Delaware
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52-2091509
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Emerging growth company
o
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PART I
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FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II
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OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1.
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Financial Statements
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Three Months Ended March 31,
|
||||||
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2018
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2017
|
||||
Revenues
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$
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273,718
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$
|
226,553
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Cost of revenues
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62,477
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51,346
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Gross profit
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211,241
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175,207
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Operating expenses:
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Selling and marketing (excluding customer base amortization)
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88,490
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76,402
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Software development
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22,913
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22,374
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General and administrative
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40,590
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33,995
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Customer base amortization
|
5,803
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4,774
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157,796
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|
137,545
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Income from operations
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53,445
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37,662
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|
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Interest and other income
|
2,987
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|
|
429
|
|
||
Interest and other expense
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(690
|
)
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|
(2,686
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)
|
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Income before income taxes
|
55,742
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35,405
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|
||
Income tax expense
|
3,511
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|
13,275
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Net income
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$
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52,231
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|
$
|
22,130
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||||
Net income per share — basic
|
$
|
1.46
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|
|
$
|
0.69
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Net income per share — diluted
|
$
|
1.44
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$
|
0.68
|
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Weighted average outstanding shares — basic
|
35,893
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32,276
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|
||
Weighted average outstanding shares — diluted
|
36,350
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32,563
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Three Months Ended March 31,
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||||||
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2018
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2017
|
||||
Net income
|
$
|
52,231
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$
|
22,130
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Other comprehensive income, net of tax
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||||
Foreign currency translation adjustment
|
951
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|
411
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|
||
Total other comprehensive income
|
951
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|
411
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Total comprehensive income
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$
|
53,182
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|
$
|
22,541
|
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Common Stock
|
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Additional
Paid-In Capital
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Accumulated
Other
Comprehensive Loss
|
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Retained
Earnings
|
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Total
Stockholders’
Equity
|
|||||||||||||
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Shares
|
|
Amount
|
|
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|||||||||||||||
Balance at December 31, 2017
|
36,107
|
|
|
$
|
361
|
|
|
$
|
2,339,253
|
|
|
$
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(9,020
|
)
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$
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320,656
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$
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2,651,250
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|
Cumulative effect of adoption of new accounting standard
|
—
|
|
|
—
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|
|
—
|
|
|
—
|
|
|
54,464
|
|
|
54,464
|
|
|||||
Balance at January 1, 2018
|
36,107
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$
|
361
|
|
|
$
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2,339,253
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$
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(9,020
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)
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$
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375,120
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$
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2,705,714
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Net income
|
—
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|
|
—
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|
|
—
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—
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52,231
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52,231
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|||||
Other comprehensive income
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—
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—
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—
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951
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—
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951
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|||||
Exercise of stock options
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111
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|
1
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9,327
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—
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—
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9,328
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|
|||||
Restricted stock grants
|
114
|
|
|
1
|
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(1
|
)
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—
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|
—
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|
|
—
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|||||
Restricted stock grants surrendered
|
(47
|
)
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—
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(15,392
|
)
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—
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—
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(15,392
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)
|
|||||
Stock compensation expense, net of forfeitures
|
—
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—
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10,335
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—
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—
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10,335
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Employee stock purchase plan
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4
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—
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1,431
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—
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—
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1,431
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|
|||||
Stock issued for acquisitions
|
103
|
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|
1
|
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36,365
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—
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—
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36,366
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|
|||||
Balance at March 31, 2018
|
36,392
|
|
|
$
|
364
|
|
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$
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2,381,318
|
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$
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(8,069
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)
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$
|
427,351
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$
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2,800,964
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Three Months Ended March 31,
|
||||||
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2018
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2017
|
||||
Operating activities:
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|
||||
Net income
|
$
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52,231
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$
|
22,130
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Adjustments to reconcile net income to net cash provided by operating activities:
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|
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Depreciation and amortization
|
16,983
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17,298
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Amortization of deferred commissions costs
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12,006
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—
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|
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Amortization of debt issuance costs
|
219
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|
|
772
|
|
||
Stock-based compensation expense
|
10,412
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|
9,357
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|
||
Deferred income tax expense, net
|
1,851
|
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|
2,091
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|
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Bad debt expense
|
1,431
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|
1,800
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||
Changes in operating assets and liabilities, net of acquisitions:
|
|
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|
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Accounts receivable
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(2,511
|
)
|
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(2,760
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)
|
||
Prepaid expenses and other current assets
|
(9,522
|
)
|
|
(359
|
)
|
||
Deferred commissions
|
(16,263
|
)
|
|
—
|
|
||
Deposits and other assets
|
(3,412
|
)
|
|
(117
|
)
|
||
Accounts payable and other liabilities
|
4,288
|
|
|
11,588
|
|
||
Deferred revenue
|
5,272
|
|
|
2,757
|
|
||
Net cash provided by operating activities
|
72,985
|
|
|
64,557
|
|
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|
||||
Investing activities:
|
|
|
|
|
|
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Purchases of property and equipment and other assets
|
(8,617
|
)
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(6,146
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)
|
||
Acquisitions, net of cash acquired
|
(340,074
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)
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|
(13,673
|
)
|
||
Net cash used in investing activities
|
(348,691
|
)
|
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(19,819
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
|
|
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Payments of long-term debt
|
—
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|
|
(35,000
|
)
|
||
Repurchase of restricted stock to satisfy tax withholding obligations
|
(15,392
|
)
|
|
(5,781
|
)
|
||
Proceeds from exercise of stock options and employee stock purchase plan
|
10,616
|
|
|
1,234
|
|
||
Net cash used in financing activities
|
(4,776
|
)
|
|
(39,547
|
)
|
||
|
|
|
|
||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
448
|
|
|
58
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(280,034
|
)
|
|
5,249
|
|
||
Cash and cash equivalents at the beginning of period
|
1,211,463
|
|
|
567,223
|
|
||
Cash and cash equivalents at the end of period
|
$
|
931,429
|
|
|
$
|
572,472
|
|
|
|
|
|
||||
Supplemental cash flow disclosures:
|
|
|
|
||||
Interest paid
|
$
|
381
|
|
|
$
|
1,336
|
|
Income taxes paid
|
533
|
|
|
434
|
|
||
|
|
|
|
||||
Supplemental non-cash investing and financing activities:
|
|
|
|
||||
Stock issued in connection with acquisition - ForRent
|
$
|
36,366
|
|
|
$
|
—
|
|
1.
|
ORGANIZATION
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Foreign currency translation adjustment
|
$
|
(7,339
|
)
|
|
$
|
(8,290
|
)
|
Accumulated net unrealized loss on investments, net of tax
|
(730
|
)
|
|
(730
|
)
|
||
Total accumulated other comprehensive loss
|
$
|
(8,069
|
)
|
|
$
|
(9,020
|
)
|
|
Three Months Ended March 31,
|
||||||
Numerator:
|
2018
|
|
2017
|
||||
|
|||||||
Net income
|
$
|
52,231
|
|
|
$
|
22,130
|
|
Denominator:
|
|
|
|
|
|
||
Denominator for basic net income per share — weighted-average outstanding shares
|
35,893
|
|
|
32,276
|
|
||
Effect of dilutive securities:
|
|
|
|
|
|
||
Stock options and restricted stock awards
|
457
|
|
|
287
|
|
||
Denominator for diluted net income per share — weighted-average outstanding shares
|
36,350
|
|
|
32,563
|
|
||
|
|
|
|
|
|
||
Net income per share — basic
|
$
|
1.46
|
|
|
$
|
0.69
|
|
Net income per share — diluted
|
$
|
1.44
|
|
|
$
|
0.68
|
|
|
Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
||
Performance-based restricted stock awards
|
84
|
|
|
85
|
|
Service-based restricted stock units
|
1
|
|
|
1
|
|
Total shares excluded from computation
|
85
|
|
|
86
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Cost of revenues
|
$
|
1,431
|
|
|
$
|
1,171
|
|
Selling and marketing
|
1,835
|
|
|
1,652
|
|
||
Software development
|
1,729
|
|
|
1,810
|
|
||
General and administrative
|
5,417
|
|
|
4,724
|
|
||
Total stock-based compensation
|
$
|
10,412
|
|
|
$
|
9,357
|
|
|
As of
December 31, 2017
|
|
ASC 606 Adjustments
|
|
As of
January 1, 2018
|
||||||
Assets
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
60,900
|
|
|
$
|
(1,867
|
)
|
|
$
|
59,033
|
|
Prepaid expenses and other current assets
|
15,572
|
|
|
1,867
|
|
|
17,439
|
|
|||
Deferred commissions costs
|
—
|
|
|
71,118
|
|
|
71,118
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Deferred revenue
|
$
|
45,686
|
|
|
$
|
(1,716
|
)
|
|
$
|
43,970
|
|
Deferred income taxes, net
|
12,070
|
|
|
18,370
|
|
|
30,440
|
|
|||
Retained earnings
|
320,656
|
|
|
54,464
|
|
|
375,120
|
|
|
As of
March 31, 2018
without adoption of ASC 606
|
|
ASC 606 Adjustments
|
|
As reported as of
March 31, 2018
|
||||||
Assets
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
74,550
|
|
|
$
|
(5,636
|
)
|
|
$
|
68,914
|
|
Prepaid expenses and other current assets
|
26,025
|
|
|
5,636
|
|
|
31,661
|
|
|||
Deferred commissions costs
|
—
|
|
|
75,201
|
|
|
75,201
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Deferred revenue
|
$
|
50,684
|
|
|
$
|
(1,216
|
)
|
|
$
|
49,468
|
|
Deferred income taxes, net
|
46,122
|
|
|
19,334
|
|
|
65,456
|
|
|||
Retained earnings
|
370,268
|
|
|
57,083
|
|
|
427,351
|
|
3.
|
REVENUE FROM CONTRACTS WITH CUSTOMERS
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Information and analytics
|
|
|
|
||||
CoStar Suite
|
$
|
130,361
|
|
|
$
|
109,979
|
|
Information services
|
15,060
|
|
|
18,336
|
|
||
Online marketplaces
|
|
|
|
||||
Multifamily
|
87,683
|
|
|
63,991
|
|
||
Commercial property and land
|
40,614
|
|
|
34,247
|
|
||
Total revenues
|
$
|
273,718
|
|
|
$
|
226,553
|
|
Balance at December 31, 2017
|
$
|
45,686
|
|
Cumulative effect of adoption of ASC 606
|
(1,716
|
)
|
|
Balance at January 1, 2018
|
43,970
|
|
|
Revenue recognized in the current period from the amounts in the beginning balance
|
(29,910
|
)
|
|
New deferrals, net of amounts recognized in the current period
|
35,173
|
|
|
Effects of foreign currency translation
|
235
|
|
|
Balance at March 31, 2018
|
$
|
49,468
|
|
Commissions expense prior to adoption
|
$
|
23,595
|
|
Commissions capitalized in the current period
|
(16,263
|
)
|
|
Amortization of deferred commissions costs
|
12,006
|
|
|
Total commissions expense
|
$
|
19,338
|
|
4.
|
ACQUISITION
|
Cash and cash equivalents
|
$
|
59
|
|
Accounts receivable
|
8,769
|
|
|
Indemnification asset
|
5,443
|
|
|
Goodwill
|
266,720
|
|
|
Intangible assets
|
141,300
|
|
|
Deferred tax liabilities
|
(34,032
|
)
|
|
Contingent sales tax liability
|
(6,260
|
)
|
|
State uncertain income tax position liability
|
(2,047
|
)
|
|
Other assets and liabilities
|
(3,453
|
)
|
|
Fair value of identifiable net assets acquired
|
$
|
376,499
|
|
|
March 31, 2018
|
|
March 31, 2017
|
||||
Revenue
|
$
|
287,470
|
|
|
$
|
252,895
|
|
Net income
|
$
|
52,839
|
|
|
$
|
15,996
|
|
Net income per share - basic
|
$
|
1.47
|
|
|
$
|
0.49
|
|
Net income per share - diluted
|
$
|
1.45
|
|
|
$
|
0.49
|
|
5.
|
INVESTMENTS
|
Maturity
|
|
Fair Value
|
||
Due:
|
|
|
||
April 1, 2018 — March 31, 2019
|
|
$
|
—
|
|
April 1, 2019 — March 31, 2023
|
|
—
|
|
|
April 1, 2023 — March 31, 2028
|
|
—
|
|
|
After March 31, 2028
|
|
10,070
|
|
|
Available-for-sale investments
|
|
$
|
10,070
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Auction rate securities
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
Available-for-sale investments
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Auction rate securities
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
Available-for-sale investments
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||||||||||
|
Aggregate
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Aggregate
Fair
Value
|
|
Gross
Unrealized
Losses
|
||||||||
Auction rate securities
|
$
|
10,070
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
|
$
|
(730
|
)
|
Investments in an unrealized loss position
|
$
|
10,070
|
|
|
$
|
(730
|
)
|
|
$
|
10,070
|
|
|
$
|
(730
|
)
|
6.
|
FAIR VALUE
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
584,244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
584,244
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
10,070
|
|
|
10,070
|
|
||||
Total assets measured at fair value
|
$
|
584,244
|
|
|
$
|
—
|
|
|
$
|
10,070
|
|
|
$
|
594,314
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
586,084
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
586,084
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
10,070
|
|
|
10,070
|
|
||||
Total assets measured at fair value
|
$
|
586,084
|
|
|
$
|
—
|
|
|
$
|
10,070
|
|
|
$
|
596,154
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Balance at beginning of period
|
$
|
10,070
|
|
|
$
|
9,952
|
|
Decrease in unrealized loss included in accumulated other comprehensive loss
|
—
|
|
|
—
|
|
||
Settlements
|
—
|
|
|
—
|
|
||
Balance at end of period
|
$
|
10,070
|
|
|
$
|
9,952
|
|
|
Auction
Rate
Securities
|
||
Balance at December 31, 2016
|
$
|
9,952
|
|
Decrease in unrealized loss included in accumulated other comprehensive loss
|
118
|
|
|
Balance at December 31, 2017
|
10,070
|
|
|
Decrease in unrealized loss included in accumulated other comprehensive loss
|
—
|
|
|
Settlements
|
—
|
|
|
Balance at March 31, 2018
|
$
|
10,070
|
|
7.
|
GOODWILL
|
|
North America
|
|
International
|
|
Total
|
||||||
Goodwill, December 31, 2016
|
$
|
1,227,777
|
|
|
$
|
27,089
|
|
|
$
|
1,254,866
|
|
Acquisitions
|
25,717
|
|
|
—
|
|
|
25,717
|
|
|||
Effect of foreign currency translation
|
—
|
|
|
2,874
|
|
|
2,874
|
|
|||
Goodwill, December 31, 2017
|
1,253,494
|
|
|
29,963
|
|
|
1,283,457
|
|
|||
Acquisition
|
266,720
|
|
|
—
|
|
|
266,720
|
|
|||
Effect of foreign currency translation
|
—
|
|
|
1,071
|
|
|
1,071
|
|
|||
Goodwill, March 31, 2018
|
$
|
1,520,214
|
|
|
$
|
31,034
|
|
|
$
|
1,551,248
|
|
8.
|
INTANGIBLE ASSETS
|
|
March 31,
2018 |
|
December 31,
2017 |
|
Weighted-
Average
Amortization
Period (in years)
|
||||
Capitalized product development cost
|
$
|
2,173
|
|
|
$
|
2,275
|
|
|
4
|
Accumulated amortization
|
(2,165
|
)
|
|
(2,262
|
)
|
|
|
||
Capitalized product development cost, net
|
8
|
|
|
13
|
|
|
|
||
|
|
|
|
|
|
||||
Building photography
|
8,935
|
|
|
18,739
|
|
|
2
|
||
Accumulated amortization
|
(8,339
|
)
|
|
(18,212
|
)
|
|
|
||
Building photography, net
|
596
|
|
|
527
|
|
|
|
||
|
|
|
|
|
|
||||
Acquired database technology
|
93,561
|
|
|
83,469
|
|
|
4
|
||
Accumulated amortization
|
(80,405
|
)
|
|
(79,188
|
)
|
|
|
||
Acquired database technology, net
|
13,156
|
|
|
4,281
|
|
|
|
||
|
|
|
|
|
|
||||
Acquired customer base
|
336,376
|
|
|
225,879
|
|
|
10
|
||
Accumulated amortization
|
(175,426
|
)
|
|
(169,157
|
)
|
|
|
||
Acquired customer base, net
|
160,950
|
|
|
56,722
|
|
|
|
||
|
|
|
|
|
|
||||
Acquired trade names and other intangible assets
|
188,856
|
|
|
167,718
|
|
|
13
|
||
Accumulated amortization
|
(49,705
|
)
|
|
(46,369
|
)
|
|
|
||
Acquired trade names and other intangible assets, net
|
139,151
|
|
|
121,349
|
|
|
|
||
|
|
|
|
|
|
||||
Intangible assets, net
|
$
|
313,861
|
|
|
$
|
182,892
|
|
|
|
9.
|
LONG-TERM DEBT
|
10.
|
INCOME TAXES
|
11.
|
COMMITMENTS AND CONTINGENCIES
|
12.
|
SEGMENT REPORTING
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Revenues
|
|
|
|
||||
North America
|
$
|
264,795
|
|
|
$
|
219,341
|
|
International
|
|
|
|
|
|
||
External customers
|
8,923
|
|
|
7,212
|
|
||
Intersegment revenues
|
13
|
|
|
11
|
|
||
Total International revenues
|
8,936
|
|
|
7,223
|
|
||
Intersegment eliminations
|
(13
|
)
|
|
(11
|
)
|
||
Total revenues
|
$
|
273,718
|
|
|
$
|
226,553
|
|
|
|
|
|
||||
EBITDA
|
|
|
|
|
|
||
North America
|
$
|
71,055
|
|
|
$
|
54,433
|
|
International
|
(627
|
)
|
|
527
|
|
||
Total EBITDA
|
$
|
70,428
|
|
|
$
|
54,960
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net income
|
$
|
52,231
|
|
|
$
|
22,130
|
|
Amortization of acquired intangible assets in cost of revenues
|
4,608
|
|
|
6,119
|
|
||
Amortization of acquired intangible assets in operating expenses
|
5,803
|
|
|
4,774
|
|
||
Depreciation and other amortization
|
6,572
|
|
|
6,405
|
|
||
Interest and other income
|
(2,987
|
)
|
|
(429
|
)
|
||
Interest and other expense
|
690
|
|
|
2,686
|
|
||
Income tax expense
|
3,511
|
|
|
13,275
|
|
||
EBITDA
|
$
|
70,428
|
|
|
$
|
54,960
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Property and equipment, net
|
|
|
|
||||
North America
|
$
|
78,722
|
|
|
$
|
79,736
|
|
International
|
4,679
|
|
|
4,760
|
|
||
Total property and equipment, net
|
$
|
83,401
|
|
|
$
|
84,496
|
|
|
|
|
|
||||
Goodwill
|
|
|
|
|
|
||
North America
|
$
|
1,520,214
|
|
|
$
|
1,253,494
|
|
International
|
31,034
|
|
|
29,963
|
|
||
Total goodwill
|
$
|
1,551,248
|
|
|
$
|
1,283,457
|
|
|
|
|
|
||||
Assets
|
|
|
|
|
|
||
North America
|
$
|
3,037,575
|
|
|
$
|
2,816,156
|
|
International
|
57,525
|
|
|
57,285
|
|
||
Total assets
|
$
|
3,095,100
|
|
|
$
|
2,873,441
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
|
||
North America
|
$
|
274,776
|
|
|
$
|
201,831
|
|
International
|
19,360
|
|
|
20,360
|
|
||
Total liabilities
|
$
|
294,136
|
|
|
$
|
222,191
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
We are migrating all of our commercial real estate information capabilities to our flagship CoStar Suite product and winding down the legacy LoopNet Information products. This process began in the fall of 2017 with the integration of the CoStar and Loopnet databases. In addition, we are transitioning the LoopNet marketplace to a pure pay-to-list marketing site for commercial real estate. We completed integrating the backend systems of the LoopNet and CoStar databases during the second half of 2017; the two services now share a unified database of information, creating operating efficiencies and improving the data available to our customers. We also introduced new enhancements on the CoStar homepage, including a Listing Manager feature that we believe will increase the quantity and quality of the listing information available by enabling brokers and other industry participants to load information directly into the integrated system. This in turn is expected to reduce the time and costs associated with researching and maintaining our comprehensive database of commercial real estate information.
|
•
|
On February 21, 2018, we completed the acquisition of ForRent ("ForRent"), a division of Dominion Enterprises ("Seller"). ForRent's primary service is digital advertising through a network of four multifamily websites - which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com. We are integrating and plan to continue to integrate, develop and cross-sell the services offered by ForRent. ForRent.com is expected to remain a distinct, complementary brand to Apartments.com, giving property managers and owners more exposure for their listings.
|
•
|
We plan to continue developing new, and improve existing, product and service offerings to the apartments industry. In particular, we expect to implement the ability for renters to apply for leases online, for landlords to run tenant credit and background checks and, eventually, for landlords and tenants to generate leases and process payments online.
|
•
|
We continue to invest in our research operations to support continued growth of our information and analytics offerings. We established our research operations headquarters in Richmond, Virginia, in December 2016, which is developing into a technology innovation hub, powering the software development necessary to support the content within our information, analytics and marketing services. In connection with the opening of the Richmond research headquarters, we have expanded our research team to continue to meet the growing content needs of our clients. In addition, we expect to continue to invest in our international research operations in the U.K.
|
•
|
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 database 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 and other income we generate may be useful for investors to consider and may result in current cash inflows. However, we do not consider the amount of interest and other income to be a representative component of the day-to-day operating performance of our business.
|
•
|
The amount of interest and other expense we incur may be useful for investors to consider and may result in current cash outflows. However, we do not consider the amount of interest and other expense 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 they generally represent gains or losses from the early extinguishment of debt, However, we do not consider the amount of the loss on debt extinguishment to be representative component of the day-to-day operating performance of our business.
|
•
|
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 they 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 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 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.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net income
|
$
|
52,231
|
|
|
$
|
22,130
|
|
Amortization of acquired intangible assets in cost of revenues
|
4,608
|
|
|
6,119
|
|
||
Amortization of acquired intangible assets in operating expenses
|
5,803
|
|
|
4,774
|
|
||
Depreciation and other amortization
|
6,572
|
|
|
6,405
|
|
||
Interest and other income
|
(2,987
|
)
|
|
(429
|
)
|
||
Interest and other expense
|
690
|
|
|
2,686
|
|
||
Income tax expense
|
3,511
|
|
|
13,275
|
|
||
EBITDA
|
$
|
70,428
|
|
|
$
|
54,960
|
|
|
|
|
|
||||
Net cash flows provided by (used in)
|
|
|
|
|
|
||
Operating activities
|
$
|
72,985
|
|
|
$
|
64,557
|
|
Investing activities
|
(348,691
|
)
|
|
(19,819
|
)
|
||
Financing activities
|
(4,776
|
)
|
|
(39,547
|
)
|
|
Three Months Ended
March 31, |
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase (Decrease) ($)
|
|
Increase (Decrease) (%)
|
|||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
CoStar Suite
|
$
|
130,361
|
|
|
$
|
109,979
|
|
|
$
|
20,382
|
|
|
19
|
%
|
Information services
|
15,060
|
|
|
18,336
|
|
|
(3,276
|
)
|
|
(18
|
)
|
|||
Multifamily
|
87,683
|
|
|
63,991
|
|
|
23,692
|
|
|
37
|
|
|||
Commercial property and land
|
40,614
|
|
|
34,247
|
|
|
6,367
|
|
|
19
|
|
|||
Total revenues
|
273,718
|
|
|
226,553
|
|
|
47,165
|
|
|
21
|
|
|||
Cost of revenues
|
62,477
|
|
|
51,346
|
|
|
11,131
|
|
|
22
|
|
|||
Gross profit
|
211,241
|
|
|
175,207
|
|
|
36,034
|
|
|
21
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Selling and marketing (excluding customer base amortization)
|
88,490
|
|
|
76,402
|
|
|
12,088
|
|
|
16
|
|
|||
Software development
|
22,913
|
|
|
22,374
|
|
|
539
|
|
|
2
|
|
|||
General and administrative
|
40,590
|
|
|
33,995
|
|
|
6,595
|
|
|
19
|
|
|||
Customer base amortization
|
5,803
|
|
|
4,774
|
|
|
1,029
|
|
|
22
|
|
|||
Total operating expenses
|
157,796
|
|
|
137,545
|
|
|
20,251
|
|
|
15
|
|
|||
Income from operations
|
53,445
|
|
|
37,662
|
|
|
15,783
|
|
|
42
|
|
|||
Interest and other income
|
2,987
|
|
|
429
|
|
|
2,558
|
|
|
596
|
|
|||
Interest and other expense
|
(690
|
)
|
|
(2,686
|
)
|
|
(1,996
|
)
|
|
(74
|
)
|
|||
Income before income taxes
|
55,742
|
|
|
35,405
|
|
|
20,337
|
|
|
57
|
|
|||
Income tax expense
|
3,511
|
|
|
13,275
|
|
|
(9,764
|
)
|
|
(74
|
)
|
|||
Net income
|
$
|
52,231
|
|
|
$
|
22,130
|
|
|
$
|
30,101
|
|
|
136
|
|
__________________________
|
|
|
|
|
|
|
|
•
|
Significant underperformance relative to historical or projected future operating results;
|
•
|
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
|
•
|
Significant negative industry or economic trends; or
|
•
|
Significant decline in our market capitalization relative to net book value for a sustained period.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Month, 2018
|
|
Total Number of
Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
|
|||||
January 1 through January 31
|
|
2,977
|
|
|
$
|
333.29
|
|
|
—
|
|
|
—
|
|
February 1 through February 28
|
|
1,615
|
|
|
343.70
|
|
|
—
|
|
|
—
|
|
|
March 1 through March 31
|
|
38,912
|
|
|
355.79
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
43,504
|
|
(1)
|
$
|
353.81
|
|
|
—
|
|
|
—
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit No.
|
|
Description
|
|
Third Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 6, 2013).
|
|
|
Third Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on September 24, 2013).
|
|
|
First Amendment to the CoStar Group, Inc. 2016 Stock Incentive Plan (filed herewith)
|
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
101
|
|
The following materials from CoStar Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statement of Operations for the three ended March 31, 2018 and 2017, respectively; (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017, respectively; (iii) Unaudited Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017, respectively; (iv) Statement of Changes in Stockholders' Equity at March 31, 2018; (v) Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017, respectively; and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements that have been detail tagged.
|
|
|
COSTAR GROUP, INC.
|
||
Date:
|
April 25, 2018
|
By:
|
|
/s/ Scott T. Wheeler
|
|
|
|
|
Scott T. Wheeler
Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of CoStar Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 25, 2018
|
By: Andrew C. Florance
|
|
|
|
|
|
/s/ Andrew C. Florance
|
|
|
Andrew C. Florance
Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of CoStar Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 25, 2018
|
By: Scott T. Wheeler
|
|
|
|
|
|
/s/ Scott T. Wheeler
|
|
|
Scott T. Wheeler
Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer)
|
By:
|
|
|
|
|
/s/ Andrew C. Florance
|
|
Andrew C. Florance
Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
|
By:
|
|
|
|
|
/s/ Scott T. Wheeler
|
|
Scott T. Wheeler
Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer)
|