☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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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1331 L Street, NW
|
||
Washington,
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DC
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20005
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock ($0.01 par value)
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CSGP
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Nasdaq Global Select Market
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Large accelerated filer
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x
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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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, |
||||||
|
2020
|
|
2019
|
||||
Revenues
|
$
|
391,847
|
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|
$
|
328,425
|
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Cost of revenues
|
78,909
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|
|
71,153
|
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Gross profit
|
312,938
|
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|
257,272
|
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||
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Operating expenses:
|
|
|
|
|
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Selling and marketing (excluding customer base amortization)
|
125,107
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|
88,094
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Software development
|
41,610
|
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|
27,928
|
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General and administrative
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58,873
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|
40,076
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Customer base amortization
|
11,484
|
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|
7,682
|
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|
237,074
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|
163,780
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Income from operations
|
75,864
|
|
|
93,492
|
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||
Interest and other income
|
4,518
|
|
|
4,945
|
|
||
Interest and other expense
|
(2,026
|
)
|
|
(732
|
)
|
||
Income before income taxes
|
78,356
|
|
|
97,705
|
|
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Income tax expense
|
5,563
|
|
|
12,536
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Net income
|
$
|
72,793
|
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$
|
85,169
|
|
|
|
|
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||||
Net income per share - basic
|
$
|
2.00
|
|
|
$
|
2.35
|
|
Net income per share - diluted
|
$
|
1.98
|
|
|
$
|
2.33
|
|
|
|
|
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Weighted-average outstanding shares - basic
|
36,471
|
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|
36,237
|
|
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Weighted-average outstanding shares - diluted
|
36,776
|
|
|
36,567
|
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Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
Other comprehensive (loss) income, net of tax
|
|
|
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||||
Foreign currency translation adjustment
|
(12,949
|
)
|
|
380
|
|
||
Unrealized gain on investments
|
189
|
|
|
—
|
|
||
Reclassification adjustment for realized loss on investments included in net income
|
541
|
|
|
—
|
|
||
Total other comprehensive (loss) income
|
(12,219
|
)
|
|
380
|
|
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Total comprehensive income
|
$
|
60,574
|
|
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$
|
85,549
|
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March 31,
2020 |
|
December 31,
2019 |
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ASSETS
|
|
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|
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Current assets:
|
|
|
|
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Cash, cash equivalents and restricted cash
|
$
|
1,927,923
|
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$
|
1,070,731
|
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Accounts receivable
|
120,559
|
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96,788
|
|
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Less: Allowance for credit losses
|
(8,311
|
)
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(4,548
|
)
|
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Accounts receivable, net
|
112,248
|
|
|
92,240
|
|
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Prepaid expenses and other current assets
|
30,219
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|
36,194
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Total current assets
|
2,070,390
|
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1,199,165
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Long-term investments
|
—
|
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10,070
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|
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Deferred income taxes, net
|
4,762
|
|
|
5,408
|
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Property and equipment, net
|
106,409
|
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|
107,529
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Lease right-of-use assets
|
112,811
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115,084
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|
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Goodwill
|
1,873,987
|
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1,882,020
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Intangible assets, net
|
400,689
|
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|
421,196
|
|
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Deferred commission costs, net
|
91,000
|
|
|
89,374
|
|
||
Deposits and other assets
|
9,743
|
|
|
9,232
|
|
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Income tax receivable
|
14,806
|
|
|
14,908
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|
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Total assets
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$
|
4,684,597
|
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$
|
3,853,986
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
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Current liabilities:
|
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|
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Accounts payable
|
$
|
22,486
|
|
|
$
|
7,640
|
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Accrued wages and commissions
|
49,302
|
|
|
53,087
|
|
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Accrued expenses
|
40,310
|
|
|
38,680
|
|
||
Income taxes payable
|
12,183
|
|
|
10,705
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|
||
Lease liabilities
|
27,681
|
|
|
29,670
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|
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Deferred revenue
|
84,717
|
|
|
67,274
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||
Total current liabilities
|
236,679
|
|
|
207,056
|
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||
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|
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|
||||
Long-term debt
|
745,000
|
|
|
—
|
|
||
Deferred income taxes, net
|
88,799
|
|
|
87,096
|
|
||
Income taxes payable
|
20,611
|
|
|
20,521
|
|
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Lease and other long-term liabilities
|
130,697
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|
133,720
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Total liabilities
|
1,221,786
|
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|
448,393
|
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||||
Total stockholders’ equity
|
3,462,811
|
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|
3,405,593
|
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Total liabilities and stockholders’ equity
|
$
|
4,684,597
|
|
|
$
|
3,853,986
|
|
|
Common Stock
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive Loss
|
|
Retained
Earnings
|
|
Total
Stockholders’
Equity
|
||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||
Balance at December 31, 2019
|
36,668
|
|
|
366
|
|
|
$
|
2,473,338
|
|
|
$
|
(8,585
|
)
|
|
$
|
940,474
|
|
|
$
|
3,405,593
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72,793
|
|
|
72,793
|
|
||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,219
|
)
|
|
—
|
|
|
(12,219
|
)
|
||||
Exercise of stock options
|
41
|
|
|
1
|
|
|
9,232
|
|
|
—
|
|
|
—
|
|
|
9,233
|
|
||||
Restricted stock grants
|
83
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted stock grants surrendered
|
(56
|
)
|
|
(1
|
)
|
|
(30,144
|
)
|
|
—
|
|
|
—
|
|
|
(30,145
|
)
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
15,006
|
|
|
—
|
|
|
—
|
|
|
15,006
|
|
||||
Employee stock purchase plan
|
4
|
|
|
—
|
|
|
2,550
|
|
|
—
|
|
|
—
|
|
|
2,550
|
|
||||
Balance at March 31, 2020
|
36,740
|
|
|
367
|
|
|
$
|
2,469,981
|
|
|
$
|
(20,804
|
)
|
|
$
|
1,013,267
|
|
|
$
|
3,462,811
|
|
|
Common Stock
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive Loss
|
|
Retained
Earnings
|
|
Total
Stockholders’
Equity
|
||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||
Balance at December 31, 2018
|
36,446
|
|
|
364
|
|
|
$
|
2,419,812
|
|
|
$
|
(11,688
|
)
|
|
$
|
613,454
|
|
|
$
|
3,021,942
|
|
Cumulative effect of adoption of new accounting standard, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,057
|
|
|
12,057
|
|
||||
Balance at January 1, 2019
|
36,446
|
|
|
364
|
|
|
2,419,812
|
|
|
(11,688
|
)
|
|
625,511
|
|
|
3,033,999
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85,169
|
|
|
85,169
|
|
||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
380
|
|
|
—
|
|
|
380
|
|
||||
Exercise of stock options
|
79
|
|
|
1
|
|
|
10,637
|
|
|
—
|
|
|
—
|
|
|
10,638
|
|
||||
Restricted stock grants
|
132
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted stock grants surrendered
|
(43
|
)
|
|
—
|
|
|
(18,679
|
)
|
|
—
|
|
|
—
|
|
|
(18,679
|
)
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
12,034
|
|
|
—
|
|
|
—
|
|
|
12,034
|
|
||||
Management stock purchase plan
|
—
|
|
|
—
|
|
|
3,491
|
|
|
—
|
|
|
—
|
|
|
3,491
|
|
||||
Employee stock purchase plan
|
4
|
|
|
—
|
|
|
1,582
|
|
|
—
|
|
|
—
|
|
|
1,582
|
|
||||
Balance at March 31, 2019
|
36,618
|
|
|
366
|
|
|
$
|
2,428,876
|
|
|
$
|
(11,308
|
)
|
|
$
|
710,680
|
|
|
$
|
3,128,614
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
24,256
|
|
|
19,659
|
|
||
Amortization of deferred commissions costs
|
14,747
|
|
|
12,407
|
|
||
Amortization of debt issuance costs
|
292
|
|
|
219
|
|
||
Realized loss on investments
|
541
|
|
|
—
|
|
||
Non-cash lease expense
|
6,261
|
|
|
5,197
|
|
||
Stock-based compensation expense
|
15,180
|
|
|
12,029
|
|
||
Deferred income taxes, net
|
2,825
|
|
|
3,702
|
|
||
Credit loss expense
|
6,183
|
|
|
2,185
|
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||
Accounts receivable
|
(26,613
|
)
|
|
(5,835
|
)
|
||
Income taxes payable
|
1,624
|
|
|
8,311
|
|
||
Prepaid expenses and other current assets
|
1,838
|
|
|
206
|
|
||
Deferred commissions
|
(16,523
|
)
|
|
(13,729
|
)
|
||
Other assets
|
1,215
|
|
|
(59
|
)
|
||
Accounts payable and other liabilities
|
15,564
|
|
|
15,068
|
|
||
Lease liabilities
|
(6,967
|
)
|
|
(4,743
|
)
|
||
Deferred revenue
|
18,248
|
|
|
8,708
|
|
||
Net cash provided by operating activities
|
131,464
|
|
|
148,494
|
|
||
|
|
|
|
||||
Investing activities:
|
|
|
|
|
|
||
Proceeds from sale and settlement of investments
|
10,259
|
|
|
—
|
|
||
Purchases of property and equipment and other assets
|
(7,133
|
)
|
|
(9,429
|
)
|
||
Cash paid for acquisitions, net of cash acquired
|
(432
|
)
|
|
—
|
|
||
Net cash provided by (used in) investing activities
|
2,694
|
|
|
(9,429
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
|
|
||
Proceeds from long-term debt
|
745,000
|
|
|
—
|
|
||
Repurchase of restricted stock to satisfy tax withholding obligations
|
(30,144
|
)
|
|
(18,679
|
)
|
||
Proceeds from exercise of stock options and employee stock purchase plan
|
10,295
|
|
|
12,061
|
|
||
Net cash provided by (used in) financing activities
|
725,151
|
|
|
(6,618
|
)
|
||
|
|
|
|
||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
(2,117
|
)
|
|
(46
|
)
|
||
Net increase in cash, cash equivalents and restricted cash
|
857,192
|
|
|
132,401
|
|
||
Cash, cash equivalents and restricted cash at the beginning of period
|
1,070,731
|
|
|
1,100,416
|
|
||
Cash, cash equivalents and restricted cash at the end of period
|
$
|
1,927,923
|
|
|
$
|
1,232,817
|
|
|
|
|
|
||||
Supplemental cash flow disclosures:
|
|
|
|
||||
Interest paid
|
$
|
499
|
|
|
$
|
519
|
|
Income taxes paid
|
$
|
1,111
|
|
|
$
|
521
|
|
1.
|
ORGANIZATION
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Foreign currency translation adjustment
|
$
|
(20,804
|
)
|
|
$
|
(7,855
|
)
|
Net unrealized loss on investments, net of tax
|
—
|
|
|
(730
|
)
|
||
Total accumulated other comprehensive loss
|
$
|
(20,804
|
)
|
|
$
|
(8,585
|
)
|
|
Three Months Ended
March 31, |
||||||
Numerator:
|
2020
|
|
2019
|
||||
|
|
|
|||||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
Denominator:
|
|
|
|
|
|
||
Denominator for basic net income per share — weighted-average outstanding shares
|
36,471
|
|
|
36,237
|
|
||
Effect of dilutive securities:
|
|
|
|
|
|
||
Stock options, restricted stock awards and restricted stock units
|
305
|
|
|
330
|
|
||
Denominator for diluted net income per share — weighted-average outstanding shares
|
36,776
|
|
|
36,567
|
|
||
|
|
|
|
|
|
||
Net income per share — basic
|
$
|
2.00
|
|
|
$
|
2.35
|
|
Net income per share — diluted
|
$
|
1.98
|
|
|
$
|
2.33
|
|
|
Three Months Ended
March 31, |
||||
|
2020
|
|
2019
|
||
Performance-based restricted stock awards
|
84
|
|
|
89
|
|
Anti-dilutive securities
|
96
|
|
|
141
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cost of revenues
|
$
|
2,472
|
|
|
$
|
2,058
|
|
Selling and marketing (excluding customer base amortization)
|
2,024
|
|
|
1,638
|
|
||
Software development
|
2,528
|
|
|
2,056
|
|
||
General and administrative
|
8,156
|
|
|
6,277
|
|
||
Total stock-based compensation expense
|
$
|
15,180
|
|
|
$
|
12,029
|
|
•
|
CoStar Suite Portfolio Segment - The CoStar Suite portfolio segment consists of two classes of trade receivables based on geographical location: CoStar Suite, North America and CoStar Suite, International.
|
•
|
Information Services Portfolio Segment - The information services portfolio segment consists of four classes of trade receivables: Real Estate Manager; information services, North America; STR, US; and STR, International.
|
•
|
Multifamily Portfolio Segment - The multifamily portfolio segment consists of one class of trade receivables.
|
•
|
Commercial property and land Portfolio Segment - The commercial property and land portfolio segment consists of two classes of trade receivables: LoopNet and other commercial property and land online marketplaces.
|
3.
|
REVENUE FROM CONTRACTS WITH CUSTOMERS
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2020
|
|
2019
|
||||||||||||||||||||
|
North America
|
|
International
|
|
Total
|
|
North America
|
|
International
|
|
Total
|
||||||||||||
Information and analytics
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
CoStar Suite
|
$
|
157,335
|
|
|
$
|
7,621
|
|
|
$
|
164,956
|
|
|
$
|
140,973
|
|
|
$
|
6,728
|
|
|
$
|
147,701
|
|
Information services
|
25,690
|
|
|
6,692
|
|
|
32,382
|
|
|
16,591
|
|
|
2,259
|
|
|
18,850
|
|
||||||
Online marketplaces
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Multifamily
|
137,460
|
|
|
—
|
|
|
137,460
|
|
|
114,268
|
|
|
—
|
|
|
114,268
|
|
||||||
Commercial property and land
|
56,962
|
|
|
87
|
|
|
57,049
|
|
|
47,405
|
|
|
201
|
|
|
47,606
|
|
||||||
Total revenues
|
$
|
377,447
|
|
|
$
|
14,400
|
|
|
$
|
391,847
|
|
|
$
|
319,237
|
|
|
$
|
9,188
|
|
|
$
|
328,425
|
|
Balance at December 31, 2019
|
$
|
70,620
|
|
Revenue recognized in the current period from the amounts in the beginning balance
|
(38,354
|
)
|
|
New deferrals, net of amounts recognized in the current period
|
56,602
|
|
|
Effects of foreign currency
|
(824
|
)
|
|
Balance at March 31, 2020(1)
|
$
|
88,044
|
|
__________________________
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Commissions incurred
|
$
|
22,437
|
|
|
$
|
18,551
|
|
Commissions capitalized in the current period
|
(16,523
|
)
|
|
(13,729
|
)
|
||
Amortization of deferred commissions costs
|
14,747
|
|
|
12,407
|
|
||
Total commissions expense
|
$
|
20,661
|
|
|
$
|
17,229
|
|
4.
|
ALLOWANCE FOR CREDIT LOSSES
|
|
Three Months Ended March 31, 2020
|
|
|
||||||||||||||||
|
CoStar Suite
|
|
Information services
|
|
Multifamily
|
|
Commercial property and land
|
|
Total
|
||||||||||
Beginning balance at December 31, 2019
|
$
|
1,264
|
|
|
$
|
624
|
|
|
$
|
1,195
|
|
|
$
|
1,465
|
|
|
$
|
4,548
|
|
Current-period provision for expected credit losses(1), (2)
|
2,634
|
|
|
1,247
|
|
|
1,403
|
|
|
899
|
|
|
6,183
|
|
|||||
Write-offs charged against the allowance, net of recoveries and other
|
(1,372
|
)
|
|
—
|
|
|
(565
|
)
|
|
(483
|
)
|
|
(2,420
|
)
|
|||||
Ending balance at March 31, 2020
|
$
|
2,526
|
|
|
$
|
1,871
|
|
|
$
|
2,033
|
|
|
$
|
1,881
|
|
|
$
|
8,311
|
|
__________________________
|
|
|
|
|
|
|
|
|
|
|
Preliminary:
October 22, 2019
|
|
Measurement Period Adjustments
|
|
Updated Preliminary:
October 22, 2019
|
||||||
Cash and cash equivalents
|
$
|
11,710
|
|
|
$
|
(90
|
)
|
|
$
|
11,620
|
|
Accounts receivable
|
8,067
|
|
|
|
|
|
8,067
|
|
|||
Lease right-of-use assets
|
7,306
|
|
|
|
|
|
7,306
|
|
|||
Goodwill
|
261,436
|
|
|
432
|
|
|
261,868
|
|
|||
Intangible assets
|
178,000
|
|
|
|
|
|
178,000
|
|
|||
Lease liabilities
|
(7,306
|
)
|
|
|
|
(7,306
|
)
|
||||
Deferred revenue
|
(10,966
|
)
|
|
|
|
(10,966
|
)
|
||||
Deferred tax liabilities
|
(7,980
|
)
|
|
|
|
(7,980
|
)
|
||||
Other assets and liabilities
|
(4,815
|
)
|
|
|
|
(4,815
|
)
|
||||
Fair value of identifiable net assets acquired
|
$
|
435,452
|
|
|
$
|
342
|
|
|
$
|
435,794
|
|
|
North America
|
|
International
|
|
|
||||||||
|
Estimated Fair Value
|
|
Estimated Useful Life
|
|
Estimated Fair Value
|
|
Estimated Useful Life
|
|
Amortization Method
|
||||
Customer base
|
$
|
97,000
|
|
|
13
|
|
$
|
42,000
|
|
|
10
|
|
Accelerated
|
Trade name
|
24,000
|
|
|
15
|
|
|
|
|
|
Straight-line
|
|||
Other intangible assets
|
10,000
|
|
|
5
|
|
5,000
|
|
|
5
|
|
Straight-line
|
||
Total intangible assets
|
$
|
131,000
|
|
|
|
|
$
|
47,000
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
||
Revenue
|
|
$
|
340,180
|
|
Net income
|
|
$
|
79,423
|
|
Net income per share - basic
|
|
$
|
2.19
|
|
Net income per share - diluted
|
|
$
|
2.17
|
|
|
December 31, 2019
|
||||||||||||||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Cash equivalents
|
$
|
576,761
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
576,761
|
|
|
$
|
576,761
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Auction rate securities
|
10,800
|
|
|
—
|
|
|
(730
|
)
|
|
10,070
|
|
|
—
|
|
|
—
|
|
|
10,070
|
|
|||||||
Total cash equivalents and long-term investments
|
$
|
587,561
|
|
|
$
|
—
|
|
|
$
|
(730
|
)
|
|
$
|
586,831
|
|
|
$
|
576,761
|
|
|
$
|
—
|
|
|
$
|
10,070
|
|
|
Three Months Ended
March 31, |
||||||
Operating lease costs:
|
2020
|
|
2019
|
||||
|
|
|
|||||
Cost of revenues
|
$
|
2,894
|
|
|
$
|
3,238
|
|
Software development
|
1,396
|
|
|
952
|
|
||
Selling and marketing (excluding customer base amortization)
|
2,539
|
|
|
2,191
|
|
||
General and administrative
|
1,174
|
|
|
292
|
|
||
Total operating lease costs
|
$
|
8,003
|
|
|
$
|
6,673
|
|
Balance
|
Balance Sheet Location
|
March 31, 2020
|
|
December 31, 2019
|
||||
Long-term lease liabilities
|
Lease and other long-term liabilities
|
$
|
116,785
|
|
|
$
|
120,153
|
|
|
|
|
|
|
||||
Weighted-average remaining lease term in years
|
|
4.8
|
|
|
5.0
|
|
||
Weighted-average discount rate
|
|
3.9
|
%
|
|
4.0
|
%
|
|
Three Months Ended
March 31, |
||||||
Cash paid for amounts included in the measurement of lease liabilities:
|
2020
|
|
2019
|
||||
|
|
|
|||||
Operating cash flows used in operating leases
|
$
|
8,709
|
|
|
$
|
7,716
|
|
|
|
|
|
||||
ROU assets obtained in exchange for lease obligations:
|
|
|
|
||||
Operating leases
|
$
|
5,080
|
|
|
$
|
170
|
|
2020(1)
|
$
|
26,214
|
|
2021
|
32,115
|
|
|
2022
|
31,915
|
|
|
2023
|
30,674
|
|
|
2024
|
25,040
|
|
|
Thereafter
|
12,981
|
|
|
Total lease payments
|
158,939
|
|
|
Less imputed interest
|
(14,473
|
)
|
|
Present value of lease liabilities
|
$
|
144,466
|
|
__________________________
|
|
||
(1) Represents the nine months ending December 31, 2020
|
|
|
North America
|
|
International
|
|
Total
|
||||||
Goodwill, December 31, 2018
|
$
|
1,573,088
|
|
|
$
|
38,447
|
|
|
$
|
1,611,535
|
|
Acquisitions, including measurement period adjustments
|
165,272
|
|
|
102,532
|
|
|
267,804
|
|
|||
Effect of foreign currency translation
|
—
|
|
|
2,681
|
|
|
2,681
|
|
|||
Goodwill, December 31, 2019
|
1,738,360
|
|
|
143,660
|
|
|
1,882,020
|
|
|||
Acquisitions, including measurement period adjustments
|
319
|
|
|
113
|
|
|
432
|
|
|||
Effect of foreign currency translation
|
|
|
|
(8,465
|
)
|
|
(8,465
|
)
|
|||
Goodwill, March 31, 2020
|
$
|
1,738,679
|
|
|
$
|
135,308
|
|
|
$
|
1,873,987
|
|
|
March 31,
2020 |
|
December 31,
2019 |
|
Weighted-
Average
Amortization
Period (in years)
|
||||
Acquired technology and data
|
$
|
104,933
|
|
|
$
|
105,168
|
|
|
5
|
Accumulated amortization
|
(91,929
|
)
|
|
(90,542
|
)
|
|
|
||
Acquired technology and data, net
|
13,004
|
|
|
14,626
|
|
|
|
||
|
|
|
|
|
|
||||
Acquired customer base
|
484,131
|
|
|
487,532
|
|
|
11
|
||
Accumulated amortization
|
(243,803
|
)
|
|
(233,202
|
)
|
|
|
||
Acquired customer base, net
|
240,328
|
|
|
254,330
|
|
|
|
||
|
|
|
|
|
|
||||
Acquired trade names and other intangible assets
|
237,821
|
|
|
236,358
|
|
|
12
|
||
Accumulated amortization
|
(90,464
|
)
|
|
(84,118
|
)
|
|
|
||
Acquired trade names and other intangible assets, net
|
147,357
|
|
|
152,240
|
|
|
|
||
|
|
|
|
|
|
||||
Intangible assets, net
|
$
|
400,689
|
|
|
$
|
421,196
|
|
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
EBITDA
|
|
|
|
|
|
||
North America
|
$
|
102,413
|
|
|
$
|
115,268
|
|
International
|
(2,293
|
)
|
|
(2,117
|
)
|
||
Total EBITDA
|
$
|
100,120
|
|
|
$
|
113,151
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
Amortization of acquired intangible assets in cost of revenues
|
6,005
|
|
|
5,513
|
|
||
Amortization of acquired intangible assets in operating expenses
|
11,484
|
|
|
7,682
|
|
||
Depreciation and other amortization
|
6,767
|
|
|
6,464
|
|
||
Interest and other income
|
(4,518
|
)
|
|
(4,945
|
)
|
||
Interest and other expense
|
2,026
|
|
|
732
|
|
||
Income tax expense
|
5,563
|
|
|
12,536
|
|
||
EBITDA
|
$
|
100,120
|
|
|
$
|
113,151
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Property and equipment, net:
|
|
|
|
||||
North America
|
$
|
102,843
|
|
|
$
|
103,383
|
|
International
|
3,566
|
|
|
4,146
|
|
||
Total property and equipment, net
|
$
|
106,409
|
|
|
$
|
107,529
|
|
|
|
|
|
||||
Goodwill:
|
|
|
|
|
|
||
North America
|
$
|
1,738,679
|
|
|
$
|
1,738,360
|
|
International
|
135,308
|
|
|
143,660
|
|
||
Total goodwill
|
$
|
1,873,987
|
|
|
$
|
1,882,020
|
|
|
|
|
|
||||
Assets:
|
|
|
|
|
|
||
North America
|
$
|
4,462,340
|
|
|
$
|
3,615,258
|
|
International
|
222,257
|
|
|
238,728
|
|
||
Total assets
|
$
|
4,684,597
|
|
|
$
|
3,853,986
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
|
||
North America
|
$
|
1,176,504
|
|
|
$
|
402,759
|
|
International
|
45,282
|
|
|
45,634
|
|
||
Total liabilities
|
$
|
1,221,786
|
|
|
$
|
448,393
|
|
14.
|
SUBSEQUENT EVENTS
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Continue to develop, improve and market our recently launched Apartments.com service offerings that focus on the digital rental experience and enable renters to apply for leases and make rent payments, and for landlords to run tenant credit and background checks, all online through a single platform. We continue to aggressively market our multifamily listing services in an effort to provide more value to advertisers and, in turn, to attract advertisers. Our marketing investment is focused on search engine marketing and enhanced brand awareness. As we continue to assess the success and effectiveness of our marketing campaign, we will continue to work to determine the optimal level and focus of our marketing investment for our services for future periods and may adjust our marketing spend as deemed appropriate.
|
•
|
Obtaining necessary bankruptcy court and regulatory approvals to close the pending acquisition of RentPath and integrating RentPath with the Apartments.com network post-closing. On February 11, 2020, a wholly owned subsidiary of the Company entered into an agreement to acquire for $588 million in cash all of the equity interests of RentPath Holdings, Inc., as reorganized following an internal restructuring pursuant to and under the joint chapter 11 plan of reorganization of RentPath and certain of its subsidiaries. Closing of the acquisition is subject to customary closing conditions, including the expiration or termination of any applicable waiting period under applicable antitrust laws and approval by the bankruptcy court. See Note 5 to the accompanying Notes to the Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q for further discussion.
|
•
|
Continue to invest in the LoopNet marketplace by enhancing the content on the site (including high-quality imagery), seeking targeted advertisements, providing premium listing services (such as LoopNet Signature Ads) that increase a property listing’s exposure, and adding more content for premium listings to better meet the needs of a broader cross section of the commercial real estate industry. To support the LoopNet marketplace, we initiated training and incentive programs for our sales team to increase sales of LoopNet Signature Ads, with a focus on property owners.
|
•
|
Integrating recently completed acquisitions, including STR, with CoStar’s business operations. We plan to consolidate STR data and services with CoStar Suite to create an integrated platform. We expect that the combination of STR's and CoStar's offerings will allow us to create valuable new and improved tools for industry participants. We plan to drive international expansion, in part, through STR's global operations and to apply STR's benchmarking expertise to other commercial real estate segments we serve.
|
•
|
Continue to invest in CoStar Suite, including capabilities that allow us to broaden the reach of CoStar Suite in Europe by offering multiple languages and currencies on the platform. We plan to enhance CoStar Suite by making additional investments in analytical capabilities focused on owners and lenders of commercial real estate. In addition, we plan to invest in integrating the technology and infrastructure from other existing service offerings into the CoStar Suite platform, including CoStar Real Estate Manager, in order to leverage data and technology across our platforms and provide customers with additional functionality.
|
•
|
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 and other income and expense 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 and other income and 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 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.
|
•
|
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 for pending and completed acquisitions 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 for pending and completed acquisitions 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.
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
Amortization of acquired intangible assets in cost of revenues
|
6,005
|
|
|
5,513
|
|
||
Amortization of acquired intangible assets in operating expenses
|
11,484
|
|
|
7,682
|
|
||
Depreciation and other amortization
|
6,767
|
|
|
6,464
|
|
||
Interest and other income
|
(4,518
|
)
|
|
(4,945
|
)
|
||
Interest and other expense
|
2,026
|
|
|
732
|
|
||
Income tax expense
|
5,563
|
|
|
12,536
|
|
||
EBITDA
|
$
|
100,120
|
|
|
$
|
113,151
|
|
|
|
|
|
||||
Net cash flows provided by (used in)
|
|
|
|
|
|
||
Operating activities
|
$
|
131,464
|
|
|
$
|
148,494
|
|
Investing activities
|
2,694
|
|
|
(9,429
|
)
|
||
Financing activities
|
725,151
|
|
|
(6,618
|
)
|
|
Three Months Ended
March 31, |
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
Increase (Decrease) ($)
|
|
Increase (Decrease) (%)
|
|||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
CoStar Suite
|
$
|
164,956
|
|
|
$
|
147,701
|
|
|
$
|
17,255
|
|
|
12
|
%
|
Information services
|
32,382
|
|
|
18,850
|
|
|
13,532
|
|
|
72
|
|
|||
Multifamily
|
137,460
|
|
|
114,268
|
|
|
23,192
|
|
|
20
|
|
|||
Commercial property and land
|
57,049
|
|
|
47,606
|
|
|
9,443
|
|
|
20
|
|
|||
Total revenues
|
391,847
|
|
|
328,425
|
|
|
63,422
|
|
|
19
|
|
|||
Cost of revenues
|
78,909
|
|
|
71,153
|
|
|
7,756
|
|
|
11
|
|
|||
Gross profit
|
312,938
|
|
|
257,272
|
|
|
55,666
|
|
|
22
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Selling and marketing (excluding customer base amortization)
|
125,107
|
|
|
88,094
|
|
|
37,013
|
|
|
42
|
|
|||
Software development
|
41,610
|
|
|
27,928
|
|
|
13,682
|
|
|
49
|
|
|||
General and administrative
|
58,873
|
|
|
40,076
|
|
|
18,797
|
|
|
47
|
|
|||
Customer base amortization
|
11,484
|
|
|
7,682
|
|
|
3,802
|
|
|
49
|
|
|||
Total operating expenses
|
237,074
|
|
|
163,780
|
|
|
73,294
|
|
|
45
|
|
|||
Income from operations
|
75,864
|
|
|
93,492
|
|
|
(17,628
|
)
|
|
(19
|
)
|
|||
Interest and other income
|
4,518
|
|
|
4,945
|
|
|
(427
|
)
|
|
(9
|
)
|
|||
Interest and other expense
|
(2,026
|
)
|
|
(732
|
)
|
|
1,294
|
|
|
NM
|
|
|||
Income before income taxes
|
78,356
|
|
|
97,705
|
|
|
(19,349
|
)
|
|
(20
|
)
|
|||
Income tax expense
|
5,563
|
|
|
12,536
|
|
|
(6,973
|
)
|
|
(56
|
)
|
|||
Net income
|
$
|
72,793
|
|
|
$
|
85,169
|
|
|
$
|
(12,376
|
)
|
|
(15
|
)
|
__________________________
|
|
|
|
|
|
|
|
|||||||
NM - Not meaningful
|
|
|
|
|
|
|
|
•
|
Long-lived assets, intangible assets and goodwill
|
•
|
Revenue recognition
|
•
|
Income taxes
|
•
|
Business combinations
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
the length and severity of the pandemic;
|
•
|
the negative impact on global and regional economies, credit markets and economic activity;
|
•
|
governmental, business and individual actions taken in response to the pandemic and the impact of those actions on global economic activity;
|
•
|
the impact of business disruptions and reductions in employment levels and the level of consumer confidence in the economy on our clients and the resulting impact on their demand for our services and solutions;
|
•
|
business consolidations or failures among businesses that we serve;
|
•
|
our clients’ ability to pay for our services and solutions and our ability to collect payment for services provided;
|
•
|
our ability to market, develop, provide, and train clients on the use of our services and solutions, including as a result of our employees or our clients’ employees working remotely, worker absenteeism, quarantines, social distancing or other travel or health-related restrictions;
|
•
|
the pace and extent of economic recovery following the COVID-19 pandemic, including recovery in the real estate industry in particular
|
•
|
increased costs of additional safety procedures and increased technology-related expenses to provide for business continuity; and
|
•
|
increased cyber security risk, data accessibility concerns, and susceptibility to communication disruptions as a result of the increase in our employees and employees of our clients working remotely.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Month, 2020
|
|
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
|
|
2,002
|
|
|
$
|
651.69
|
|
|
—
|
|
|
—
|
|
February 1 through February 29
|
|
14,537
|
|
|
670.83
|
|
|
—
|
|
|
—
|
|
|
March 1 through March 31
|
|
29,432
|
|
|
639.59
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
45,971
|
|
(1)
|
$
|
651.52
|
|
|
—
|
|
|
—
|
|
__________________________
|
|
|
|
|
|
|
|
|
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).
|
|
|
Asset Purchase Agreement, dated as of the Petition Date (on or about February 12, 2020), among CSGP Holdings, LLC, CoStar Group, Inc. (solely for the specified purposes), RentPath Holdings, Inc. and the other Sellers named therein (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 13, 2020).
|
|
|
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.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
104
|
|
The cover page from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (included as Exhibit 101).
|
|
|
COSTAR GROUP, INC.
|
||
Date:
|
April 29, 2020
|
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 29, 2020
|
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 29, 2020
|
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)
|