Name: CoStar Group Inc. (NASDAQ:CSGP) | Cash Flow Statement
Creator: Stock Analysis on Net

Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

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CoStar Group Inc., consolidated cash flow statement

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	369,453)	292,564)	227,128)	314,963)	238,334)
Depreciation and amortization	137,885)	139,558)	116,944)	81,165)	77,743)
Amortization of deferred commissions costs	76,082)	63,391)	60,516)	53,421)	48,313)
Amortization of Senior Notes discount and issuance costs	2,365)	2,327)	1,658)	876)	876)
Non-cash lease expense	38,489)	28,485)	26,326)	22,748)	—)
Stock-based compensation expense	75,207)	63,709)	53,450)	52,255)	41,214)
Deferred income taxes, net	(31,203)	24,165)	(11,530)	8,220)	3,666)
Credit loss expense	18,309)	10,928)	25,212)	10,978)	6,542)
Other operating activities, net	(2,439)	(654)	288)	105)	73)
Accounts receivable	(46,403)	(29,630)	(36,118)	(5,014)	(27,819)
Prepaid expenses and other current assets	(17,910)	(14,873)	1,936)	(14,244)	(1,651)
Deferred commissions	(116,796)	(72,038)	(64,355)	(66,688)	(53,497)
Accounts payable and other liabilities	23,234)	(30,051)	100,846)	17,751)	(14,132)
Lease liabilities	(37,396)	(30,904)	(30,497)	(25,442)	—)
Income taxes payable	(19,259)	5,860)	10,352)	(577)	9,632)
Deferred revenue	6,785)	17,396)	2,188)	7,911)	7,879)
Other assets	2,217)	(502)	1,762)	(648)	(1,715)
Changes in operating assets and liabilities, net of acquisitions	(205,528)	(154,742)	(13,886)	(86,951)	(81,303)
Adjustments to reconcile net income to net cash provided by operating activities	109,167)	177,167)	258,978)	142,817)	97,124)
Net cash provided by operating activities	478,620)	469,731)	486,106)	457,780)	335,458)
Proceeds from sale and settlement of investments	864)	—)	10,259)	—)	—)
Proceeds from sale of property and equipment and other assets	30,097)	612)	—)	—)	—)
Purchase of Richmond assets	(35,169)	(123,764)	—)	—)	—)
Purchases of property and equipment and other assets	(58,574)	(65,220)	(48,347)	(46,197)	(29,632)
Cash paid for acquisitions, net of cash acquired	(6,273)	(192,971)	(426,075)	(437,556)	(418,369)
Net cash used in investing activities	(69,055)	(381,343)	(464,163)	(483,753)	(448,001)
Proceeds from long-term debt	—)	—)	1,744,210)	—)	—)
Payments of long-term debt	(2,155)	—)	(745,000)	—)	—)
Payments of debt issuance costs	—)	—)	(16,647)	—)	—)
Repurchase of restricted stock to satisfy tax withholding obligations	(23,108)	(33,314)	(38,867)	(27,577)	(24,327)
Proceeds from equity offering, net of transaction costs	745,700)	—)	1,689,971)	—)	—)
Proceeds from exercise of stock options and employee stock purchase plan	13,540)	18,046)	30,280)	25,080)	27,071)
Other financing activities	—)	(411)	(1,650)	(1,657)	—)
Net cash provided by (used in) financing activities	733,977)	(15,679)	2,662,297)	(4,154)	2,744)
Effect of foreign currency exchange rates on cash and cash equivalents	(2,698)	(1,495)	941)	442)	(1,248)
Net increase (decrease) in cash and cash equivalents	1,140,844)	71,214)	2,685,181)	(29,685)	(111,047)
Cash and cash equivalents at beginning of year	3,827,126)	3,755,912)	1,070,731)	1,100,416)	1,211,463)
Cash and cash equivalents at end of year	4,967,970)	3,827,126)	3,755,912)	1,070,731)	1,100,416)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The cash flow profile from 2018 to 2022 demonstrates a transition from aggressive acquisition-led growth to a phase of significant liquidity accumulation and operational scaling. While net income exhibited a general upward trajectory, increasing from 238.3 million in 2018 to 369.5 million in 2022, the net cash provided by operating activities grew more consistently, reaching 478.6 million by the end of the period.

Operating Cash Flow Dynamics: A positive correlation is observed between the growth of net income and non-cash adjustments. Depreciation and amortization nearly doubled over the five-year period, rising from 77.7 million to 137.9 million, while stock-based compensation expenses increased from 41.2 million to 75.2 million. These add-backs provided a significant cushion to operational cash flow. However, there is a notable and increasing drain on cash from operating assets and liabilities. The net change in operating assets and liabilities became increasingly negative, moving from -81.3 million in 2018 to -205.5 million in 2022. This trend is primarily driven by a substantial increase in deferred commissions, which grew from an outflow of 53.5 million in 2018 to 116.8 million in 2022, suggesting an acceleration in customer acquisition costs that are capitalized.
Investing Activity and Capital Allocation: The investment strategy shifted dramatically between 2018 and 2022. From 2018 to 2020, the company maintained a high level of capital expenditure on acquisitions, averaging over 420 million annually. This aggressive M&A activity decelerated sharply in 2021 and nearly ceased by 2022, with cash paid for acquisitions dropping to 6.3 million. Simultaneously, purchases of property and equipment increased from 29.6 million in 2018 to a peak of 65.2 million in 2021, before settling at 58.6 million in 2022. This indicates a pivot from inorganic growth via acquisitions toward organic infrastructure investment.
Financing and Liquidity Position: Financing activities were characterized by a massive capital infusion in 2020, where the company raised 1.74 billion through long-term debt and 1.69 billion through equity offerings. This strategic move fundamentally altered the balance sheet, providing a massive liquidity buffer. A secondary equity offering in 2022 contributed an additional 745.7 million. These financing activities, combined with steady operating cash flows, resulted in the cash and cash equivalents balance increasing from 1.1 billion at the end of 2018 to nearly 5 billion by the end of 2022.
Overall Cash Flow Sustainability: The company maintains a high quality of earnings, as net cash provided by operating activities consistently exceeded net income throughout the period. The ability to fund increasing capital expenditures and significant working capital outflows through internal operations, supplemented by strategic capital raises, has resulted in a highly liquid financial position. The shift away from large-scale acquisitions in 2022 further reduced the net cash used in investing activities, contributing to the overall increase in the ending cash balance.

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