EMPLOYEE BENEFIT PLANS

9 Months Ended

Sep. 30, 2025

Stock Incentive Plans

In April 2016, the Board of Directors adopted the CoStar Group 2016 Stock Incentive Plan (as amended, the “2016 Plan”), subject to stockholder approval, which was obtained on June 9, 2016. On April 28, 2025, the Board of Directors approved the CoStar Group, Inc. 2025 Stock Incentive Plan (the “2025 Plan”), subject to stockholder approval, which was obtained on June 26, 2025. All shares of common stock that were authorized for issuance under the 2016 Plan that, as of April 28, 2025, remained available for issuance under the 2016 Plan (excluding shares subject to outstanding awards) were rolled into the 2025 Plan and, following stockholder approval of the 2025 Plan, no further grants will be made under the 2016 Plan.

The 2025 Plan provides for the grant of stock options, restricted stock, restricted stock units, and stock appreciation rights to officers, employees, and directors of the Company and its subsidiaries. Stock options granted under the 2025 Plan may be non-qualified or may qualify as incentive stock options. Except in limited circumstances related to a merger or other acquisition, the exercise price for an option may not be less than the fair market value of the Company’s common stock on the date of grant. The vesting period for each grant of options, restricted stock, restricted stock units, and stock appreciation rights under the 2025 Plan is determined by the Board of Directors or a committee thereof and is generally three to four years, subject to minimum vesting periods for restricted stock and restricted stock units of at least one year. In some cases, vesting of awards under the 2025 Plan may be based on performance conditions. The Company initially reserved approximately 13.2 million shares of common stock for issuance under the 2025 Plan, which included shares of common stock that were authorized and remained available for issuance under the 2016 Plan as of April 28, 2025. Any shares of common stock subject to (a) outstanding awards under the 2016 Plan as of June 26, 2025 or (b) outstanding awards under the 2025 Plan after June 26, 2025, that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised or settled in vested and nonforfeitable shares) will become authorized and unissued under the 2025 Plan. Unless terminated sooner, the 2025 Plan will terminate in June 2035, but will continue to govern unexercised and unexpired awards issued under the 2025 Plan prior to that date. Approximately 9.7 million shares were available for future grant under the 2025 Plan as of September 30, 2025.

In connection with the Matterport Acquisition, the Company assumed Matterport's 2021 Incentive Award Plan and Matterport's Amended and Restated 2011 Stock Incentive Plan, including outstanding restricted stock units and stock options originally granted by Matterport under the Assumed Matterport Plans to continuing employees. These assumed awards will vest in accordance with their original terms, generally over four years. The Company does not intend to issue further grants under these plans. Shares forfeited due to employee termination or expiration are returned to the share pool. As of September 30, 2025, approximately 1.9 million shares remained available under the Assumed Matterport Plans.

At September 30, 2025, there was approximately $282.4 million of unrecognized compensation cost related to stock incentive plans, net of estimated forfeitures, which the Company expects to recognize over a weighted-average-period of 2.7 years. See Note 2 for further discussion of stock-based compensation expense.

Stock Options

Option activity was as follows:


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contract Life (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2024	1,904,590	$	51.48	4.80	$	43.8
Assumed in Matterport Acquisition	1,799,170	$	9.54
Granted	212,700	$	78.33
Exercised	(637,509)	$	9.65		$	45.2
Canceled or expired	(26,000)	$	91.98
Outstanding at September 30, 2025	3,252,951	$	37.91	4.21	$	151.0
Exercisable at September 30, 2025	2,898,515	$	32.84	3.64	$	149.3

The Company estimated the fair value of each option granted on the date of grant using the Black-Scholes option-pricing model, using the assumptions in the following table:


	Nine Months Ended September 30,
	2025			2024
Dividend yield	0		%	0		%
Expected volatility	35		%	35		%
Risk-free interest rate	4.3		%	4.3		%
Expected life (in years)	5			5
Weighted-average grant date fair value	$	30.05		$	31.57

The expected dividend yield is determined based on the Company's past cash dividend history and anticipated future cash dividend payments. The Company has never declared nor paid any dividends on its common stock and does not anticipate paying any dividends on its common stock during the foreseeable future but intends to retain any earnings for future growth of its business. Expected volatility is calculated based on historical volatility of the daily closing price of the Company's common stock over a period consistent with the expected life of the options granted. The risk-free interest rate is based on the U.S. Treasury rate with terms similar to the expected life of the options granted. The expected life for the options is determined based on multiple factors, including historical employee behavior patterns of exercising options and post-employment termination behavior as well as expected future employee option exercise patterns.

Restricted Stock Awards

The Company grants restricted common stock to certain executive officers, directors, and employees of the Company which vest over a specific service period. Executive officers also receive restricted common stock that vests based on the achievement of certain performance conditions, primarily the achievement of a three-year cumulative revenue goal established at the grant date. The CEO of the Company has approved grants of restricted common stock to other executive officers and employees of the Company that vest over a specific service period and to other executive officers that vest based on the achievement of certain performance conditions, primarily the achievement of revenue growth and profit margins established at the grant date. The grant of awards with performance conditions supports the Company’s goal of aligning executive incentives with long-term stockholder value and ensuring that executive officers have a continuing stake in the long-term success of the Company.

The vesting of restricted common stock is subject to continuing employment requirements. Certain performance-based restricted common stock awards are also subject to a market condition such that the actual number of shares that vest at the end of the respective three-year period is determined based on the Company’s achievement of performance goals and an established Company specific TSR factor relative to the S&P 500 Index over the same three-year performance period. At the end of the three-year performance period, if the performance condition is achieved at or above the pre-established threshold, the number of shares earned is further adjusted by a TSR payout percentage, which ranges between 80% and 120%, based on the Company’s TSR performance relative to that of S&P 500 Index over the respective three-year period.

The Company estimates the fair value of its performance-based restricted stock awards with market conditions on the date of grant using a Monte-Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards. Expense is only recorded for awards that

are expected to vest, net of estimated forfeitures. The assumptions used to estimate the fair value of performance-based restricted stock awards with market conditions were as follows:


	Nine Months Ended September 30,
	2025			2024
Dividend yield	0		%	0		%
Expected volatility	31		%	34		%
Risk-free interest rate	4.2		%	4.5		%
Expected life (in years)	3			3
Weighted-average grant date fair value	$	85.29		$	86.96

The expected dividend yield is determined based on the Company's past cash dividend history and anticipated future cash dividend payments. The Company has never declared nor paid any dividends on its common stock and does not anticipate paying any dividends on its common stock during the foreseeable future but intends to retain any earnings for future growth of its business. Expected volatility is calculated based on historical volatility of the daily closing price of the common stock of the companies within the S&P 500 Index over a period consistent with the expected life of the awards. The risk-free interest rate is based on the U.S. Treasury rate with terms similar to the expected life of the awards. The expected life is consistent with the performance measurement period of the awards.

As of September 30, 2025, the Company determined that it was probable that at least the minimum performance goals associated with performance-based restricted stock awards with market conditions granted during 2023, 2024, and 2025 would be met by their forfeiture dates. As of September 30, 2025, the Company determined that it was probable that at least the minimum performance goals associated with performance-based restricted stock awards without market conditions granted during the first quarter of 2025 would be met by their forfeiture dates.

The following table presents stock-based compensation expense related to performance-based restricted stock awards for the three and nine months ended September 30, 2025 and 2024 (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Performance-based restricted stock awards without market conditions	$	1.5	$	—	$	3.5	$	—
Performance-based restricted stock awards with market conditions	$	3.3	$	0.7	$	7.1	$	6.3

As of September 30, 2025, the Company expects to record an aggregate stock-based compensation expense of approximately $43.1 million for performance-based restricted stock awards over the remainder of 2025 and in 2026, 2027, and 2028.

The following table presents unvested restricted stock awards activity for the nine months ended September 30, 2025:


	Restricted Stock Awards — without Market Condition			Restricted Stock Awards — with Market Condition
	Number of Shares	Weighted-Average Grant Date Fair Value per Share		Number of Shares	Weighted-Average Grant Date Fair Value per Share
Unvested restricted stock awards at December 31, 2024	2,554,989	$	76.19	733,200	$	81.49
Granted	2,293,972	$	79.14	435,120	$	85.29
Vested	(863,118)	$	74.35	(124,068)	$	71.19
Canceled	(238,382)	$	74.90	(48,252)	$	71.19
Unvested restricted stock awards at September 30, 2025	3,747,461	$	77.69	996,000	$	84.93

Restricted Stock Units

The following table presents unvested restricted stock units activity for the nine months ended September 30, 2025:


	Number of Units	Weighted-Average Grant Date Fair Value per Share
Unvested restricted stock units at December 31, 2024	23,532	$	73.88
Assumed in Matterport Acquisition	2,256,423	75.63
Granted	65,087	87.36
Vested	(995,930)	75.60
Canceled	(226,322)	75.63
Unvested restricted stock units at September 30, 2025	1,122,790	$	76.30

COSTAR GROUP, INC. 10-Q