RealPage Reports Second Quarter 2019 Financial Results

RICHARDSON, Texas--(BUSINESS WIRE)-- RealPage, Inc. (NASDAQ:RP), a leading global provider of software and data analytics to the real estate industry, today announced financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Financial Highlights

  • GAAP total revenue of $243.9 million, an increase of 13% year-over-year;
  • Net income of $15.1 million, or $0.16 in net income per diluted share, a year-over-year increase of 78% for each;
  • Adjusted EBITDA of $68.2 million, an increase of 19% year-over-year; and
  • Non-GAAP net income of $40.0 million, or $0.43 in non-GAAP net income per diluted share, a year-over-year increase of 24% and 16%, respectively.

Comments on the News

“Our strategic platform enables owners of rental real estate to increase yields on their assets and better position for any future softening in market dynamics,” said Steve Winn, Chairman and CEO of RealPage. “At our recent RealWorld user conference we outlined our thesis that technology spending in the rental real estate industry will increase going forward due to the introduction of innovative new ways to capture yield from ancillary sources of revenue by more effectively monetizing space. We introduced 7 new innovations at RealWorld that do just that.”

“Second quarter financial performance was solid with total revenue growth of 13% and adjusted EBITDA growth of 19%,” said Tom Ernst, CFO and Treasurer of RealPage. “For the remainder of 2019, our investment focuses will be on driving Yes-To-Success improvements, accelerating innovation, and providing our sales teams with the resources to market new innovation more effectively.”

2019 Financial Outlook

RealPage management expects to achieve the following results during the third quarter ending September 30, 2019:

  • GAAP total revenue is expected to be in the range of $253 million to $255 million;
  • GAAP net income per diluted share is expected to be in the range of $0.11 to $0.13;
  • Non-GAAP total revenue is expected to be in the range of $253 million to $255 million;
  • Adjusted EBITDA is expected to be in the range of $71 million to $73 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $0.44 to $0.46;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 94.7 million.

RealPage management expects to achieve the following results during the calendar year ending December 31, 2019:

  • GAAP total revenue is expected to be in the range of $987 million to $995 million;
  • GAAP net income per diluted share is expected to be in the range of $0.54 to $0.59;
  • Non-GAAP total revenue is expected to be in the range of $987 million to $995 million;
  • Adjusted EBITDA is expected to be in the range of $278 million to $283 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $1.73 to $1.77;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 94.4 million.

Conference Call Information; Presentation Slides

The Company will host a conference call at 5:00 p.m. EDT today to discuss its financial results. Participants are encouraged to listen to the presentation via a live web broadcast and view presentation slides at : https://78449.themediaframe.com/dataconf/productusers/rlpg/mediaframe/31595/indexl.html. In addition, a live dial-in is available domestically at 877-407-9128 and internationally at 201-493-6752. A replay will be available at 877-660-6853 or 201-612-7415.

About RealPage

RealPage is a leading global provider of software and data analytics to the real estate industry. Clients use our platform to improve operating performance and increase capital returns. Founded in 1998 and headquartered in Richardson, Texas, RealPage currently serves nearly 12,300 clients worldwide from offices in North America, Europe and Asia. For more information about the company, visit https://www.realpage.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking” statements relating to RealPage, Inc.’s strategy, goals, future focus areas, and expected, possible or assumed future results, including its financial outlook for the third quarter ending September 30, 2019 and calendar year ending December 31, 2019, the ability of our strategic platform to enable owners of rental real estate to increase yields on their assets and better position for any future softening in market dynamics, our thesis that technology spending in the rental real estate industry will increase going forward due to the introduction of innovative new ways to capture yield from ancillary sources of revenue by more effectively monetizing space, and the investment focus on driving Yes-To-Success improvements, accelerating innovation, and providing our sales teams with the resources to market new innovation more effectively. 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. These 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 contained herein upon finalizing its review of quarterly and full-year results and completion of the annual audit, 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 client cancellations; (d) the inability to increase sales to existing clients and to attract new clients; (e) RealPage’s failure to integrate recent or future acquired businesses successfully or to achieve expected synergies, including the recently completed acquisitions of LeaseTerm Solutions, Hipercept and SimpleBills; (f) the timing and success of new product introductions by RealPage or its competitors; (g) changes in RealPage’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; (j) changes in RealPage’s estimates with respect to its long-term corporate tax rate or any other impact from the Tax Cuts and Jobs Act; and (k) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission (“SEC”) by RealPage, including its Annual Report on Form 10-K previously filed with the SEC on February 27, 2019 and its Quarterly Report on Form 10-Q previously filed with the SEC on May 8, 2019. All information provided in this release is as of the date hereof and RealPage undertakes no duty to update this information except as required by law.

Explanation of Non-GAAP Financial Measures

The company reports its financial results in accordance with accounting principles generally accepted in the United States of America, or GAAP. However, the company believes that, in order to properly understand its short-term and long-term financial, operational and strategic trends, it may be helpful for investors to exclude certain non-cash or non-recurring items when used as a supplement to financial performance measures in accordance with GAAP. These non-cash or non-recurring items result from facts and circumstances that vary in both frequency and impact on continuing operations. The company also uses results of operations excluding such items to evaluate the operating performance of RealPage and compare it against prior periods, make operating decisions, determine executive compensation, and serve as a basis for long-term strategic planning. These non-GAAP financial measures provide the company with additional means to understand and evaluate the operating results and trends in its ongoing business by eliminating certain non-cash expenses and other items that RealPage believes might otherwise make comparisons of its ongoing business with prior periods more difficult, obscure trends in ongoing operations, reduce management’s ability to make useful forecasts, or obscure the ability to evaluate the effectiveness of certain business strategies and management incentive structures. In addition, the company also believes that investors and financial analysts find this information to be helpful in analyzing the company’s financial and operational performance and comparing this performance to the company’s peers and competitors.

The company defines “Non-GAAP Total Revenue” as total revenue plus acquisition-related deferred revenue. The company believes it is useful to include deferred revenue written down for GAAP purposes under purchase accounting rules in order to appropriately measure the underlying performance of its business operations in the period of activity and associated expense. Further, the company believes this measure is useful to investors as a way to evaluate the company’s ongoing performance because it provides a more accurate depiction of on demand revenue arising from our strategic acquisitions.

The company defines “Adjusted Gross Profit” as gross profit, plus (1) acquisition-related deferred revenue adjustments, (2) depreciation, (3) amortization of product technologies, and (4) stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.

The company defines “Adjusted EBITDA” as net income, plus (1) acquisition-related deferred revenue, (2) depreciation, asset impairment, and the loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) change in fair value of equity investment, (5) acquisition-related expense, (6) interest expense, net, (7) income tax (benefit) expense, (8) regulatory and legal matters, and (9) stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.

The company defines “Non-GAAP Product Development Expense” as product development expense, excluding stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ongoing expenditures related to product innovation.

The company defines “Non-GAAP Sales and Marketing Expense” as sales and marketing expense, excluding stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ongoing expenditures related to its sales and marketing strategies.

The company defines “Non-GAAP General and Administrative Expense” as general and administrative expense, excluding (1) asset impairment and (gain) loss on disposal of assets, (2) acquisition-related expense, (3) regulatory and legal matters, and (4) stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s underlying expense structure to support corporate activities and processes.

The company defines “Non-GAAP Operating Expense” as operating expense, excluding (1) asset impairment and (gain) loss on disposal of assets, (2) amortization of intangible assets, (3) acquisition-related expense, (4) regulatory and legal matters, and (5) stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s underlying expense structure to support ongoing operations.

The company defines “Non-GAAP Operating Income” as operating income, plus (1) acquisition-related deferred revenue, (2) asset impairment and (gain) loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) acquisition-related expense, (5) regulatory and legal matters, and (6) stock-based expense. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.

The company defines “Non-GAAP Net Income” as net income, plus (1) income tax (benefit) expense, (2) acquisition-related deferred revenue, (3) asset impairment and (gain) loss on disposal of assets, (4) amortization of product technologies and intangible assets, (5) change in fair value of equity investment, (6) acquisition-related expense, (7) amortization of convertible note discount, (8) regulatory and legal matters, and (9) stock-based expense, less (10) provision for income tax expense based on an assumed rate in order to approximate the company’s long-term effective corporate tax rate.

The company defines “Non-GAAP Net Income per Diluted Share” as Non-GAAP Net Income divided by Non-GAAP Weighted Average Diluted Shares Outstanding. The company believes that investors and financial analysts find these non-GAAP financial measures to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.

The company defines "Non-GAAP Weighted Average Diluted Shares Outstanding" as weighted average diluted shares outstanding excluding the impact of shares that are issuable upon conversions of our convertible notes. It is the current intent of the company to settle conversions of the convertible notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of our common stock. We exclude these shares that are issuable upon conversions of our convertible notes because we expect that the dilution from such shares will be offset by the convertible note hedge transactions entered into in May 2017 in connection with the issuance of the convertible notes.

The company defines “Non-GAAP On Demand Revenue” as total on demand revenue plus acquisition-related deferred revenue. The company believes 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 the company’s business operations in the period of activity and associated expense. Further, the company believes that investors and financial analysts find this measure to be useful in evaluating the company’s ongoing performance because it provides a more accurate depiction of on demand revenue arising from our strategic acquisitions.

The company defines “Ending On Demand Units” as the number of rental housing units managed by our clients with one or more of our on demand software solutions at the end of the period. We use ending on demand units to measure the success of our strategy of increasing the number of rental housing units managed with our on demand software solutions. Property unit counts are provided to us by our customers as new sales orders are processed. Property unit counts may be adjusted periodically as information related to our clients’ properties is updated or supplemented, which could result in adjustments to the number of units previously reported.

The company defines “Average On Demand Units” as the average of the beginning and ending on demand units for each quarter in the period presented. The company’s management monitors this metric to measure its success in increasing the number of on demand software solutions utilized by our clients to manage their rental housing units, our overall revenue, and profitability.

The company defines “ACV,” or Annual Client Value, as management’s estimate of the annual value of the company’s on demand revenue contracts at a point in time. The company’s management monitors this metric to measure its success in increasing the number of on demand units, and the amount of software solutions utilized by its clients to manage their rental housing units.

The company defines “RPU,” or Revenue Per Unit, as ACV divided by ending on demand units. The company monitors this metric to measure its success in increasing the penetration of on demand software solutions utilized by its clients to manage their rental housing units.

The company excludes or adjusts each of the items identified below from the applicable non-GAAP financial measure referenced above for the reasons set forth with respect to each excluded item:

  • Non-GAAP tax rate – The GAAP tax rate includes certain tax items which may include, but are not limited to: unusual or infrequently occurring items; benefits from stock compensation deductions for tax purposes that exceed the stock compensation expense recognized for GAAP; certain changes in estimates related to prior fiscal years; certain changes in the realizability of deferred tax assets and liabilities; and changes in tax law. In 2018 and 2019, the company uses a Non-GAAP tax rate of approximately 26% to approximate the company’s long-term effective corporate tax rate. We believe excluding these items assists investors and analysts in understanding the tax provision and the effective tax rate related to ongoing operations.
  • Acquisition-related deferred revenue – These items are included to reflect deferred revenue written down for GAAP purposes under purchase accounting in order to appropriately measure the underlying performance of the company’s business operations in the period of activity and associated expense.
  • Asset impairment and (gain) loss on disposal of assets – These items comprise gains and/or losses on the disposal and impairment of long-lived assets, and impairment of indefinite-lived intangible assets, which are not reflective of the company’s ongoing operations. We believe exclusion of these items facilitates a more accurate comparison of the company’s results of operations between periods.
  • Depreciation of long-lived assets – Long-lived assets are depreciated over their estimated useful lives in a manner reflecting the pattern in which the economic benefit is consumed. Management is limited in its ability to change or influence these charges after the asset has been acquired and placed in service. We do not believe that depreciation expense accurately reflects the performance of our ongoing operations for the period in which the charges are incurred, and are therefore not considered by management in making operating decisions.
  • Amortization of product technologies and intangible assets – These items are amortized over their estimated useful lives and generally cannot be changed or influenced by the company after initial capitalization. Accordingly, these items are not considered by the company in making operating decisions. The company does not believe such charges accurately reflect the performance of its ongoing operations for the period in which such charges are incurred.
  • Change in fair value of equity investment This represents changes in fair value of our equity investment based on observable price changes in orderly transactions for an identical or similar investment of the same issuer. We believe exclusion of these items facilitates a more accurate comparison of our results of operations between periods as these items are not reflective of our ongoing operations.
  • Acquisition-related expense – These items consist of direct costs incurred in our business acquisition transactions and the impact of changes in the fair value of acquisition-related contingent consideration obligations. We believe exclusion of these items facilitates a more accurate comparison of the results of the company’s ongoing operations across periods and eliminates volatility related to changes in the fair value of acquisition-related contingent consideration obligations.
  • Amortization of the convertible note discount – This item consists of non-cash interest expense related to the amortization of the discount recognized on the convertible notes issued in May 2017. Management excludes this item, as it is not indicative of the company’s ongoing operating performance.
  • Regulatory and legal matters – This item is comprised of certain regulatory and similar costs and certain legal settlement costs, such as costs related to the company’s Hart-Scott-Rodino Antitrust Improvements Act review process incurred in connection with our acquisitions or the settlement of certain legal matters. These items are excluded as they are irregular in timing and scope, and may not be indicative of our past and future performance. We believe exclusion of these items facilitates a more accurate comparison of the company’s results of operations between periods.
  • Stock-based expense – This item is excluded because these are non-cash expenditures that the company does not consider part of ongoing operating results when assessing the performance of our business, and also because the total amount of the expenditure is partially outside of its control because it is based on factors such as stock price, volatility, and interest rates, which may be unrelated to the company’s performance during the period in which the expenses are incurred.
Consolidated Balance Sheets
(in thousands, except share and per share data)
 

June 30,

December 31,

2019

2018

(unaudited)
Assets
Current assets:
Cash and cash equivalents

$

261,571

 

$

228,159

 

Restricted cash

 

113,359

 

 

154,599

 

Accounts receivable, less allowances of $7,815 and $8,850 at June 30, 2019 and December 31, 2018, respectively

 

128,080

 

 

123,596

 

Prepaid expenses

 

17,411

 

 

19,214

 

Other current assets

 

17,046

 

 

15,185

 

Total current assets

 

537,467

 

 

540,753

 

Property, equipment, and software, net

 

156,213

 

 

153,528

 

Right-of-use assets

 

99,122

 

 

-

 

Goodwill

 

1,070,828

 

 

1,053,119

 

Intangible assets, net

 

262,711

 

 

287,378

 

Deferred tax assets, net

 

38,999

 

 

42,602

 

Other assets

 

23,783

 

 

20,393

 

Total assets

$

2,189,123

 

$

2,097,773

 

 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable

$

32,673

 

$

25,312

 

Accrued expenses and other current liabilities

 

70,819

 

 

95,482

 

Current portion of deferred revenue

 

124,726

 

 

120,704

 

Current portion of term loans

 

20,166

 

 

16,133

 

Convertible notes, net

 

298,927

 

 

-

 

Customer deposits held in restricted accounts

 

113,358

 

 

154,601

 

Total current liabilities

 

660,669

 

 

412,232

 

Deferred revenue

 

3,924

 

 

4,902

 

Term loans, net

 

275,701

 

 

287,582

 

Convertible notes, net

 

-

 

 

292,843

 

Lease liabilities, net of current portion

 

113,511

 

 

-

 

Other long-term liabilities

 

14,999

 

 

37,190

 

Total liabilities

 

1,068,804

 

 

1,034,749

 

Stockholders’ equity:
Common stock, $0.001 par value: 250,000,000 shares authorized, 96,151,815 and 95,991,162 shares issued and 94,860,120 and 93,650,127 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

96

 

 

96

 

Additional paid-in capital

 

1,189,875

 

 

1,187,683

 

Treasury stock, at cost: 1,291,695 and 2,341,035 shares at June 30, 2019 and December 31, 2018, respectively

 

(34,109

)

 

(65,470

)

Accumulated deficit

 

(33,075

)

 

(58,793

)

Accumulated other comprehensive loss

 

(2,468

)

 

(492

)

Total stockholders’ equity

 

1,120,319

 

 

1,063,024

 

Total liabilities and stockholders’ equity

$

2,189,123

 

$

2,097,773

 

Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Revenue:
On demand

$

235,185

 

$

206,945

 

$

461,704

 

$

400,245

 

Professional and other

 

8,676

 

 

9,307

 

 

16,463

 

 

17,308

 

Total revenue

 

243,861

 

 

216,252

 

 

478,167

 

 

417,553

 

Cost of revenue(1)

 

95,708

 

 

81,942

 

 

185,902

 

 

154,779

 

Amortization of product technologies

 

9,900

 

 

9,127

 

 

19,414

 

 

17,422

 

Gross profit

 

138,253

 

 

125,183

 

 

272,851

 

 

245,352

 

Operating expenses:
Product development(1)

 

28,151

 

 

30,771

 

 

58,048

 

 

59,811

 

Sales and marketing(1)

 

49,120

 

 

40,664

 

 

93,943

 

 

78,344

 

General and administrative(1)

 

28,310

 

 

28,444

 

 

56,453

 

 

55,534

 

Amortization of intangible assets

 

10,402

 

 

8,496

 

 

20,238

 

 

16,585

 

Total operating expenses

 

115,983

 

 

108,375

 

 

228,682

 

 

210,274

 

Operating income

 

22,270

 

 

16,808

 

 

44,169

 

 

35,078

 

Interest expense and other, net

 

(8,029

)

 

(8,518

)

 

(14,009

)

 

(16,188

)

Income before income taxes

 

14,241

 

 

8,290

 

 

30,160

 

 

18,890

 

Income tax (benefit) expense

 

(822

)

 

(189

)

 

3,825

 

 

(490

)

Net income

$

15,063

 

$

8,479

 

$

26,335

 

$

19,380

 

 
Net income per share attributable to common stockholders:
Basic

$

0.16

 

$

0.10

 

$

0.29

 

$

0.23

 

Diluted

$

0.16

 

$

0.09

 

$

0.27

 

$

0.22

 

Weighted average common shares outstanding:
Basic

 

91,914

 

 

85,124

 

 

91,703

 

 

83,156

 

Diluted

 

96,493

 

 

90,005

 

 

96,036

 

 

87,332

 

 
 
(1) Includes stock-based expense as follows:

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Cost of revenue

$

1,447

 

$

1,168

 

$

2,778

 

$

2,003

 

Product development

 

2,016

 

 

2,645

 

 

4,496

 

 

4,808

 

Sales and marketing

 

6,383

 

 

4,470

 

 

11,733

 

 

8,011

 

General and administrative

 

6,019

 

 

5,412

 

 

11,771

 

 

9,191

 

$

15,865

 

$

13,695

 

$

30,778

 

$

24,013

 

Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Cash flows from operating activities:
Net income

$

15,063

 

$

8,479

 

$

26,335

 

$

19,380

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

29,016

 

 

25,129

 

 

56,840

 

 

48,389

 

Amortization of debt discount and issuance costs

 

3,279

 

 

3,109

 

 

6,513

 

 

6,121

 

Amortization of right-of-use assets

 

2,920

 

 

-

 

 

5,925

 

 

-

 

Deferred taxes

 

1,686

 

 

(1,819

)

 

4,236

 

 

(2,973

)

Stock-based expense

 

15,865

 

 

13,695

 

 

30,778

 

 

24,013

 

(Gain) loss on disposal and impairment of other long-lived assets

 

(17

)

 

156

 

 

269

 

 

1,098

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

-

 

Acquisition-related consideration

 

294

 

 

722

 

 

699

 

 

1,124

 

Change in customer deposits

 

3,706

 

 

(11,135

)

 

(46,546

)

 

5,142

 

Other changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations

 

(2,427

)

 

(6,887

)

 

(9,072

)

 

(74

)

Net cash provided by operating activities

 

69,385

 

 

31,449

 

 

73,377

 

 

102,220

 

 
Cash flows from investing activities:
Purchases of property, equipment, and software

 

(12,593

)

 

(9,833

)

 

(23,466

)

 

(22,493

)

Acquisition of businesses, net of cash and restricted cash acquired

 

(17,528

)

 

(137,475

)

 

(17,528

)

 

(137,475

)

Purchase of other investment

 

(1,750

)

 

-

 

 

(1,750

)

 

(1,800

)

Net cash used in investing activities

 

(31,871

)

 

(147,308

)

 

(42,744

)

 

(161,768

)

 
Cash flows from financing activities:
Payments on and proceeds from debt, net

 

(4,034

)

 

(54,085

)

 

(8,067

)

 

(57,188

)

Payments on finance lease obligations

 

(1,358

)

 

(97

)

 

(2,127

)

 

(211

)

Payments of acquisition-related consideration

 

(8,835

)

 

(6,595

)

 

(20,247

)

 

(7,371

)

Proceeds from public offering, net of underwriters’ discount and offering costs

 

-

 

 

441,799

 

 

-

 

 

441,799

 

Proceeds from exercise of stock options

 

1,192

 

 

2,701

 

 

3,069

 

 

7,739

 

Purchase of treasury stock related to stock-based compensation

 

(6,092

)

 

(6,310

)

 

(11,108

)

 

(14,760

)

Net cash (used in) provided by financing activities

 

(19,127

)

 

377,413

 

 

(38,480

)

 

370,008

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

18,387

 

 

261,554

 

 

(7,847

)

 

310,460

 

Effect of exchange rate on cash

 

118

 

 

14

 

 

19

 

 

(113

)

 
Cash, cash equivalents and restricted cash:
Beginning of period

 

356,425

 

 

214,124

 

 

382,758

 

 

165,345

 

End of period

$

374,930

 

$

475,692

 

$

374,930

 

$

475,692

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
COMPARABLE GAAP MEASURES
(unaudited, in thousands, except per share data)
 
The following is a reconciliation of the non-GAAP financial measures used by RealPage to describe its financial results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). An explanation of these measures is also included under the heading “Explanation of Non-GAAP Financial Measures.”

While the company believes that these non-GAAP financial measures provide useful supplemental information to investors regarding the underlying performance of our business operations, investors are reminded to consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition, it should be noted that these non-GAAP financial measures may be different from non-GAAP measures used by other companies, and the company may utilize other measures to illustrate performance in the future. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP.
 
Non-GAAP Total Revenue
Set forth below is a presentation of the company’s “Non-GAAP Total Revenue.” Please reference the “Explanation of Non-GAAP Financial Measures” section.

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Revenue (GAAP)

$

243,861

 

$

216,252

 

$

478,167

 

$

417,553

 

Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Non-GAAP Total Revenue

$

244,018

 

$

216,355

 

$

478,548

 

$

417,969

 

 
Adjusted Gross Profit
Set forth below is a presentation of the company’s “Adjusted Gross Profit.” Please reference the “Explanation of Non-GAAP Financial Measures” section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Gross profit (GAAP)

$

138,253

 

$

125,183

 

$

272,851

 

$

245,352

 

Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Depreciation

 

4,017

 

 

3,099

 

 

7,688

 

 

6,033

 

Amortization of product technologies

 

9,900

 

 

9,127

 

 

19,414

 

 

17,422

 

Stock-based expense

 

1,447

 

 

1,168

 

 

2,778

 

 

2,003

 

Adjusted Gross Profit

$

153,774

 

$

138,680

 

$

303,112

 

$

271,226

 

 
Adjusted EBITDA
Set forth below is a presentation of the company’s "Adjusted EBITDA." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Net income (GAAP)

$

15,063

 

$

8,479

 

$

26,335

 

$

19,380

 

Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Depreciation, asset impairment, and loss on disposal of assets

 

8,697

 

 

7,662

 

 

17,457

 

 

15,480

 

Amortization of product technologies and intangible assets

 

20,302

 

 

17,623

 

 

39,652

 

 

34,007

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

-

 

Acquisition-related expense

 

376

 

 

1,168

 

 

405

 

 

2,175

 

Interest expense, net

 

8,241

 

 

8,584

 

 

16,822

 

 

16,305

 

Income tax (benefit) expense

 

(822

)

 

(189

)

 

3,825

 

 

(490

)

Regulatory and legal matters

 

352

 

 

-

 

 

352

 

 

-

 

Stock-based expense

 

15,865

 

 

13,695

 

 

30,778

 

 

24,013

 

Adjusted EBITDA

$

68,231

 

$

57,125

 

$

133,407

 

$

111,286

 

Non-GAAP Product Development Expense
Set forth below is a presentation of the company’s "Non-GAAP Product Development Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Product development expense (GAAP)

$

28,151

 

$

30,771

$

58,048

$

59,811

Less:Stock-based expense

 

2,016

 

 

2,645

 

4,496

 

4,808

Non-GAAP Product Development Expense

$

26,135

 

$

28,126

$

53,552

$

55,003

 
Non-GAAP Sales and Marketing Expense
Set forth below is a presentation of the company’s "Non-GAAP Sales and Marketing Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Sales and marketing expense (GAAP)

$

49,120

 

$

40,664

$

93,943

$

78,344

Less:Stock-based expense

 

6,383

 

 

4,470

 

11,733

 

8,011

Non-GAAP Sales and Marketing Expense

$

42,737

 

$

36,194

$

82,210

$

70,333

 
Non-GAAP General and Administrative Expense
Set forth below is a presentation of the company’s "Non-GAAP General and Administrative Expense." Please reference the "Explanation of Non-GAAP Financial Measures section.

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

General and administrative expense (GAAP)

$

28,310

 

$

28,444

$

56,453

$

55,534

Less: Asset impairment and (gain) loss on disposal of assets

 

(17

)

 

156

 

269

 

1,098

Acquisition-related expense

 

376

 

 

1,168

 

405

 

2,175

Regulatory and legal matters

 

352

 

 

-

 

352

 

-

Stock-based expense

 

6,019

 

 

5,412

 

11,771

 

9,191

Non-GAAP General and Administrative Expense

$

21,580

 

$

21,708

$

43,656

$

43,070

 
Non-GAAP Operating Expense
Set forth below is a presentation of the company’s "Non-GAAP Operating Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Operating expense (GAAP)

$

115,983

 

$

108,375

$

228,682

$

210,274

Less: Asset impairment and (gain) loss on disposal of assets

 

(17

)

 

156

 

269

 

1,098

Amortization of intangible assets

 

10,402

 

 

8,496

 

20,238

 

16,585

Acquisition-related expense

 

376

 

 

1,168

 

405

 

2,175

Regulatory and legal matters

 

352

 

 

-

 

352

 

-

Stock-based expense

 

14,418

 

 

12,527

 

28,000

 

22,010

Non-GAAP Operating Expense

$

90,452

 

$

86,028

$

179,418

$

168,406

Non-GAAP Operating Income
Set forth below is a presentation of the company’s "Non-GAAP Operating Income." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Operating income (GAAP)

$

22,270

 

$

16,808

 

$

44,169

 

$

35,078

 

Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Asset impairment and (gain) loss on disposal of assets

 

(17

)

 

156

 

 

269

 

 

1,098

 

Amortization of product technologies and intangible assets

 

20,302

 

 

17,623

 

 

39,652

 

 

34,007

 

Acquisition-related expense

 

376

 

 

1,168

 

 

405

 

 

2,175

 

Regulatory and legal matters

 

352

 

 

-

 

 

352

 

 

-

 

Stock-based expense

 

15,865

 

 

13,695

 

 

30,778

 

 

24,013

 

Non-GAAP Operating Income

$

59,305

 

$

49,553

 

$

116,006

 

$

96,787

 

 
Non-GAAP Net Income
Set forth below is a presentation of the company’s "Non-GAAP Net Income" and "Non-GAAP Net Income per Diluted Share." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Net income (GAAP)

$

15,063

 

$

8,479

 

$

26,335

 

$

19,380

 

Income tax (benefit) expense

 

(822

)

 

(189

)

 

3,825

 

 

(490

)

Income before income taxes

 

14,241

 

 

8,290

 

 

30,160

 

 

18,890

 

 
Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Asset impairment and (gain) loss on disposal of assets

 

(17

)

 

156

 

 

269

 

 

1,098

 

Amortization of product technologies and intangible assets

 

20,302

 

 

17,623

 

 

39,652

 

 

34,007

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

-

 

Acquisition-related expense

 

376

 

 

1,168

 

 

405

 

 

2,175

 

Amortization of convertible note discount

 

2,717

 

 

2,562

 

 

5,393

 

 

5,086

 

Regulatory and legal matters

 

352

 

 

-

 

 

352

 

 

-

 

Stock-based expense

 

15,865

 

 

13,695

 

 

30,778

 

 

24,013

 

Non-GAAP income before income taxes

 

53,993

 

 

43,597

 

 

104,790

 

 

85,685

 

Assumed rate for income tax expense (1)

 

26.0

%

 

26.0

%

 

26.0

%

 

26.0

%

Assumed provision for non-GAAP income tax expense

 

14,038

 

 

11,335

 

 

27,245

 

 

22,278

 

Non-GAAP Net Income

$

39,955

 

$

32,262

 

$

77,545

 

$

63,407

 

 
Net income per diluted share

$

0.16

 

$

0.09

 

$

0.27

 

$

0.22

 

Non-GAAP Net Income per Diluted Share

$

0.43

 

$

0.37

 

$

0.83

 

$

0.74

 

 
Weighted average outstanding shares - basic

 

91,914

 

 

85,124

 

 

91,703

 

 

83,156

 

Non-GAAP adjusted diluted weighted average shares outstanding:
Weighted average outstanding shares - diluted

 

96,493

 

 

90,005

 

 

96,036

 

 

87,332

 

Dilution offset from convertible note hedge transactions

 

(2,528

)

 

(2,116

)

 

(2,368

)

 

(1,720

)

Non-GAAP diluted weighted average shares outstanding (2)

 

93,965

 

 

87,889

 

 

93,668

 

 

85,612

 

 
Non-GAAP On Demand Revenue
Set forth below is a presentation of the company’s "Non-GAAP On Demand Revenue." Please reference the "Explanation of Non-GAAP Financial Measures" section.

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

On demand revenue (GAAP)

$

235,185

 

$

206,945

 

$

461,704

 

$

400,245

 

Acquisition-related deferred revenue

 

157

 

 

103

 

 

381

 

 

416

 

Non-GAAP On Demand Revenue

$

235,342

 

$

207,048

 

$

462,085

 

$

400,661

 

Ending On Demand Units, Average On Demand Units, ACV, and RPU
Set forth below is a presentation of the company’s "Ending On Demand Units," "Average On Demand Units," "ACV," and "RPU." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Ending on demand units

 

16,505

 

 

15,531

 

 

16,505

 

 

15,531

 

Average on demand units

 

16,453

 

 

14,352

 

 

16,382

 

 

13,720

 

 
ACV

$

942,436

 

$

837,897

 

RPU

$

57.10

 

$

53.95

 

 
Non-GAAP Total Revenue Guidance
Set forth below is a presentation of the company’s "Non-GAAP Total Revenue" guidance for the three months ending September 30, 2019, and the twelve months ending December 31, 2019. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the Three Months Ending Guidance Range for the Twelve Months Ending
September 30, 2019 December 31, 2019
Low (3) High (3) Low (3) High (3)
Revenue (GAAP)

$

252,955

 

$

254,955

 

$

986,560

 

$

994,560

 

Acquisition-related deferred revenue

 

45

 

 

45

 

 

440

 

 

440

 

Non-GAAP Total Revenue

$

253,000

 

$

255,000

 

$

987,000

 

$

995,000

 

 
Non-GAAP Net Income Guidance
Set forth below is a presentation of the company’s "Non-GAAP Net Income" and "Non-GAAP Net Income per Diluted Share" guidance for the three months ending September 30, 2019, and the twelve months ending December 31, 2019. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the Three Months Ending Guidance Range for the Twelve Months Ending
September 30, 2019 December 31, 2019
Low (3) High (3) Low (3) High (3)
Non-GAAP Net Income:
Net income (GAAP)

$

10,945

 

$

13,015

 

$

52,355

 

$

57,235

 

Income tax expense

 

2,820

 

 

3,550

 

 

10,925

 

 

12,645

 

Income before income taxes

 

13,765

 

 

16,565

 

 

63,280

 

 

69,880

 

 
Acquisition-related deferred revenue

 

45

 

 

45

 

 

440

 

 

440

 

Asset impairment and loss on disposal of assets

 

-

 

 

-

 

 

270

 

 

270

 

Amortization of product technologies and intangible assets

 

21,350

 

 

21,150

 

 

81,350

 

 

80,950

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

(2,600

)

Acquisition-related expense

 

1,090

 

 

1,090

 

 

1,650

 

 

1,650

 

Amortization of convertible note discount

 

2,760

 

 

2,760

 

 

10,950

 

 

10,950

 

Regulatory and legal matters

 

-

 

 

-

 

 

360

 

 

360

 

Stock-based expense

 

17,200

 

 

17,000

 

 

64,300

 

 

63,900

 

Non-GAAP income before income taxes

 

56,210

 

 

58,610

 

 

220,000

 

 

225,800

 

Expected effective tax rate (1)

 

26.0

%

 

26.0

%

 

26.0

%

 

26.0

%

Assumed provision for income tax expense

 

14,615

 

 

15,239

 

 

57,200

 

 

58,708

 

Non-GAAP Net Income

$

41,595

 

$

43,371

 

$

162,800

 

$

167,092

 

 
Net income per diluted share

$

0.11

 

$

0.13

 

$

0.54

 

$

0.59

 

Non-GAAP Net Income per Diluted Share

$

0.44

 

$

0.46

 

$

1.73

 

$

1.77

 

 
Non-GAAP adjusted diluted weighted average shares outstanding:
Weighted average outstanding shares - diluted

 

97,440

 

 

97,440

 

 

96,960

 

 

96,960

 

Dilution offset from convertible note hedge transactions

 

(2,790

)

 

(2,790

)

 

(2,610

)

 

(2,610

)

Non-GAAP diluted weighted average shares outstanding (2)

 

94,650

 

 

94,650

 

 

94,350

 

 

94,350

 

Adjusted EBITDA Guidance
Set forth below is a presentation of the company’s "Adjusted EBITDA" guidance for the three months ending September 30, 2019, and the twelve months ending December 31, 2019. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the
Three Months Ending
Guidance Range for the
Twelve Months Ending
September 30, 2019 December 31, 2019
Low (3) High (3) Low (3) High (3)
Adjusted EBITDA:
Net income (GAAP)

$

10,945

$

13,015

$

52,355

 

$

57,235

 

Acquisition-related deferred revenue

 

45

 

45

 

440

 

 

440

 

Depreciation, asset impairment, and loss on disposal of assets

 

8,900

 

8,700

 

35,370

 

 

34,970

 

Amortization of product technologies and intangible assets

 

21,350

 

21,150

 

81,350

 

 

80,950

 

Change in fair value of equity investment

 

-

 

-

 

(2,600

)

 

(2,600

)

Acquisition-related expense

 

1,090

 

1,090

 

1,650

 

 

1,650

 

Interest expense, net

 

8,450

 

8,250

 

33,850

 

 

33,450

 

Income tax expense

 

2,820

 

3,550

 

10,925

 

 

12,645

 

Regulatory and legal matters

 

-

 

-

 

360

 

 

360

 

Stock-based expense

 

17,200

 

17,000

 

64,300

 

 

63,900

 

 
Adjusted EBITDA

$

70,800

$

72,800

$

278,000

 

$

283,000

 

 

(1)

A 26.0% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate. Please reference the “Explanation of Non-GAAP Financial Measures” section.
 

(2)

It is the current intent of the Company to settle conversions of the Convertible Notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of our common stock. We exclude these shares that are issuable upon conversions of our convertible notes because we expect that the dilution from such shares will be offset by the convertible note hedge transactions entered into in May 2017 in connection with the issuance of the convertible notes.
 

(3)

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. 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. See additional discussion under "Cautionary Statement Regarding Forward-Looking Statements" above.

 

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

Source: RealPage, Inc.