CoStar Group Inc. (NASDAQ:CSGP)

The analysis of the annual current and deferred income tax expenses reveals notable fluctuations over the five-year period under consideration.

Current Income Tax Expense

The current income tax expense demonstrates an overall increasing trend from 2018 through 2022. It started at $42,015 thousand in 2018, rising steadily to reach $67,766 thousand in 2019. Although there was a decrease in 2020 to $55,382 thousand, the amount significantly increased again in subsequent years, reaching $87,239 thousand in 2021 and peaking at $148,207 thousand in 2022. This suggests a growing liability in current tax obligations, with a substantial surge in the last reported year.

Deferred Income Tax Expense

The deferred income tax expense exhibits volatility throughout the period. It increased from $3,666 thousand in 2018 to $8,220 thousand in 2019, indicating higher deferred tax liabilities or reduced deferred tax assets during that period. However, in 2020, the deferred tax expense turned negative to -$11,530 thousand, implying a deferred tax benefit or recovery. This positive effect reversed back to a significant expense of $24,165 thousand in 2021, before again declining substantially to a negative figure of -$31,203 thousand in 2022. Such fluctuations indicate variability in timing differences affecting taxable income recognition or changes in tax legislation or accounting estimates.

Provision for Income Taxes

The total provision for income taxes aligns with the combined effect of current and deferred expenses. It increased from $45,681 thousand in 2018 to $75,986 thousand in 2019, followed by a notable decrease to $43,852 thousand in 2020. Subsequently, the provision rose sharply to $111,404 thousand in 2021 and slightly increased further to $117,004 thousand in 2022. This pattern reflects the dynamic interplay between current and deferred tax expenses and suggests an overall upward trajectory in total tax provisions, particularly in the most recent years.

Overall, the data indicates an increasing trend in current income tax expenses with considerable volatility in deferred tax expenses. The total provision for income taxes has correspondingly shown fluctuations but generally increased over the period, driven predominantly by the rise in current tax liabilities. The alternating positive and negative values in deferred taxes highlight the impact of timing differences or tax strategy adjustments affecting reported tax expenses.

Statutory Federal Income Tax Rate

The statutory federal income tax rate remained constant at 21% across the entire five-year period from 2018 to 2022, indicating no changes in the legislated tax rate affecting the company's taxable income during these years.

Effective Tax Rate

The effective tax rate exhibited variability over the years, starting at 16.08% in 2018, then increasing to 19.44% in 2019. It decreased again to 16.18% in 2020 before rising sharply to 27.58% in 2021. In 2022, the rate slightly decreased to 24.05%. This fluctuation, especially the significant jump in 2021, suggests changes in the company's tax planning, deductions, credits, or non-recurring tax events that caused the effective tax burden to deviate notably from the statutory rate.

Overall Trend and Insights

Despite a stable statutory tax rate, the effective tax rate showed considerable volatility, with the lowest points in 2018 and 2020 around 16%, and a peak in 2021 at over 27%. The effective tax rate has generally been below the statutory rate, except in 2021 and 2022 where it exceeded 21%. This pattern may indicate variability in the company’s taxable income composition or changes in applicable tax regulations, incentives, or one-time adjustments affecting reported taxes. The upward trend from 2020 to 2021 and continuing into 2022 could imply increased tax expenses or reduced benefits impacting profitability.

Allowance for credit losses

The allowance for credit losses displayed fluctuation over the period, decreasing slightly from 2018 to 2019, then increasing sharply in 2020, followed by a gradual decline in the subsequent years through 2022.

Accrued compensation

Accrued compensation showed a general decline from 2018 to 2021, reaching its lowest point in 2021, before increasing again in 2022, yet not recovering to the initial 2018 level.

Stock compensation

Stock compensation expenses increased steadily each year, more than doubling from 2018 to 2022, indicating rising costs associated with employee stock-based remuneration.

Net operating losses

Net operating losses exhibited notable volatility, initially declining in 2019, then spiking sharply in 2020 and 2021, before decreasing again in 2022, suggesting fluctuating operational challenges or tax-related impacts.

Accrued reserve and other

This item showed a significant rise from 2018 to 2020, then declined in 2021, only to increase substantially in 2022, indicating variable accruals or reserves likely linked to operational factors.

Lease liabilities

Lease liabilities were not present in 2018 but appeared in 2019 with a substantial amount, then progressively decreased year by year through 2022, suggesting amortization or lease terminations over time.

Capitalized research and development costs

This item was reported only in 2022, revealing a sizeable capitalization of R&D expenses in that year, which could imply a change in accounting policy or increased investment focus.

Deferred rent

Deferred rent was reported only in 2018, after which there are no recorded amounts, indicating either the settlement of deferred rent balances or a change in accounting treatment.

Deferred gain on sale of building

Deferred gain on the sale of building appeared solely in 2018 and was absent in following years, suggesting the gain was fully recognized or extinguished by year-end 2018.

Research and development credits

R&D credits remained relatively stable throughout the years with minor fluctuations, indicating consistent levels of qualifying R&D expenditures or credit utilization.

Accrued transaction fees

Accrued transaction fees were reported only in 2020, revealing a one-time or periodic expense associated with transactions during that year.

Deferred tax assets, prior to valuation allowance

Deferred tax assets increased steadily from 2018 through 2020, with a slight decrease in 2021, then rising again in 2022, reflecting growing temporary differences favorable for future tax deductions.

Valuation allowance

The valuation allowance decreased annually from 2018 to 2022, reducing the negative adjustment against deferred tax assets, which may indicate improved expectations of asset realizability.

Deferred tax assets, net of valuation allowance

Net deferred tax assets consistently increased from 2018 to 2020, slightly declined in 2021, and increased again in 2022, mirroring the movement in gross deferred tax assets adjusted for the diminishing valuation allowance.

Deferred commission costs, net

Deferred commission costs demonstrated a continuous increase in the negative balance, suggesting rising deferred expense capitalization or amortization liabilities.

Lease right-of-use assets

Lease right-of-use assets were introduced in 2019 as a negative value and have decreased steadily each year through 2022, indicating ongoing amortization or asset impairment in relation to leases.

Prepaid expenses

Prepaid expenses showed a consistent increase in negative amounts over the period, suggesting growing prepaid assets or timing differences affecting expense recognition.

Property and equipment, net

The net value of property and equipment declined steadily over the years, with increasing negative amounts, likely due to ongoing depreciation or asset disposals exceeding additions.

Intangible assets, net

Intangible assets net balance exhibited a decreasing trend until 2021, followed by a moderate recovery in 2022, indicating amortization coupled with possible impairment or acquisition activity.

Deferred tax liabilities

Deferred tax liabilities increased consistently in magnitude each year, indicating accumulating taxable temporary differences or revaluations increasing future tax obligations.

Net deferred tax assets (liabilities)

The net deferred tax position fluctuated, with negative balances worsening from 2018 to 2019, improving in 2020, deteriorating again in 2021, and improving in 2022, reflecting the interplay of deferred tax assets and liabilities over time.

Deferred Tax Assets, Net

The deferred tax assets, net, showed a declining trend from 2018 through 2020, decreasing from 7,469 thousand US dollars in 2018 to 4,983 thousand in 2020. The values stabilized in 2021, with a slight increase to 5,034 thousand US dollars, followed by a significant rise to 9,722 thousand US dollars in 2022. This suggests a recovery and strengthening of deferred tax assets in the most recent year after a prior period of reduction.

Deferred Tax Liabilities

The deferred tax liabilities exhibited considerable fluctuations over the five-year period. The value increased substantially from 69,857 thousand US dollars in 2018 to 87,096 thousand in 2019. However, it declined in 2020 to 72,991 thousand before rising again to a peak of 98,656 thousand in 2021. In 2022, the deferred tax liabilities reduced sharply to 76,202 thousand US dollars. These swings indicate volatility in the company’s deferred tax obligations, with notable peaks in 2019 and 2021 followed by declines.

Overall Trends and Insights

Throughout the analyzed period, deferred tax assets remained significantly lower than deferred tax liabilities in absolute value, indicating a consistent net liability position. The increase in deferred tax assets in 2022 could point to improved tax-related asset recognition or changes in tax provisions. Meanwhile, the volatility in deferred tax liabilities suggests possible impacts from varying tax regulations, changes in temporary differences, or reassessments of tax positions. Monitoring these deferred tax items is important as they can influence future tax expenses and cash flows.

Total Assets

Total assets exhibited a consistent upward trend over the analyzed period. Reported total assets increased from approximately US$3.31 billion in 2018 to about US$8.40 billion by the end of 2022. Adjusted total assets followed a similar pattern, showing steady growth each year and closely mirroring reported figures, with a marginal adjustment downward at each period.

Total Liabilities

Total liabilities experienced notable increases, particularly between 2019 and 2020. Reported total liabilities rose sharply from roughly US$291 million in 2018 to US$1.54 billion in 2020, then stabilized around US$1.53 billion through 2022. Adjusted liabilities similarly increased substantially by 2020 but showed a slight decline afterward, settling just below US$1.46 billion by 2022. The adjustments consistently lowered the liability figures compared to reported values, with the gap narrowing in the later years.

Stockholders' Equity

Stockholders’ equity increased steadily, reflecting growth in the company's net worth. Reported equity grew from approximately US$3.02 billion in 2018 to about US$6.87 billion in 2022. The adjusted equity values were slightly higher than reported figures across all years, ranging from about US$3.08 billion in 2018 to US$6.94 billion in 2022. This indicates that deferred tax adjustments contributed positively to equity valuation.

Net Income

Both reported and adjusted net income showed fluctuations across the periods. Reported net income increased from around US$238 million in 2018 to a peak near US$315 million in 2019, followed by a decline to approximately US$227 million in 2020. Subsequently, reported income rebounded to US$293 million in 2021 and reached its highest level of about US$369 million in 2022. Adjusted net income demonstrated a somewhat smoother trajectory, with a decline in 2020 that was less pronounced than reported income, followed by increases through 2021 and a slight decrease in 2022. Across all years, adjusted net income tended to differ from reported income, reflecting the impact of deferred tax adjustments on profit recognition.

Overall Insights

The data reflects significant growth in asset base and equity over five years, pointing to expansion and increased shareholder value. The marked rise in liabilities by 2020 suggests increased leverage or funding requirements during that period, stabilizing thereafter. Deferred tax adjustments consistently lowered liabilities and increased equity, indicating the effect of income tax timing differences on the balance sheet. Net income volatility, particularly around 2020, may reflect operational or economic factors influencing profitability, with adjustments smoothing some of these variations. Altogether, the adjustments contribute to a more stable equity position and moderate net income volatility.

Net Profit Margin Trends

The reported net profit margin demonstrated an initial increase from 20% in 2018 to a peak of 22.5% in 2019, followed by a significant decline to 13.69% in 2020. The margin showed moderate recovery thereafter, rising to 15.05% in 2021 and 16.93% in 2022. The adjusted net profit margin mirrors this pattern with slightly higher values in earlier years and slightly lower values in later years, suggesting some impact from deferred tax adjustments on profitability measurement.

Total Asset Turnover Trends

Both reported and adjusted total asset turnover ratios remained stable at 0.36 in 2018 and 2019, followed by a notable decrease to 0.24 in 2020. This lower turnover rate marginally improved to 0.27 in 2021 before declining slightly to 0.26 in 2022. The consistent identical values of reported and adjusted ratios throughout the period indicate minimal influence from tax adjustments on asset utilization efficiency.

Financial Leverage Evolution

Financial leverage, as reported, increased steadily from 1.1 in 2018 to a peak of 1.29 in 2020, before gradually declining to 1.22 in 2022. Adjusted financial leverage follows a similar trajectory, showing slightly lower ratios in most periods, signaling that adjustments marginally reduce leverage estimates. The trend denotes initial increased reliance on debt or financial obligations before a moderate deleveraging phase.

Return on Equity (ROE) Dynamics

Reported ROE rose from 7.89% in 2018 to 9.25% in 2019, then experienced a sharp decline to 4.23% in 2020. It improved modestly to 5.12% in 2021 and 5.38% in 2022. The adjusted ROE values are close but generally lower from 2020 onward, reaching 4.88% in 2022, which may reflect deferred tax effects diminishing equity returns. Overall, ROE shows weakening profitability relative to equity after 2019 with partial recovery.

Return on Assets (ROA) Patterns

Reported ROA declined from 7.19% in 2018 to a low of 3.28% in 2020, followed by a modest improvement to 4.4% in 2022. The adjusted ROA figures slightly exceed reported ones at the start but converge and drop below in later years, indicating some variability due to tax-related adjustments. The pattern suggests reduced efficiency in asset use to generate profit, especially around 2020, before slight stabilization.

Overall Insights

The data reflects a deterioration in profitability and asset utilization beginning in 2020, potentially linked to specific operational challenges or environmental factors in that period. Although there is some recovery observed in 2021 and 2022, performance levels remain below earlier highs. Financial leverage trends indicate increased borrowing or leverage pre-2020 followed by cautious reduction. Adjustments for deferred taxes have minor but consistent effects on profitability and leverage metrics, underscoring their role in financial performance assessment.

The analysis of the annual reported and deferred income tax adjusted financial data reveals several notable trends and patterns over the five-year period under review.

Net Income Trends

Reported net income demonstrates a generally positive trajectory, starting at 238,334 thousand USD in 2018 and rising to 369,453 thousand USD by the end of 2022. Despite a dip in 2020 to 227,128 thousand USD, there is a recovery thereafter, with significant increases in both 2021 and 2022.

Adjusted net income similarly shows a growth pattern from 242,000 thousand USD in 2018 to 338,250 thousand USD in 2022, although it too experiences a decline in 2020 to 215,598 thousand USD. The rebound in 2021 is more pronounced in the adjusted figures than in the reported, peaking at 316,729 thousand USD before a slight decrease in 2022.

Profit Margin Analysis

The reported net profit margin follows a variable trend, increasing from 20% in 2018 to a peak of 22.5% in 2019, then declining sharply to 13.69% in 2020. Following this decline, the margin recovers moderately to 16.93% by 2022, yet it remains below the pre-2020 levels.

Adjusted net profit margin exhibits a similar pattern but with slightly higher percentages in the earlier years. After peaking at 23.09% in 2019, it falls markedly to 13% in 2020. The margin improves to 16.29% in 2021 but then slightly decreases to 15.5% in 2022, indicating a less consistent recovery compared to the reported margin.

Comparative Observations

Throughout the examined period, adjusted net income and profit margins generally exceed reported values, reflecting the impact of deferred income tax adjustments. The decline observed in 2020 across all metrics suggests external or internal challenges affecting profitability, followed by a recovery phase. However, the incomplete return to the high margins of 2019 indicates lingering headwinds or strategic changes impacting efficiency or cost structures.

The analysis covers a five-year period, examining the trends in reported and adjusted total assets alongside their respective total asset turnover ratios.

Total Assets

There is a consistent upward trend in both reported and adjusted total assets from 2018 through 2022. Reported total assets increased from approximately $3.31 billion in 2018 to $8.40 billion in 2022, which represents more than a doubling over five years. Adjusted total assets follow the same pattern and closely mirror the reported figures, differing only marginally. This gradual increase suggests consistent growth and asset accumulation by the company during the period under review.

Total Asset Turnover

The reported and adjusted total asset turnover ratios display identical values each year, indicating consistency in their computation and adjustment. In 2018 and 2019, the turnover ratio remained steady at 0.36 times. A notable decline occurred in 2020 to 0.24 times, indicating reduced efficiency in using assets to generate revenue during that year. Subsequently, there was a modest recovery to 0.27 times in 2021, followed by a slight decrease to 0.26 times in 2022. This trend suggests that while the asset base grew significantly, revenue generation relative to total assets fluctuated and did not return to prior levels seen in 2018-2019.

The data demonstrates a consistent upward trajectory in both total assets and stockholders’ equity over the five-year period. Total assets have more than doubled from approximately 3.31 billion to 8.40 billion US dollars, while stockholders’ equity has also shown significant growth, rising from roughly 3.02 billion to 6.87 billion US dollars according to reported figures. Adjusted figures closely mirror these trends, indicating a high degree of alignment between reported and adjusted data.

Specifically, reported total assets increased steadily each year, with the most substantial jump occurring between 2019 and 2020, where assets rose from about 3.85 billion to nearly 6.92 billion US dollars. Adjusted total assets reflect this pattern almost identically, suggesting that deferred income tax adjustments did not significantly alter the asset values.

Stockholders’ equity displays a comparable pattern of growth, with substantial increases each year and particularly notable expansion during the 2019 to 2020 interval. Adjusted equity values are consistently higher than reported figures, which might imply that deferred income tax adjustments positively impact equity valuation. The growing equity base supports an expanding financial foundation for the company over the period analyzed.

Financial leverage ratios remain relatively stable but indicate a moderate decline in leverage over time. Reported financial leverage peaked at 1.29 in 2020 before gradually decreasing to 1.22 by the end of 2022. Adjusted financial leverage shows a similar pattern, slightly lower than the reported values throughout, ranging from 1.07 in 2018 to 1.21 in 2022. This trend suggests a cautious approach to debt utilization, with the company maintaining or slightly reducing reliance on debt relative to equity, promoting financial stability.

Overall, the data reveals a company experiencing robust asset and equity growth accompanied by prudent leverage management. The adjusted figures reinforce the reliability of reported data while highlighting the modest impact of deferred income tax on financial metrics. The trends reflect expanding operational scale with a solidening capital structure over the five-year period.

Net Income Trends

The reported net income demonstrates fluctuation over the observed period, starting at approximately $238 million in 2018, peaking at around $315 million in 2019, then declining to roughly $227 million in 2020. It subsequently recovers to about $293 million in 2021 and further rises to approximately $369 million by the end of 2022. Similarly, the adjusted net income shows a comparable pattern with an initial value close to $242 million in 2018, increasing to roughly $323 million in 2019 before decreasing to about $216 million in 2020. It then increases to near $317 million in 2021 and slightly declines to around $338 million in 2022. The adjustments appear to smooth some variations but follow the general trend.

Stockholders’ Equity Trends

Reported stockholders’ equity exhibits consistent growth throughout the period, starting from approximately $3.0 billion in 2018 and rising progressively to about $3.4 billion in 2019, $5.4 billion in 2020, $5.7 billion in 2021, and reaching around $6.9 billion in 2022. Adjusted stockholders’ equity follows the same upward trajectory with marginally higher values, moving from approximately $3.1 billion in 2018 to nearly $3.5 billion in 2019, then increasing to about $5.4 billion in 2020, $5.8 billion in 2021, and about $6.9 billion in 2022. The adjustments maintain the growth pattern but indicate slightly larger equity bases.

Return on Equity (ROE) Analysis

The reported ROE shows a varied trend starting at 7.89% in 2018, increasing to 9.25% in 2019, then dropping notably to 4.23% in 2020. This is followed by a moderate increase to 5.12% in 2021 and a slight rise to 5.38% in 2022. Adjusted ROE values closely mirror the reported figures, starting at 7.85% in 2018 and peaking at 9.27% in 2019. Then, it decreases more sharply to 3.96% in 2020 but recovers to 5.46% in 2021 before declining slightly to 4.88% in 2022. The adjusted ROE suggests a more conservative profitability measure especially in the later years.

Overall Observations

The financial data indicates overall growth in stockholders’ equity consistent with a growing company. However, net income exhibits volatility, particularly with a dip in 2020, likely impacting profitability measures such as ROE. Although net income recovered in the subsequent years, ROE did not return to prior high levels, especially when adjusted. The adjustments to net income and equity slightly moderate the variations but do not significantly alter the underlying trends. The decline in ROE from the 2019 peak points to reduced efficiency in generating returns on equity despite increasing equity bases, which may warrant further investigation into cost structures or other operational factors influencing profitability.

The financial data reveals notable trends in reported and adjusted earnings, assets, and profitability ratios over the five-year period. Both reported and adjusted net income exhibit fluctuations, with a general upward movement from 2018 to 2022, though there are periods of decline between specific years.

Net Income Trends

Reported net income increased from approximately $238 million in 2018 to nearly $370 million in 2022. However, the path was not strictly linear; after rising to approximately $315 million in 2019, it declined to about $227 million in 2020 before recovering in subsequent years. Adjusted net income showed a somewhat similar pattern but with less pronounced volatility, peaking at around $323 million in 2019, decreasing in 2020, then rising again, though it ended at a slightly lower level than reported net income in 2022.

Total Assets Behavior

Total assets measured both on reported and adjusted bases increased substantially throughout the period. Reported total assets expanded from approximately $3.31 billion in 2018 to over $8.4 billion in 2022, reflecting significant growth. Adjusted total assets closely mirrored this growth pattern with marginal differences in magnitude each year.

Return on Assets (ROA)

Reported ROA showed a declining trend overall, beginning at 7.19% in 2018, peaking at 8.17% in 2019, then decreasing significantly to 3.28% in 2020 before a moderate recovery to 4.4% by 2022. Adjusted ROA followed a comparable trajectory, reaching its highest point at 8.4% in 2019 and declining thereafter to 4.03% in 2022. This decrease in ROA, despite asset growth, suggests diminishing efficiency in generating profit from assets during the latter years.

In summary, the company experienced robust asset growth across the five years while net income experienced fluctuations with a notable dip in 2020 followed by recovery. Profitability as measured by ROA declined after 2019, indicating that asset expansion did not translate proportionately into higher returns. Adjusted figures generally followed the same trends as reported figures but showed slight differences which reflect effects of income tax adjustments on reported profitability and asset valuation.