CoStar Group, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide a separate Q4 financial-results table. CoStar provides commercial real estate information, analytics and marketplaces, alongside apartment, residential and other listing services. Amounts below are in U.S. dollars.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $2.182 billion | $1.944 billion | +12% |
| Gross profit / margin | $1.768 billion / 81% | $1.587 billion / 82% | Gross profit +11%; margin down 1 percentage point |
| Operating income / margin | $451 million / 21% | $432 million / 22% | +4% |
| Net income | $369 million | $293 million | +26% |
| Diluted EPS | $0.93 | $0.74 | +26% |
| EBITDA (company-defined) | $583 million | $565 million | +3% |
| Cash from operating activities | $479 million | $470 million | +$9 million |
Cash and cash equivalents were $4.968 billion at year-end, up from $3.827 billion. The increase chiefly reflected $746 million of net proceeds from a September 2022 equity offering and operating cash flow. Investing activities used $69 million; financing activities provided $734 million. The company reported $1.0 billion of 2.8% Senior Notes due in 2030, no borrowings under its $750 million revolving facility, and stated it was in compliance with credit-agreement covenants. Reported net debt, after cash, was approximately negative $4.0 billion.
Subscription services represented approximately 93% of revenue. Annualized net new subscription bookings were approximately $305 million, versus $217 million in 2021; renewal rates were approximately 90%, down from 92%. Revenue by service: CoStar $837 million (+16%); Multifamily $745 million (+10%); LoopNet $231 million (+11%); Information Services $157 million (+11%); Other Marketplaces $138 million (+16%); Residential $74 million (down 1%).
Changes versus 2021
- Revenue growth was broad-based, led by CoStar, supported by price increases, customer upgrades and subscriber growth. Multifamily benefited from renewal pricing and more listings; Information Services included the Business Immo acquisition.
- Net income grew faster than operating income, in part because net interest shifted from $32 million of expense in 2021 to $32 million of income in 2022, largely reflecting higher returns on cash.
- Operating expenses rose 14%, faster than revenue. General and administrative expense increased 32%, including higher personnel, legal and professional-service costs and bad-debt expense. Gross margin declined to 81% from 82%; operating margin declined to 21% from 22%.
- The company completed a public offering of 10.7 million shares for net proceeds of approximately $746 million. The filing reports no public share-repurchase program; fourth-quarter share purchases were employee tax-withholding transactions.
Outlook, risks and notable items
- No quantified full-year 2023 financial guidance is provided in the filing. Management expects CoStar and Information Services growth to slow, while Multifamily and LoopNet growth may accelerate. Residential revenue is expected to decline, and Other Marketplaces growth is expected to slow.
- 2023 priorities include investing in Homes.com, LoopNet and international expansion, and integrating STR benchmarking into CoStar. Management expects higher selling and marketing expense and lower operating income in 2023, reflecting investment priorities and the full-year impact of sales-force additions.
- The Richmond campus expansion is expected to cost $450–$550 million net of estimated incentives over 2023–2032; approximately $200 million of cash expenditure is expected in 2023. The company had paid $17 million and committed a further $148 million as of year-end. Incentives depend on meeting job-creation and capital-spending targets.
- Notable 2022 items included a $9 million impairment of abandoned leased-location assets, a $4 million contract-termination fee, a $3 million gain on sale of an aircraft and $16.3 million of accelerated amortization after changes to a Homesnap product. No goodwill or intangible-asset impairment was recorded.
- Principal risks highlighted include economic and real-estate downturns, higher interest rates, reduced office demand from remote or hybrid work, competition, subscriber retention and listing growth, data quality, cybersecurity and privacy compliance, acquisition integration, foreign-exchange movements, and execution and cost risks for the Richmond project. The company reported no materially disruptive information-security breach in the prior three years.
- Management said current litigation was not expected to materially affect financial position, results or liquidity, while noting outcomes are inherently uncertain. Ernst & Young issued unqualified opinions on the financial statements and internal control; subscription-revenue systems and controls were identified as a critical audit matter.
Investor verification points
- Review the audited statements and notes for the drivers of margin compression, general and administrative expense growth, and the net-interest improvement.
- Assess the quality and durability of net new bookings and the decline in renewal rates, including the contribution from price increases and customer upgrades.
- Track Homes.com and other marketplace investment: spending, traffic, listing growth, monetization and progress against management’s qualitative outlook.
- Verify Richmond project cash spending, total cost estimates, incentive eligibility and any effect on investment capacity.
- Review the $1.0 billion note maturity, revolving-facility covenants and liquidity needs alongside planned growth investments and potential acquisitions.
- Consider the dilution from the 2022 equity offering and the company’s substantial goodwill and intangible assets, approximately $2.6 billion in total.