SEGMENT REPORTING

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

The Company manages its business geographically in two operating segments, with the primary areas of measurement and decision-making being the U.S. and International, which includes the U.K. and France. The Company’s subscription-based information services consist primarily of CoStar Suite^TM and FOCUS^TM services. CoStar Suite is sold as a platform of service offerings consisting of CoStar Property Professional®, CoStar COMPS Professional®and CoStar Tenant® and through the Company's mobile application, CoStarGo®. CoStar Suite is the Company's primary service offering in the U.S. operating segment. FOCUS is the Company's primary service offering in the International operating segment. Additionally, the Company introduced CoStar Suite in the U.K. in the fourth quarter of 2012 and no longer offered FOCUS to new clients beginning in 2013. CoStar's and its subsidiaries' subscription-based services consist primarily of similar services offered over the Internet to commercial real estate industry and related professionals. Management relies on an internal management reporting process that provides revenue and operating segment EBITDA, which is the Company's net income (loss) before interest, income taxes, depreciation and amortization. Management believes that operating segment EBITDA is an appropriate measure for evaluating the operational performance of the Company's operating segments. EBITDA is used by management to internally measure operating and management performance and to evaluate the performance of the business. However, this measure should be considered in addition to, not as a substitute for or superior to, income from operations or other measures of financial performance prepared in accordance with GAAP.

Summarized information by operating segment consists of the following (in thousands):

	Three Months Ended March 31,
	2014		2013
Revenues
United States	$	113,326	$	99,296
International
External customers	5,750		4,737
Intersegment revenue	—		116
Total international revenue	5,750		4,853
Intersegment eliminations	—		(116		)
Total revenues	$	119,076	$	104,033
EBITDA
United States	$	26,368	$	9,286
International	624		(1,718		)
Total EBITDA	$	26,992	$	7,568

Reconciliation of EBITDA to net income (loss)
EBITDA	$	26,992		$	7,568
Purchase amortization in cost of revenues	(2,877		)	(3,027		)
Purchase amortization in operating expenses	(3,299		)	(4,125		)
Depreciation and other amortization	(3,675		)	(3,014		)
Interest income	137			104
Interest expense	(1,615		)	(1,755		)
Income tax expense, net	(5,923		)	1,839
Net income (loss)	$	9,740		$	(2,410	)

Intersegment revenue is attributable to services performed for the Company’s wholly owned subsidiary, Property and Portfolio Research (“PPR”) by Property and Portfolio Research Ltd., a wholly owned subsidiary of PPR. Intersegment revenue is recorded at an amount the Company believes approximates fair value. U.S. EBITDA includes a corresponding cost for the services performed by Property and Portfolio Research Ltd. for PPR.

10. SEGMENT REPORTING — (CONTINUED)

U.S. EBITDA includes an allocation of approximately $400,000 for the three months ended March 31, 2014. This allocation represents costs incurred for International employees involved in development activities of the Company's U.S. operating segment. There were no costs allocated to U.S. EBITDA for the three months ended March 31, 2013.

International EBITDA includes a corporate allocation of approximately $100,000 for each of the three months ended March 31, 2014 and 2013. This allocation represents costs incurred for U.S. employees involved in management and expansion activities of the Company's International operating segment.

Summarized information by operating segment consists of the following (in thousands):

	March 31, 2014			December 31, 2013
Property and equipment, net
United States	$	53,670		$	53,733
International	3,668			3,986
Total property and equipment, net	$	57,338		$	57,719
Goodwill
United States	$	692,639		$	692,639
International	26,185			25,948
Total goodwill	$	718,824		$	718,587
Assets
United States	$	1,298,378		$	1,311,292
International	44,163			43,464
Total operating segment assets	$	1,342,541		$	1,354,756
Reconciliation of operating segment assets to total assets
Total operating segment assets	$	1,342,541		$	1,354,756
Investment in subsidiaries	(18,344		)	(18,344		)
Intersegment receivables	(79,401		)	(79,430		)
Total assets	$	1,244,796		$	1,256,982
Liabilities
United States	$	310,048		$	324,626
International	80,289			79,266
Total operating segment liabilities	$	390,337		$	403,892
Reconciliation of operating segment liabilities to total liabilities
Total operating segment liabilities	$	390,337		$	403,892
Intersegment payables	(75,334		)	(74,772		)
Total liabilities	$	315,003		$	329,120