RealPage Reports Fourth Quarter and Full Year 2015 Financial Results

Feb 23, 2016

RealPage Reports Fourth Quarter and Full Year 2015 Financial Results
  • Q4’15 total Non-GAAP revenue of $121.2 million, representing 16 percent year-over-year growth
  • Q4’15 Adjusted EBITDA of $26.5 million, margin expands 530 basis points year-over-year
  • Q4’15 Non-GAAP net income per diluted share of $0.16, representing 78 percent year-over-year growth

CARROLLTON, Texas--(BUSINESS WIRE)-- RealPage, Inc. (NASDAQ:RP), a leading provider of on demand software and software-enabled services for the multifamily, commercial, single-family and vacation rental housing industries, today announced financial results for its fourth quarter and year ended December 31, 2015.

Fourth Quarter 2015 Financial Highlights

  • Total Non-GAAP revenue of $121.2 million, an increase of 16 percent year-over-year;
  • Adjusted EBITDA of $26.5 million, an increase of 54 percent year-over-year and 530 basis points margin expansion;
  • Non-GAAP net income of $12.5 million, or $0.16 per diluted share, a year-over-year increase of 75 percent and 78 percent, respectively; and
  • GAAP net income of $3.9 million, or $0.05 per diluted share, compared to GAAP net income of $0.1 million, or $0.00 per diluted share, in the prior year quarter.

Full Year 2015 Financial Highlights

  • Total Non-GAAP revenue of $466.4 million, an increase of 15 percent year-over-year;
  • Adjusted EBITDA of $92.2 million, an increase of 31 percent year-over-year and 240 basis points of margin expansion;
  • Non-GAAP net income of $42.2 million, or $0.55 per diluted share, a year-over-year increase of 39 percent and 41 percent, respectively; and
  • GAAP net loss of $9.2 million, or $0.12 per diluted share, compared to a GAAP net loss of $10.3 million, or $0.13 per diluted share, in the prior year. In connection with the preparation of the third quarter financial statements, the company identified certain indicators of impairment for identified intangibles within its Leasing and Marketing solutions. As a result, the company incurred a non-cash, non-tax-deductible income statement charge of $20.3 million during the third quarter to impair certain trade name intangible assets related primarily to its 2011 acquisition of Multifamily Technology Solutions, Inc.

Comments on the News

Steve Winn, Chairman and CEO of RealPage
“2015 was a great year for RealPage as we further penetrated the underserved rental housing industry with our software and data analytics solutions. Financial results across most of our metrics improved considerably. Specifically, Non-GAAP total revenue growth was 15% and Adjusted EBITDA margin expansion was 240 basis points, both compared to last year. I am also excited about our pending acquisition of NWP Services Corporation. The acquisition will allow us to expand our footprint, and introduce new resident-oriented solutions with greater speed and scale. For 2016, the combined business is expected to grow over 20%.”

Bryan Hill, CFO and Treasurer of RealPage
“While revenue growth and margin expansion during 2015 were both impressive, I am particularly pleased with our operating cash flow performance of $96.0 million. This represents growth of 37% compared to 2014, underscores the strength of our financial model, and highlights the returns we are achieving from investments made in 2014 and 2015. Looking forward, 2016 offers many exciting opportunities for RealPage as we strive for total revenue growth in excess of 20% with continued margin expansion, and maintain our focus on disciplined capital allocation.”

Financial Outlook

RealPage management expects to achieve the following results during its first quarter ended March 31, 2016:

  • Non-GAAP total revenue is expected to be in the range of $125.0 million to $127.0 million, which includes approximately $2.5 million from the acquisition of NWP that is expected to close in March of 2016;
  • Adjusted EBITDA is expected to be in the range of $26.3 million to $27.3 million, which includes approximately $0.3 million from the acquisition of NWP; In addition, Adjusted EBITDA will exclude approximately $1.1 million of expense related to the company’s headquarters move for items such as duplicative rent expense and one-time moving expenses;
  • Non-GAAP net income per diluted share is expected to be $0.16;
  • Non-GAAP tax rate is expected to be approximately 40 percent; and
  • Weighted average shares outstanding are expected to be approximately 77.5 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2016:

  • Non-GAAP total revenue is expected to be in the range of $565.0 million to $575.0 million, which includes approximately $45.0 million from the acquisition of NWP;
  • Adjusted EBITDA is expected to be in the range of $118.0 million to $123.0 million, which includes approximately $5.0 million from the acquisition of NWP; In addition, Adjusted EBITDA will exclude approximately $5.0 million of expense related to the company’s headquarters move for items such as duplicative rent expense and one-time moving expenses;
  • Non-GAAP net income per diluted share is expected to be in the range of $0.68 to $0.72;
  • Non-GAAP tax rate is expected to be approximately 40 percent;
  • Weighted average shares outstanding are expected to be approximately 78.3 million; and
  • During 2016, the company expects to incur elevated capital expenditures related to its headquarters move and expansion of its data center capacity. Drivers of this spend will be related to leasehold improvements, new furniture and fixtures as well as costs to transition two of the company’s data centers. Total capital expenditures are expected to be $60.0 million, net of a $19.0 million tenant improvement reimbursement from the company’s landlord which will be disclosed as part of operating cash flow. The company expects annual capital expenditures to return to a level of approximately 5% of revenue for 2017 and beyond.

Please note that the above statements are forward looking and that total revenue may exclude certain adjustments and the impact of acquisitions. Actual results may differ materially. Please reference the information under the caption “Non-GAAP Financial Measures,” as well as reconciliation tables of GAAP financial measures to Non-GAAP financial measures, as set forth in this press release.

Conference Call and Webcast

The company will host a conference call on February 23, 2016 at 5:00 p.m. EST to discuss its financial results. Participants are encouraged to listen to the presentation via a live web broadcast on the Investor Relations section of the RealPage website. In addition, a live dial-in is available domestically at 866-807-9684 and internationally at 412-317-5415. A replay will be available at 877-344-7529 or 412-317-0088, passcode 10081330, until March 2, 2016.

About RealPage

RealPage, Inc. is a leading provider of comprehensive property management software solutions for the multifamily, commercial, single-family and vacation rental housing industries. These solutions help property owners increase efficiency, decrease expenses, enhance the resident experience and generate more revenue. Using its innovative SaaS platform, RealPage's on demand software enables easy system integration and streamlines online property management. Its product line covers the full spectrum of property management, leasing and marketing, asset optimization, and resident services solutions. Founded in 1998 and headquartered in Carrollton, Texas, RealPage currently serves over 11,000 clients worldwide from offices in North America, Europe and Asia. For more information about the company, visit http://www.realpage.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking” statements relating to RealPage, Inc.’s expected, possible or assumed future results; its pending acquisition of NWP Services Corporation and the benefits to be derived from such acquisition, including the opportunity to expand its footprint and introduce new solutions with greater speed and scale, and the potential contribution to the company’s total revenue growth rate; its focus on driving revenue growth and margin expansion; its focus on disciplined capital allocation and cross-selling solutions; its expenses to be incurred in connection with its headquarters move and data center expansion; and its expected future capital expenditure levels. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “expects,” “believes,” “plans,” or similar expressions and the negatives of those terms. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The company may be required to revise its results upon finalizing its review of quarterly and full year results, which could cause or contribute to such differences. Additional factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the possibility that general economic conditions, including leasing velocity or uncertainty, could cause information technology spending, particularly in the rental housing industry, to be reduced or purchasing decisions to be delayed; (b) an increase in insurance claims; (c) an increase in customer cancellations; (d) the inability to increase sales to existing customers and to attract new customers; (e) RealPage, Inc.’s failure to consummate pending acquisitions or to integrate acquired businesses and any future acquisitions successfully; (f) the timing and success of new product introductions by RealPage, Inc. or its competitors; (g) changes in RealPage, Inc.'s pricing policies or those of its competitors; (h) legal or regulatory proceedings; (i) the inability to achieve revenue growth or to enable margin expansion; and (j) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission (“SEC”) by RealPage Inc., including its Quarterly Report on Form 10-Q previously filed with the SEC on November 5, 2015 and its Annual Report on Form 10-K previously filed with the SEC on March 2, 2015. All information provided in this release is as of the date hereof and RealPage Inc. undertakes no duty to update this information except as required by law.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. These measures differ from traditional GAAP financial measures in that they (1) include acquisition-related and other deferred revenue adjustments; (2) exclude depreciation, loss on impairment and disposal of assets; amortization of intangible assets; stock-based compensation expenses; any duplicative rent and one-time moving costs in connection with the headquarters move; any impact related to the Yardi litigation (including related insurance litigation and settlement costs), collectively the “Yardi Litigation”; and acquisition related expenses (including any purchase accounting adjustments); and (3) include income taxes at a sustainable effective rate, which excludes the reversal of valuation allowances due to expected or realization of deferred tax assets.

We define non-GAAP total revenue as total revenue plus acquisition-related and other deferred revenue adjustments. We also define non-GAAP on demand revenue as on demand revenue plus acquisition-related and other deferred revenue adjustments. Non-GAAP net income is defined as net (loss) income plus acquisition-related and other deferred revenue adjustments; amortization of intangible assets; stock-based compensation expense; any duplicative rent and one-time moving costs in connection with the headquarters move; acquisition-related expense; any impact related to the Yardi Litigation; loss on disposal and impairment of assets; and an adjustment to income tax expense (benefit) to reflect our effective tax rate. Other non-GAAP measures such as non-GAAP product development, non-GAAP sales and marketing, non-GAAP general and administrative, and non-GAAP operating expense and income exclude amortization of intangible assets; litigation-related expense; loss on disposal and impairment of assets; and stock-based compensation when calculating their composition. In addition to these adjustments, non-GAAP operating income is adjusted for acquisition-related and other deferred revenue.

Adjusted gross profit is defined as gross profit plus acquisition-related and other deferred revenue adjustments, depreciation and amortization of intangible assets, and stock-based compensation.

We define Adjusted EBITDA as net (loss) income plus acquisition-related and other deferred revenue adjustments; depreciation, asset impairment and loss on disposal of assets; amortization of intangible assets; net interest expense; income tax expense (benefit); stock-based compensation expense; any duplicative rent and one-time moving costs in connection with the headquarters move; any impact related to the Yardi Litigation; and acquisition-related expenses.

Non-GAAP on demand revenue per average on demand unit represents non-GAAP on demand revenue for the period presented divided by average on demand units for the same period. For interim periods, the calculation is performed on an annualized basis. We calculate average on demand units as the average of the beginning and ending on demand units for each quarter in the period presented. We monitor this metric to measure our success in increasing the number of on demand software solutions utilized by our customers to manage their rental housing units, our overall revenue and profitability.

Non-GAAP on demand annual customer value, or “ACV”, represents management's estimate of the current annual run-rate value of on demand customer relationships. ACV is calculated by multiplying ending on demand units by annualized Non-GAAP on demand revenue per average on demand unit.

We believe that the non-GAAP financial measures defined above are useful to investors and other users of our financial statements in evaluating our operating performance because they provide additional tools to compare business performance across companies and across periods. We believe that:

  • these non-GAAP financial measures provide investors and other users of our financial information consistency and comparability with our past financial performance, facilitate period-to-period comparisons of operations and facilitate comparisons with our peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results;
  • it is useful to exclude certain non-cash charges, such as depreciation and asset impairment, amortization of intangible assets and stock-based compensation, duplicative rent and one-time moving costs and non-core operational charges, such as acquisition-related expenses and any impact related to the Yardi Litigation, from non-GAAP earnings measures, such as Adjusted EBITDA and non-GAAP net income, because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards, as the case may be; and
  • it is useful to include deferred revenue written down for GAAP purposes under purchase accounting rules and revenue deferred due to a lack of historical experience determining the settlement of the contractual obligation in order to appropriately measure the underlying performance of our business operations in the period of activity and associated expense.

We use the non-GAAP financial measures defined above in conjunction with traditional GAAP financial measures as part of our overall assessment of our performance; for planning purposes, including the preparation of our annual operating budget; to evaluate the effectiveness of our business strategies; and to communicate with our board of directors concerning our financial performance.

We do not place undue reliance on non-GAAP financial measures as our only measures of operating performance. Non-GAAP financial measures should not be considered as a substitute for other measures of financial performance or liquidity reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do, that they do not reflect changes in, or cash requirements for, our working capital, and they do not reflect our capital expenditures or future requirements. We compensate for the inherent limitations associated with using non-GAAP financial measures through disclosure of these limitations, presentation of our financial statements in accordance with GAAP, and reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure.

   
Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)
 
December 31,December 31,
20152014
 
Assets
Current assets:
Cash and cash equivalents $ 30,911 $ 26,936
Restricted cash 85,461 85,543

Accounts receivable, less allowance for doubtful accounts of $2,318 and $2,363 at December 31, 2015 and 2014, respectively

74,192 64,845
Prepaid expenses 8,294 7,647
Other current assets   23,085     1,848  
Total current assets 221,943 186,819
Property, equipment and software, net 82,198 72,616
Goodwill 220,097 193,378
Identified intangible assets, net 81,280 100,085
Deferred tax assets, net 12,051 8,337
Other assets   5,632     5,059  
Total assets $ 623,201   $ 566,294  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 17,448 $ 14,830
Accrued expenses and other current liabilities 28,294 22,905
Current portion of deferred revenue 84,200 73,485

Customer deposits held in restricted accounts

  85,405     85,489  
Total current liabilities 215,347 196,709
Deferred revenue 6,979 6,903
Revolving credit facility 40,000 20,000
Other long-term liabilities   34,423     13,902  
Total liabilities 296,749 237,514
Stockholders’ equity:

Preferred stock, $0.001 par value: 10,000,000 shares authorized and zero shares issued and outstanding at December 31, 2015 and 2014, respectively

Common stock, $0.001 par value: 125,000,000 shares authorized, 82,919,033 and 83,211,650 shares issued and 78,793,670 and 79,037,351 shares outstanding at December 31, 2015 and 2014, respectively

83 83
Additional paid-in capital 471,668 437,664

Treasury stock, at cost: 4,125,363 and 4,174,299 shares at December 31, 2015 and 2014, respectively

(24,338 ) (33,398 )
Accumulated deficit (120,415 ) (75,360 )

Accumulated other comprehensive loss

  (546 )   (209 )
Total stockholders’ equity   326,452     328,780  
Total liabilities and stockholders’ equity $ 623,201   $ 566,294  
 

 
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
     
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Revenue:
On demand $ 117,090 $ 101,261 $ 450,962 $ 390,622
On premise 669 648 2,970 3,094
Professional and other   3,941     2,555     14,588     10,835  
Total revenue 121,700 104,464 468,520 404,551
Cost of revenue(1) (2)   50,818     46,518     198,613     174,871  
Gross profit 70,882 57,946 269,907 229,680
Operating expense:
Product development(1) 15,880 16,108 68,799 64,418
Sales and marketing(1) (2) 30,410 27,593 123,108 111,563
General and administrative(1) 17,017 16,011 68,814 69,202
Impairment of identified intangible assets           20,801      
Total operating expense   63,307     59,712     281,522     245,183  
Operating income (loss) 7,575 (1,766 ) (11,615 ) (15,503 )
Interest expense and other, net   (401 )   (333 )   (1,449 )   (1,104 )
Income (loss) before income taxes 7,174 (2,099 ) (13,064 ) (16,607 )
Income tax expense (benefit)   3,274     (2,209 )   (3,846 )   (6,333 )
Net income (loss) $ 3,900   $ 110   $ (9,218 ) $ (10,274 )
 
Net income (loss) per share attributable to common shareholders
Basic $ 0.05 $ $ (0.12 ) $ (0.13 )
Diluted $ 0.05 $ $ (0.12 ) $ (0.13 )

Weighted average shares used in computing net income (loss) per share attributable to common shareholders

Basic 76,445 76,742 76,689 76,991
Diluted 77,055 77,565 76,689 76,991
                 
 

(1) Includes stock-based compensation expense as follows:

 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Cost of revenue $ 779 $ 812 $ 4,046 $ 3,826
Product development 1,535 1,874 8,585 8,637
Sales and marketing 2,246 2,948 12,996 12,966
General and administrative   2,896     2,622     12,495     11,621  
$ 7,456   $ 8,256   $ 38,122   $ 37,050  
 
(2) Certain amounts in prior quarterly periods of 2015 have been reclassified to conform with current period presentation.
 

       
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Cash flows from operating activities:
Net income (loss) $ 3,900 $ 110 $ (9,218 ) $ (10,274 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 12,104 10,773 45,891 41,306
Deferred tax expense (benefit) 3,608 (1,880 ) (5,219 ) (7,891 )
Stock-based compensation 7,456 8,256 38,122 37,050
Excess tax benefit from stock options (1,325 ) (2,248 ) (357 ) (2,248 )
Loss on disposal and impairment of assets 102 350 23,871 386
Acquisition-related consideration (250 ) (391 ) (3,268 ) 173

Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations

  2,071   4,948 6,190   11,470
Net cash provided by operating activities 27,666 19,918 96,012 69,972
 
Cash flows from investing activities:
Purchases of property, equipment, and software (14,600 ) (7,937 ) (33,384 ) (37,062 )
Proceeds from disposal of property, equipment, and software 305
Acquisition of businesses, net of cash acquired (5 ) (45,282 ) (41,947 )
Intangible asset additions       (260 )       (260 )
Net cash used in investing activities (14,600 ) (8,202 ) (78,361 ) (79,269 )
 
Cash flows from financing activities:
Payments on and proceeds from debt, net (4,145 ) (18,910 ) 19,418 18,250
Payments of deferred acquisition-related consideration (1,576 ) (2,412 ) (3,685 ) (6,419 )
Issuance of common stock 9,215 4,746 12,115 9,914
Excess tax benefit from stock options 1,325 2,248 357 2,248
Purchase of treasury stock   (5,470 )   (1,093 )   (41,544 )   (22,215 )
Net cash (used in) provided by financing activities   (651 )   (15,421 )   (13,339 )   1,778  
Net increase (decrease) in cash and cash equivalents 12,415 (3,705 ) 4,312 (7,519 )
Effect of exchange rate on cash (70 ) (29 ) (337 ) (47 )
 
Cash and cash equivalents:
Beginning of period   18,566     30,670     26,936     34,502  
End of period $ 30,911   $ 26,936   $ 30,911   $ 26,936  
 

 
Reconciliation of GAAP to Non-GAAP Financial Measures
For the Three and Twelve Months Ended December 31, 2015 and 2014
(in thousands, except per share amounts)
(unaudited)
                       
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP revenue:
Revenue (GAAP) $ 121,700 $ 104,464 $ 468,520 $ 404,551
Acquisition-related and other deferred revenue   (545 )   (290 )   (2,157 )   435  
Non-GAAP revenue $ 121,155   $ 104,174   $ 466,363   $ 404,986  
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Adjusted gross profit:
Gross profit (GAAP)(4) $ 70,882 $ 57,946 $ 269,907 $ 229,680
Acquisition-related and other deferred revenue (545 ) (290 ) (2,157 ) 435
Depreciation 2,533 2,330 9,802 8,512
Amortization of intangible assets 4,071 2,860 14,213 10,712
Stock-based compensation expense   779     812     4,046     3,826  
Adjusted gross profit $ 77,720   $ 63,658   $ 295,811   $ 253,165  
 
Adjusted gross profit margin 64.1 % 61.1 % 63.4 % 62.5 %
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Adjusted EBITDA:
Net income (loss) (GAAP) $ 3,900 $ 110 $ (9,218 ) $ (10,274 )
Acquisition-related and other deferred revenue (545 ) (290 ) (2,157 ) 435
Depreciation, asset impairment, and loss on disposal of assets 5,415 5,377 44,385 19,288
Amortization of intangible assets 6,791 5,746 25,377 22,404
Acquisition-related expense (188 ) (111 ) (1,841 ) 1,987
Interest expense, net 401 337 1,367 1,117
Income tax expense (benefit) 3,274 (2,209 ) (3,846 ) (6,333 )
Litigation-related expense 31 2 4,915
Stock-based compensation expense   7,456     8,256     38,122     37,050  
Adjusted EBITDA $ 26,504   $ 17,247   $ 92,191   $ 70,589  
 
Adjusted EBITDA margin 21.9 % 16.6 % 19.8 % 17.4 %
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014

Non-GAAP total product development:

Product development (GAAP) $ 15,880 $ 16,108 $ 68,799 $ 64,418
Less: Asset impairment and loss on disposal of assets 85 1,418
Stock-based compensation expense   1,535     1,874     8,585     8,637  
Non-GAAP total product development $ 14,260   $ 14,234   $ 58,796   $ 55,781  
 
Non-GAAP total product development as % of non-GAAP revenue: 11.8 % 13.7 % 12.6 % 13.8 %
 

Reconciliation of GAAP to Non-GAAP Financial Measures
For the Three and Twelve Months Ended December 31, 2015 and 2014
(in thousands, except per share amounts)
(unaudited)
                   
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP total sales and marketing:
Sales and marketing (GAAP)(4) $ 30,410 $ 27,593 $ 123,108 $ 111,563
Less: Amortization of intangible assets 2,720 2,886 11,164 11,500
Stock-based compensation expense   2,246     2,948     12,996     12,966  
Non-GAAP total sales and marketing $ 25,444   $ 21,759   $ 98,948   $ 87,097  
 
Non-GAAP total sales and marketing as % of non-GAAP revenue: 21.0 % 20.9 % 21.2 % 21.5 %
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP total general and administrative:
General and administrative (GAAP) $ 17,017 $ 16,011 $ 68,814 $ 69,202
Less: Asset impairment and loss on disposal of assets 17 350 1,652 386
Amortization of intangible assets 192
Acquisition-related expense (188 ) (111 ) (1,841 ) 1,987
Litigation-related expense 31 2 4,915
Stock-based compensation expense   2,896     2,622     12,495     11,621  
Non-GAAP total general and administrative $ 14,292   $ 13,119   $ 56,506   $ 50,101  
 
Non-GAAP total general and administrative as % of non-GAAP revenue: 11.8 % 12.6 % 12.1 % 12.4 %
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP total operating expense:
Operating expense (GAAP)(4) $ 63,307 $ 59,712 $ 281,522 $ 245,183
Less: Asset impairment and loss on disposal of assets 102 350 23,871 386
Amortization of intangible assets 2,720 2,886 11,164 11,692
Acquisition-related expense (188 ) (111 ) (1,841 ) 1,987
Litigation-related expense 31 2 4,915
Stock-based compensation expense   6,677     7,444     34,076     33,224  
Non-GAAP total operating expense $ 53,996   $ 49,112   $ 214,250   $ 192,979  
 
Non-GAAP total operating expense as % of non-GAAP revenue: 44.6 % 47.1 % 45.9 % 47.7 %
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP operating income:
Operating income (loss) (GAAP) $ 7,575 $ (1,766 ) $ (11,615 ) $ (15,503 )
Acquisition-related and other deferred revenue (545 ) (290 ) (2,157 ) 435
Asset impairment and loss on disposal of assets 102 350 23,871 386
Amortization of intangible assets 6,791 5,746 25,377 22,404
Acquisition-related expense (188 ) (111 ) (1,841 ) 1,987
Litigation-related expense 31 2 4,915
Stock-based compensation expense   7,456     8,256     38,122     37,050  
Non-GAAP operating income $ 21,191   $ 12,216   $ 71,759   $ 51,674  
 
Non-GAAP operating margin 17.5 % 11.7 % 15.4 % 12.8 %
 

   
Reconciliation of GAAP to Non-GAAP Financial Measures
For the Three and Twelve Months Ended December 31, 2015 and 2014
(in thousands, except per share amounts)
(unaudited)
                   
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Non-GAAP net income:
Net income (loss) (GAAP) $ 3,900 $ 110 $ (9,218 ) $ (10,274 )
 
Tax deductible items:
Acquisition-related and other deferred revenue (545 ) (290 ) (2,157 ) 435
Asset impairment and loss on disposal of assets 102 350 23,871 386
Amortization of intangible assets 6,791 5,746 25,377 22,404
Acquisition-related expense (188 ) (111 ) (1,841 ) 1,987
Litigation-related expense 31 2 4,915
Stock-based compensation expense   7,456     8,256     38,122     37,050  
Subtotal of tax deductible items 13,616 13,982 83,374 67,177
 
Tax impact of tax deductible items(1) (5,447 ) (5,593 ) (33,350 ) (26,871 )
Tax benefit (expense) resulting from applying effective tax rate(2)   405     (1,369 )   1,380     310  
Non-GAAP net income $ 12,474 $ 7,130 $ 42,186 $ 30,342
 
Non-GAAP net income per share - diluted $ 0.16 $ 0.09 $ 0.55 $ 0.39
 
Weighted average shares - basic 76,445 76,742 76,689 76,991
Weighted average effect of dilutive securities - non-GAAP   610     823     611     725  
Non-GAAP weighted average shares - diluted 77,055 77,565 77,300 77,716
 
Three Months EndedTwelve Months Ended
December 31,December 31,
2015201420152014
Annualized non-GAAP on demand revenue per average on demand unit:
On demand revenue (GAAP) $ 117,090 $ 101,261 $ 450,962 $ 390,622
Acquisition-related and other deferred revenue   (545 )   (290 )   (2,157 )   435  
Non-GAAP on demand revenue 116,545 100,971 448,805 391,057
 
Ending on demand units 10,568 9,560 10,568 9,560
Average on demand units 10,487 9,528 10,118 9,361
   
Annualized non-GAAP on demand revenue per average on demand unit $ 44.45   $ 42.39  
 
Non-GAAP on demand annual customer value(3) $ 469,748 $ 405,248
                         
(1)   Reflects the removal of the tax benefit associated with the acquisition-related and other deferred revenue adjustment, asset impairment and loss on disposal of assets, amortization of intangible assets, acquisition-related expense, litigation-related expense, and stock-based compensation expense.
(2) Represents adjusting to a normalized effective tax rate of 40%.
(3) This metric represents management's estimate of the current annual run-rate value of on demand customer relationships. This metric is calculated by multiplying ending on demand units by annualized non-GAAP on demand revenue per average on demand unit for the periods presented.
(4) Certain amounts in prior quarterly periods of 2015 have been reclassified to conform with current period presentation.
 

RealPage, Inc.
Investor Relations
Rhett Butler, 972-820-3773
rhett.butler@realpage.com

Source: RealPage, Inc.

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Rhett Butler, Investor Relations
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