SEGMENT REPORTING

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

Segment Information

The Company manages its business geographically in two operating segments, with the primary areas of measurement and decision-making being North America, which includes the U.S. and Canada, and International, which includes the U.K., Spain, Germany and France. The Company and its subsidiaries' subscription-based services consist primarily of information, analytics and online marketplace services offered over the Internet to commercial real estate industry and related professionals. The Company’s subscription-based information services consist primarily of CoStar Suite®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, CoStar Go®. CoStar Suite is the Company’s primary service offering in the North America and International operating segments. Management relies on an internal management reporting process that provides revenue and operating segment net income (loss) before interest and other income (expense), income taxes, depreciation and amortization (“EBITDA”). 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):

	Year Ended December 31,
	2014			2015			2016
Revenues
North America	$	552,141		$	686,573		$	809,492
International
External customers	23,795			25,191			28,138
Intersegment revenue	57			41			40
Total International revenue	23,852			25,232			28,178
Intersegment eliminations	(57		)	(41		)	(40		)
Total revenues	$	575,936		$	711,764		$	837,630
EBITDA
North America	$	148,913		$	87,092		$	210,901
International	2,337			2,895			4,169
Total EBITDA	$	151,250		$	89,987		$	215,070

The reconciliation of net income (loss) to EBITDA consists of the following (in thousands):

	Year Ended December 31,
	2014			2015			2016
Net income (loss)	$	44,869		$	(3,465	)	$	85,071
Amortization of acquired intangible assets in cost of revenues	26,290			30,077			22,819
Amortization of acquired intangible assets in operating expenses	28,432			27,931			22,731
Depreciation and other amortization	15,650			20,524			24,615
Interest and other income	(516		)	(537		)	(1,773		)
Interest and other expense	10,481			9,411			10,016
Income tax expense, net	26,044			6,046			51,591
EBITDA	$	151,250		$	89,987		$	215,070

12. SEGMENT REPORTING — (CONTINUED)

Segment Information — (Continued)

Intersegment revenues were attributable to services performed for the Company's wholly owned subsidiary, CoStar Portfolio Strategy by Grecam S.A.S. (“Grecam”), a wholly owned subsidiary of CoStar Limited, the Company’s wholly owned U.K. holding company. Intersegment revenues are recorded at an amount the Company believes approximates fair value. North America EBITDA includes a corresponding cost for the services performed by Grecam.

North America EBITDA includes an allocation of approximately $1 million, $954,000 and $396,000 for the years ended December 31, 2014, 2015 and 2016, respectively. This allocation represents costs incurred for International employees involved in development activities of the Company’s North America operating segment.

International EBITDA includes a corporate allocation of approximately $261,000, $256,000 and $321,000 for the years ended December 31, 2014, 2015 and 2016, respectively. This corporate allocation represents costs incurred for North America 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):

	December 31,
	2015			2016
Property and equipment, net
North America	$	86,191		$	84,727
International	2,120			2,841
Total property and equipment, net	$	88,311		$	87,568
Goodwill
North America	$	1,227,310		$	1,227,777
International	25,635			27,089
Total goodwill	$	1,252,945		$	1,254,866
Assets
North America	$	2,130,202		$	2,239,587
International	41,370			45,167
Total operating segment assets	$	2,171,572		$	2,284,754
Reconciliation of operating segment assets to total assets
Total operating segment assets	$	2,171,572		$	2,284,754
Investment in subsidiaries	(18,344		)	(57,065		)
Intersegment receivables	(73,657		)	(42,626		)
Total assets	$	2,079,571		$	2,185,063
Liabilities
North America	$	525,566		$	520,833
International	72,544			50,057
Total operating segment liabilities	$	598,110		$	570,890
Reconciliation of operating segment liabilities to total liabilities
Total operating segment liabilities	$	598,110		$	570,890
Intersegment payables	(62,319		)	(40,040		)
Total liabilities	$	535,791		$	530,850

12. SEGMENT REPORTING — (CONTINUED)

Revenues by Services

The Company provides information, analytics and online marketplaces to the commercial real estate industry. The revenues by type of service consists of the following (in thousands):

	Year Ended December 31,
	2014		2015		2016
Information and analytics
CoStar Suite(1)	$	322,696	$	360,440	$	408,456
Information services(2)	72,525		75,790		77,178
Online marketplaces
Multifamily(3)	76,785		160,630		224,835
Commercial property and land(4)	103,930		114,904		127,161
Total revenues	$	575,936	$	711,764	$	837,630

⁽¹⁾ CoStar Suite is comprised of: CoStar Property Professional, CoStar COMPS Professional, CoStar Tenant; CoStar Market Analytics; and CoStar Portfolio Strategy.

⁽²⁾ Information services is comprised of: LoopNet Premium Searcher; CoStar Real Estate Manager; CoStar Risk Analytics COMPASS; CoStar Investment Analysis Portfolio Maximizer; CoStar Investment Analysis Request; CoStar Brokerage Applications; PROPEX; Grecam; Belbex; and Thomas Daily.

⁽³⁾ Multifamily is comprised of Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com.

⁽⁴⁾ Commercial property and land is comprised of: LoopNet Premium Lister; LoopLink; CoStar Advertising; BizBuySell and BizQuest; LandsofAmerica and LandAndFarm; and CoStar Private Sale Network.