022. This increase was offset by decreases in
amortization expense related to the customer base intangible assets acquired in
the acquisitions of ForRent, Ten-X, and STR, which have been amortizing on an
accelerated basis since their acquisitions.
Interest Income, net. Interest income, net was $11 million for the three months
ended September 30, 2022, as compared to interest expense, net of $8 million for
the three months ended September 30, 2021. This change was primarily due to an
increased rate of return on cash equivalents.

Other income, net. Other income, net, remained stable for the three months ended September 30, 2022 and September 30, 2021.

Income Tax Expense. Income tax expense increased to $25 million for the three
months ended September 30, 2022, from $19 million for the three months ended
September 30, 2021. The increase was mostly due to higher income before taxes
during the three months ended September 30, 2022.

Comparison of business segment results for the three months ended September 30, 2022
and three months ended September 30, 2021

We manage our business geographically in two operating segments, with our
primary areas of measurement and decision-making being North America, which
includes the U.S. and Canada, and International, which primarily includes
Europe, Asia-Pacific, and Latin America. Management relies on an internal
management reporting process that provides revenue and operating segment EBITDA,
which is our net income before interest (expense) income and other (expense)
income, loss on debt extinguishment, income taxes, depreciation and
amortization. Management believes that operating segment EBITDA is an
appropriate measure for evaluating the operational performance of our operating
segments. EBITDA is used by management to
                                       39
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internally measure our operating and management performance and to evaluate the
performance of our business. However, this measure should be considered in
addition to, not as a substitute for or superior to, income from operations or
other measures of financial performance prepared in accordance with GAAP. See
"Non-GAAP Financial Measures" for further information regarding our segment
operating results.

Segment Revenues. North America revenues increased to $538 million for the three
months ended September 30, 2022, from $483 million for the three months ended
September 30, 2021. The $55 million increase in North America revenues was
attributable to increases in revenues for several of our service offerings,
including an increase in CoStar revenues of $30 million due to higher sales
volume driven by an increase in subscribers, as well as, the impact of annual
price increases and customer upgrades on contract renewals. Multifamily revenues
increased $18 million, due to increases in pricing on renewals, partially offset
by a less favorable mix of ad packages purchased. LoopNet revenues increased $5
million as a result of price increases. Other Marketplaces revenues increased $4
million, driven by an increase of Land for Sale revenue and to a lesser extent,
an increase in revenue for BizBuySell, and Ten-X. Information Services revenues
increased $3 million due to increased revenue from our CoStar Real Estate
Manager product and STR service offerings. Residential revenues decreased $5
million due to the discontinuation of certain Homes.com products and services
that were inconsistent with our long-term business strategy, partially offset by
an increase in sales of Homesnap's products and services. International revenues
increased to $19 million for the three months ended September 30, 2022, from $16
million for the three months ended September 30, 2021. The increase in
International revenues was primarily driven by the acquisitions of BureauxLocaux
and Business Immo.

Segment EBITDA. North America EBITDA increased to $128 million for the three
months ended September 30, 2022, from $120 million for the three months ended
September 30, 2021. The increase in North America EBITDA was primarily due to an
increase in revenue, partially offset by, increases in general and
administrative, and personnel costs, partially offset by, a decrease in
marketing costs. International EBITDA for the three months ended September 30,
2022 decreased to $1 million from $3 million for the three months ended
September 30, 2021. The decrease was due to an increases in personnel and
general and administrative costs, partially offset by, an increase in revenue.
                                       40
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Comparison of the nine months ended September 30, 2022 and nine months ended
September 30, 2021

The following table provides a comparison of our selected consolidated results
of operations for the nine months ended September 30, 2022 and 2021 (in
thousands):

                                                                    Nine Months Ended
                                                                      September 30,
                                                                                                       Increase           Increase (Decrease)
                                                                2022                2021            (Decrease) ($)                (%)
Revenues:
CoStar                                                      $  617,905          $  532,428          $     85,477                        16  %
Information Services                                           116,730             105,779                10,951                        10
Multifamily                                                    547,372             508,629                38,743                         8
LoopNet                                                        169,645             152,852                16,793                        11
Residential                                                     57,565              53,939                 3,626                            7
Other Marketplaces                                              99,837              83,722                16,115                        19
Total revenues                                               1,609,054           1,437,349               171,705                        12
Cost of revenues                                               304,814             270,911                33,903                        13
Gross profit                                                 1,304,240           1,166,438               137,802                        12
Operating expenses:
Selling and marketing (excluding customer base
amortization)                                                  510,736             483,354                27,382                         6
Software development                                           162,520             148,500                14,020                         9
General and administrative                                     246,576             186,747                59,829                        32
Customer base amortization                                      60,621              55,885                 4,736                         8
Total operating expenses                                       980,453             874,486               105,967                        12
Income from operations                                         323,787             291,952                31,835                        11
Interest expense, net                                             (461)            (23,698)              (23,237)                      (98)
Other income, net                                                3,596               2,343                 1,253                        53
Income before income taxes                                     326,922             270,597                56,325                        21
Income tax expense                                              81,841              70,933                10,908                        15
Net income                                                  $  245,081          $  199,664          $     45,417                        23



Revenues. Revenues increased to $1,609 million for the nine months ended
September 30, 2022, from $1,437 million for the nine months ended September 30,
2021. The $172 million increase was attributable to increases in revenues for
several of our service offerings. CoStar revenues increased $85 million, or 16%,
due to higher sales volume driven by the impact of annual price increases and
customer upgrades on contract renewals, as well as, an increase in subscribers.
Multifamily revenues increased $39 million, or 8%, due to increases in pricing
on renewals, partially offset by a less favorable mix of ad packages purchased.
LoopNet revenues increased $17 million, or 11%, primarily as a result of an
increase in average prices, and to a lesser extent, due to the acquisition of
BureauxLocaux. Other Marketplaces revenues increased $16 million, or 19%,
primarily driven by increases in Ten-X and Land for Sale revenue in nearly equal
amounts, and to a lesser extent, an increase in revenue for BizBuySell.
Information Services revenues increased $11 million, or 10%, primarily due to
increased revenue from our CoStar Real Estate Manager product and STR service
offerings. Residential revenues increased $4 million, or 7%, due to an increase
in sales of Homesnap's products and services, partially offset by, the
discontinuation of certain Homes.com products and services that were
inconsistent with our long-term business strategy.

                                       41
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Gross Profit. Gross profit increased to $1,304 million for the nine months ended
September 30, 2022, from $1,166 million for the nine months ended September 30,
2021, and the gross profit percentage remained consistent at 81% for the nine
months ended September 30, 2022 and 2021. The increase in gross profit was due
to higher revenues, partially offset by, an increase in cost of revenues of $34
million, or 13%, mostly due to an increase of $20 million related to our
investment and further development of our residential marketplaces, including
research equipment, personnel, software and equipment, and data and content
costs. There were also increases of $7 million in personnel costs, driven by an
increase in salaries, and $5 million in software and equipment to support our
researchers.

Selling and Marketing Expenses. Selling and marketing expenses increased to $511
million for the nine months ended September 30, 2022, from $483 million for the
nine months ended September 30, 2021. The $27 million increase was primarily
attributable to increases of $20 million in personnel costs driven by a $11
million increase in salaries, primarily attributable to an increase in
headcount, and an increase in commissions of $6 million, as well as, a
$13 million increase in conferences and travel costs. These increases were
partially offset by a $10 million decrease in marketing costs, primarily
attributable to a $34 million decrease in marketing spend for our other
products, mainly to lower agency fees for LoopNet and Multifamily, partially
offset by a $25 million increase in marketing for our residential marketplace
products led by increases in spending on search engine marketing, agency fees,
events, and digital marketing.

Software Development Expenses. Software development expenses increased to $163
million for the nine months ended September 30, 2022, from $149 million for the
nine months ended September 30, 2021, and remained consistent as a percentage of
revenues at 10% for the nine months ended September 30, 2022, and 2021. The $14
million increase was primarily due to an increase of $10 million in personnel
costs, driven by increased headcount to support the development of our products,
and to a lesser extent to an increase of $2 million in occupancy costs.

General and Administrative Expenses. General and administrative expenses
increased to $247 million for the nine months ended September 30, 2022, from
$187 million for the nine months ended September 30, 2021, and increased as a
percentage of revenues to 15% for the nine months ended September 30, 2022 from
13% for the nine months ended September 30, 2021. The $60 million increase in
the amount of general and administrative expense was driven by an increase of
$15 million in personnel costs, primarily due to increases in salaries and
stock-based compensation expense, and to a lesser extent, increases of
$10 million in professional services, and $9 million in travel and conferences
costs, driven partially by an increase in the average cost of air travel. There
were also increases of $6 million each in software and equipment and bad debt
expense,$2 million each in property taxes and recruiting agency fees, and an
increase of $4 million for a fee paid to a counterparty to terminate a contract.

Customer Base Amortization Expense. Customer base amortization expense increased
to $61 million for the nine months ended September 30, 2022 from $56 million for
the nine months ended September 30, 2021, and remained consistent as a
percentage of revenues at 4% for the nine months ended September 30, 2022, and
2021. The increase in customer base amortization expense was primarily
attributable to an increase of $14 million in amortization expense driven by
intangible assets related to a Homesnap product for which we decided to
eliminate usage fees in the third quarter of 2022. This increase was offset by
decreases in amortization expense related to the customer base intangible assets
acquired in the acquisitions of ForRent, STR, and Ten-X, which had been
amortizing on an accelerated basis since their acquisitions.

Interest Expense, net. Interest expense, net was a net expense of $0.5 million
for the nine months ended September 30, 2022, as compared to net expense of $24
million for the nine months ended September 30, 2021. The decrease of $23
million for the nine months ended September 30, 2022 was primarily due to an
increased rate of return on cash equivalents.

Other Income, net. Other income, net increased $1 million for the nine months
ended September 30, 2022 compared to the nine months ended September 30, 2021.
The increase was primarily due to increases in foreign exchange gains due to
rate fluctuations.

Income Tax Expense. Income tax expense increased to $82 million for the nine
months ended September 30, 2022 from $71 million for the nine months ended
September 30, 2021. The increase was mostly due to higher income before taxes
and a decrease in excess tax benefits, partially offset by, a tax restructuring
gain recognized in the nine months ended September 30, 2021.

                                       42
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Comparison of business segment results for the nine months ended September 30, 2022
and nine months ended September 30, 2021

We manage our business geographically in two operating segments, with our
primary areas of measurement and decision-making being North America, which
includes the U.S. and Canada, and International, which primarily includes
Europe, Asia-Pacific, and Latin America. Management relies on an internal
management reporting process that provides revenue and operating segment EBITDA,
which is our net income before interest (expense) income and other (expense)
income, loss on debt extinguishment, income taxes, depreciation and
amortization. Management believes that operating segment EBITDA is an
appropriate measure for evaluating the operational performance of our operating
segments. EBITDA is used by management to internally measure our operating and
management performance and to evaluate the performance of our business. However,
this measure should be considered in addition to, not as a substitute for or
superior to, income from operations or other measures of financial performance
prepared in accordance with GAAP.

Segment Revenues. North America revenues increased to $1,553 million for the
nine months ended September 30, 2022, from $1,388 million for the nine months
ended September 30, 2021. The $164 million increase in North America revenues
was attributable to increases in revenues for several of our services. CoStar
revenues increased $85 million, due to higher sales volume driven by the impact
of annual price increases and customer upgrades on contract renewals, as well
as, an increase in subscribers. Multifamily revenues increased $39 million, due
to increases in pricing on renewals, partially offset by a less favorable mix of
ad packages purchased. Other Marketplaces revenues increased $16 million,
primarily driven by increases in Ten-X and Land for Sale revenue in nearly equal
amounts, and to a lesser extent, an increase in revenue for BizBuySell. LoopNet
revenues increased $13 million, primarily as a result of an increase in average
prices. Information Services revenues increased $8 million, primarily due to
increased revenue from our CoStar Real Estate Manager and STR service offerings.
Residential revenues increased $4 million, due to an increase in sales of
Homesnap's products and services partially offset by the discontinuation of
certain Homes.com products and services that were inconsistent with our
long-term business strategy. International revenues increased to $56 million for
the nine months ended September 30, 2022, from $49 million for the nine months
ended September 30, 2021. The increase in International revenues was primarily
driven by the acquisitions of BureauxLocaux and Business Immo, and to a lesser
extent, due to growth in our CoStar product revenue.

Segment EBITDA. North America EBITDA increased to $422 million for the nine
months ended September 30, 2022, from $386 million for the nine months ended
September 30, 2021. The increase in North America EBITDA was primarily due to an
increase in revenue, and to a lesser extent, to a decrease in marketing costs,
partially offset by, increases in general and administrative and personnel
costs. International EBITDA for the nine months ended September 30, 2022 was
income of $5 million, as compared to $6 million for the nine months ended
September 30, 2021, the decrease was due to increases in personnel, general and
administrative, and marketing costs, partially offset by, an increase in
revenue.

Cash and capital resources

We believe the balance of cash, cash equivalents and restricted cash, which was
approximately $4.8 billion as of September 30, 2022, along with cash generated
by ongoing operations and continued access to capital markets, will be
sufficient to satisfy our cash requirements over the next 12 months and beyond.
Our cash requirements have not changed materially since the 2021 Form 10-K.

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

We are currently planning to expand our Richmond, Virginia campus, which may result in a significant cash requirement in 2022 and beyond. We currently plan to fund the expansion with available cash.

Cash, cash equivalents and restricted cash increased to approximately $4.8
billion as of September 30, 2022, compared to cash, cash equivalents and
restricted cash of approximately $3.8 billion as of December 31, 2021. The
increase in cash, cash equivalents, and restricted cash for the nine months
ended September 30, 2022 was primarily due to $746 million of net proceeds from
our September 2022 equity offering, and cash provided by operating activities of
$294 million. These increases were partially offset by $76 million of cash used
in investing activities, primarily attributable to purchases of property and
equipment and other assets of $75 million, including the purchase of assets
related to the expansion of our campus in Richmond, Virginia.

Net cash provided by operating activities for the nine months ended September
30, 2022 was approximately $294 million compared to approximately $319 million
for the nine months ended September 30, 2021. The $26 million decrease in cash
                                       43
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provided by operating activities was primarily due a decrease from changes in
net working capital of $62 million, partially offset by, an increase in net
income excluding certain non-cash expenses such as deferred income taxes and
stock-based compensation expense.

Net cash used in investing activities for the nine months ended September 30,
2022 was approximately $76 million compared to approximately $298 million of
cash used in investing activities for the nine months ended September 30, 2021.
The $221 million decrease in cash used in investing activities was primarily due
to $146 million additional cash paid for acquisitions during the nine months
ended September 30, 2021 , as well as, $92 million additional cash paid for
assets related to the expansion of our campus in Richmond, Virginia, partially
offset by, an increase in cash used for the purchase of other property and
equipment, including capitalized software development costs, during the nine
months ended September 30, 2022.

Net cash provided by financing activities for the nine months ended September
30, 2022 was approximately $735 million compared to approximately $14 million
used in financing activities for the nine months ended September 30, 2021. The
$749 million increase in cash used in financing activities was primarily due to
$746 million of net proceeds from our September 2022 equity offering.

Critical accounting estimates

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

•Long-lived assets, intangible assets and goodwill;
•Income taxes;
•Revenue recognition; and
•Business combinations.

For an in-depth discussion of each of our significant accounting policies,
including the related critical accounting estimates. and further information
regarding estimates and assumptions involved in their application, see the 2021
Form 10-K and Note 2 to the condensed consolidated financial statements included
in Part I of this Quarterly Report on Form 10-Q. During the nine months ended
September 30, 2022, there were no material changes to our critical accounting
estimates from those described in the 2021 Form 10-K.

Recent accounting pronouncements

See Note 2 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

Caution Regarding Forward-Looking Statements

We have made forward-looking statements in this Quarterly Report on Form 10-Q
and make forward-looking statements in our press releases, investor conference
calls, Annual Reports on Form 10-K, other Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and other filings with the Securities and Exchange
Commission that are subject to risks and uncertainties. Forward-looking
statements include information that is not purely historic fact and include,
without limitation, statements concerning our financial outlook for 2022 and
beyond, our possible or assumed future results of operations generally, and
other statements and information regarding assumptions or expectations about our
revenues, revenue growth rates, gross margin percentage, net income, net income
per share, fully diluted net income per share, EBITDA, adjusted EBITDA, adjusted
EBITDA margin, non-generally accepted accounting principles ("GAAP") net income,
non-GAAP net income per share, weighted-average outstanding shares, cash flow
from operating activities, operating costs, capital and other expenditures, the
impact of COVID-19 on our revenues, revenue growth rates and profitability, key
priorities for 2022, trends in customer behavior, legal proceedings and claims,
legal costs, effective tax rate, the anticipated benefits of completed or
proposed acquisitions, the anticipated timing for integration of completed
acquisitions, the anticipated benefits of cross-selling efforts,
                                       44
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product development and release, geographic and product expansion, planned
service enhancements, expansion and development of our sales forces, planned
sales and marketing activities and investments, the impact or results of sales
and marketing initiatives, product integrations, elimination and de-emphasizing
of services, investments in residential marketplace services and our residential
marketplace strategy, net new sales, contract renewal rates, use of proceeds
from equity and debt offerings, the use of proceeds of any draws under our
$750 million credit facility (the "2020 Credit Agreement"), employee relations,
attrition and retention, management's plans, goals and objectives for future
operations, deferral of tax payments, sources and adequacy of liquidity, and
growth and markets for our stock. Sections of this Report which contain
forward-looking statements include the Financial Statements and related Notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Quantitative and Qualitative Disclosures About Market Risk,"
"Controls and Procedures," "Legal Proceedings" and "Risk Factors."

Our forward-looking statements may be identified by words such as "hope,"
"anticipate," "may," "believe," "expect," "intend," "will," "should," "plan,"
"estimate," "predict," "continue" and "potential" or the negative of these terms
or other comparable terminology. You should understand that these
forward-looking statements are estimates reflecting our judgment, beliefs and
expectations, not guarantees of future performance. They are subject to a number
of assumptions, risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the forward-looking
statements. The following important factors, in addition to those discussed or
referred to under the heading "Risk Factors," and other unforeseen events or
circumstances, could affect our future results and could cause those results or
other outcomes to differ materially from those expressed or implied in our
forward-looking statements: potential declines in our revenues, revenue growth
rates and profitability due to the impacts of the COVID-19 pandemic and economic
conditions on the commercial real estate industry and our core customer base;
our inability to attract and retain clients; our inability to successfully
develop and introduce new or upgraded information, analytics and online
marketplace services that are attractive to our users and advertisers or
successfully combine or shift focus from current services with less demand; our
inability to compete successfully against existing or future competitors in
attracting advertisers; a downturn or consolidation in the real estate industry
that may decrease customer demand for our services; our inability to hire
qualified persons or retain and continue to develop our sales force; downward
pressure on our operating margins by our internal and external investments; our
inability to increase awareness of our brands, including CoStar, LoopNet,
Apartments.com, BizBuySell, LandsofAmerica, STR, Ten-X, Homes.com and Homesnap;
our inability to maintain or increase traffic to our marketplaces and the
possibility of internet search engines not featuring our websites on the search
engine results page; competition; our inability to successfully identify,
finance, integrate and/or manage costs related to acquisitions; our actual or
perceived failure to comply with privacy laws and standards; cyberattacks and
security vulnerabilities; technical problems or disruptions that affect either
our customers' ability to access our services, or the software, internal
applications, database and network systems underlying our services; the costs of
a large infrastructure project to build out our campus in Richmond, Virginia;
our current or future geographic expansion plans that may not result in
increased revenues; fluctuations and market cyclicality; our inability to retain
and attract highly capable management and operating personnel; changes in tax
laws, regulations or fiscal and tax policies; risks related to acceptance of
credit cards and debit cards and facilitation of other customer payments; risks
related to our data, intellectual property and listings; risks related to our
international operations, including fluctuating foreign currencies and the
economic effects of "Brexit" and risks related to our indebtedness.

Accordingly, you should not place undue reliance on forward-looking statements,
which speak only as of, and are based on information available to us on, the
date of this Quarterly Report on Form 10-Q (unless otherwise indicated). All
subsequent written and oral forward-looking statements attributable to us or any
person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to update any such statements or release publicly any
revisions to these forward-looking statements to reflect new information or
events or circumstances after the date of this Report or to reflect the
occurrence of unanticipated events.

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