RealPage Reports Fourth Quarter and Full Year 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 fourth quarter and year ended December 31, 2019, exceeding guidance for both revenue and Adjusted EBITDA.

Fourth Quarter 2019 Financial Highlights

  • GAAP total revenue of $254.8 million, an increase of 12% year-over-year;
  • Net income of $20.2 million, or $0.21 in net income per diluted share, a year-over-year increase of 222% and 200%, respectively;
  • Adjusted EBITDA of $76.2 million, an increase of 25% year-over-year; and
  • Non-GAAP net income of $45.2 million, or $0.48 in non-GAAP net income per diluted share, a year-over-year increase of 23% and 23%, respectively.

Full Year 2019 Financial Highlights

  • GAAP total revenue of $988.1 million, an increase of 14% year-over-year;
  • Net income of $58.2 million, or $0.60 in net income per diluted share, a year-over-year increase of 68% and 58%, respectively;
  • Adjusted EBITDA of $281.7 million, an increase of 22% year-over-year; and
  • Non-GAAP net income of $165.3 million, or $1.76 in non-GAAP net income per diluted share, a year-over-year increase of 22% and 17%, respectively.

Comments on the News

“2019 was a key year of organic and inorganic investment to fuel our long-term strategy to accelerate innovation and make RealPage an easier company to do business with,” said Steve Winn, Chairman and CEO of RealPage. “Financial performance for the year shows healthy progress toward execution of that strategy, with total revenue growth of 14% and adjusted EBITDA growth of 22%. We have released one of the largest waves of innovation in the company’s history and we must build on that momentum. Whether in our traditional multifamily market or our SMB category recently augmented with the acquisition of Buildium, our platform is thinly penetrated into an enormous market opportunity.”

“We finished 2019 strong with fourth quarter total revenue growth of 12% year-over-year and adjusted EBITDA growth of 25%,” said Tom Ernst, CFO and Treasurer of RealPage. “Our efforts on improving our Yes-To-Success customer journeys, our internal wave of innovation, and our 2019 strategic acquisition efforts have laid a solid foundation to accelerate our organic revenue growth profile. 2020 will be about leveraging and extending these efforts to expand shareholder value.”

2020 Financial Outlook

RealPage management expects to achieve the following results during the first quarter ending March 31, 2020:

  • GAAP total revenue is expected to be in the range of $276 million to $280 million;
  • GAAP net income per diluted share is expected to be in the range of $0.00 to $0.02;
  • Non-GAAP total revenue is expected to be in the range of $277 million to $281 million;
  • Adjusted EBITDA is expected to be in the range of $70 million to $72 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $0.41 to $0.43;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 93.8 million.

RealPage management expects to achieve the following results during the calendar year ending December 31, 2020:

  • GAAP total revenue is expected to be in the range of $1,163 million to $1,183 million;
  • GAAP net income per diluted share is expected to be in the range of $0.29 to $0.35;
  • Non-GAAP total revenue is expected to be in the range of $1,165 million to $1,185 million;
  • Adjusted EBITDA is expected to be in the range of $320 million to $324 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $1.95 to $2.00;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 94.5 million.

Conference Call Information; Presentation Slides

The Company will host a conference call at 5 p.m. EST today to discuss its financial results. Participants are encouraged to listen to the presentation via a live web broadcast and to view the company’s presentation slides at https://78449.themediaframe.com/dataconf/productusers/rlpg/mediaframe/34658/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 provides a technology platform that enables real estate owners and managers to change how people experience and use rental space. Clients use the platform to gain transparency in asset performance, leverage data insights and monetize space to create incremental yields. Founded in 1998 and headquartered in Richardson, Texas, RealPage currently serves over 18 million units worldwide from offices in North America, Europe and Asia. For more information about RealPage, please 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 first quarter ending March 31, 2020, and calendar year ending December 31, 2020, that our platform is thinly penetrated into an enormous market opportunity, that we have laid a solid foundation to accelerate our organic revenue growth profile, the potential market opportunity for our platform in the traditional multifamily business and the SMB business recently augmented with the acquisition of Buildium, and the ability of our Yes-To-Success customer journeys, internal innovation and 2019 strategic acquisitions to accelerate organic revenue growth and expand shareholder value in 2020. 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 Modern Message, Buildium, Investor Management Services, SimpleBills, Hipercept and LeaseTerm Solutions; (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 (as amended on November 5, 2019) and its Quarterly Report on Form 10-Q previously filed with the SEC on November 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 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 revenue arising from our strategic acquisitions.

The company defines “Adjusted Gross Profit” as gross profit, plus (1) acquisition-related deferred revenue, (2) depreciation, (3) amortization of product technologies, (4) impairment of product technologies, (5) organizational realignment costs and (6) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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 loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) change in fair value of equity investment, (5) loss due to cyber incident, net of recoveries, (6) acquisition-related expense (income), (7) organizational realignment costs, (8) regulatory and legal matters, (9) stock-based expense, (10) interest expense, net, and (11) income tax (benefit) expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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 organizational realignment costs and stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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 (1) organizational realignment costs, (2) asset impairment, and (3) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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) organizational realignment costs, (2) asset impairment and loss on disposal of assets, (3) loss due to cyber incident, net of recoveries, (4) acquisition-related expense (income), (5) regulatory and legal matters, and (6) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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) organizational realignment costs, (2) asset impairment and loss on disposal of assets, (3) amortization of intangible assets, (4) loss due to cyber incident, net of recoveries, (5) acquisition-related expense (income), (6) regulatory and legal matters, and (7) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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 loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) loss due to cyber incident, net of recoveries, (5) acquisition-related expense (income), (6) organizational realignment costs, (7) regulatory and legal matters, and (8) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure 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 loss on disposal of assets, (4) amortization of product technologies and intangible assets, (5) change in fair value of equity investment, (6) loss due to cyber incident, net of recoveries, (7) acquisition-related expense (income), (8) organizational realignment costs, (9) regulatory and legal matters, (10) amortization of convertible note discount, and (11) stock-based expense, less (12) 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 believes that investors and financial analysts find this non-GAAP financial measure 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 per Diluted Share” as Non-GAAP Net Income divided by Non-GAAP Diluted Weighted Average Shares Outstanding. The company believes that investors and financial analysts find this non-GAAP financial measure 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 Diluted Weighted Average Shares Outstanding" as diluted weighted average 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 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: income tax expenses or benefits that are not related to ongoing business operations in the current year; unusual or infrequently occurring items; benefits from stock compensation deductions for tax purposes that exceed the stock compensation expense recognized for GAAP; tax adjustments associated with fluctuations in foreign currency re-measurement; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets and liabilities; and changes in tax law. The non-GAAP tax rate excludes the tax effect of these items. We believe excluding these items assists investors and analysts in understanding the tax provision and the effective tax rate related to non-GAAP operations. 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. During 2019, the company availed itself of research and development tax credits for both federal and state and other state tax credits that will impact its long-term effective tax rate in future periods. For 2020 guidance purposes, the company has revised its non-GAAP tax rate from 26% to 24% to more align with the expected impact of the credits and other anticipated impacts of US tax reform as rules are clarified by the US Treasury and foreign jurisdictional changes that impact the company’s tax portfolio globally. The non-GAAP tax rate used in future periods will be reviewed annually to determine whether it remains appropriate in consideration of the company’s operating environment, changes in tax legislation, jurisdictional mix of earnings, and other factors deemed appropriate and necessary.
  • 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 loss on disposal of assets – These items comprise 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 it is 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 item 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.
  • Loss due to cyber incident, net of recoveries – This item relates to losses, net of recoveries, arising from the May 2018 incident in which the company was the subject of a targeted email phishing campaign. The company believes this loss is not reflective of its ongoing operations and that exclusion of this item facilitates a more accurate comparison of the company’s results of operations between periods.
  • Acquisition-related expense (income) – These items consist of direct costs incurred in our business acquisition transactions and expenses related to integration activities, and the impact of changes in the fair value of acquisition-related contingent consideration obligations. Examples of these direct costs include transaction fees, due diligence costs, acquisition retention bonuses and severance, and third-party consultants to assist with integration. 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.
  • Organizational realignment These items consist of direct costs associated with the alignment of our business strategies. In connection with these actions, we recognize costs related to termination benefits, exit costs associated with closure of facilities, certain asset impairments, cancellation of certain contracts, and other professional and consulting fees associated with these initiatives. We believe exclusion of these items facilitates a more accurate comparison of our ongoing results of operations between periods.
  • Regulatory and legal matters – These items are 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.
  • 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.
  • 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)
 

December 31,

 

December 31,

 

2019

 

 

 

2018

 

(Unaudited)  
Assets
Current assets:
Cash and cash equivalents

$

197,154

 

$

228,159

 

Restricted cash

 

243,323

 

 

154,599

 

Accounts receivable, less allowances of $10,271 and $8,850 at December 31, 2019 and 2018, respectively

 

143,127

 

 

123,596

 

Prepaid expenses

 

24,539

 

 

19,214

 

Other current assets

 

27,387

 

 

15,185

 

Total current assets

 

635,530

 

 

540,753

 

Property, equipment, and software, net

 

163,282

 

 

153,528

 

Right-of-use assets

 

121,941

 

 

-

 

Goodwill

 

1,611,749

 

 

1,053,119

 

Intangible assets, net

 

372,996

 

 

287,378

 

Deferred tax assets, net

 

33,812

 

 

42,602

 

Other assets

 

30,507

 

 

20,393

 

Total assets

$

2,969,817

 

$

2,097,773

 

 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable

$

40,092

 

$

25,312

 

Accrued expenses and other current liabilities

 

89,038

 

 

95,482

 

Current portion of deferred revenue

 

134,148

 

 

120,704

 

Current portion of term loans

 

18,750

 

 

16,133

 

Customer deposits held in restricted accounts

 

243,316

 

 

154,601

 

Total current liabilities

 

525,344

 

 

412,232

 

Deferred revenue

 

4,793

 

 

4,902

 

Revolving facility

 

230,000

 

 

-

 

Term loans, net

 

575,313

 

 

287,582

 

Convertible notes, net

 

305,188

 

 

292,843

 

Lease liabilities, net of current portion

 

133,313

 

 

-

 

Other long-term liabilities

 

22,940

 

 

37,190

 

Total liabilities

 

1,796,891

 

 

1,034,749

 

Stockholders’ equity:
Common stock, $0.001 par value: 250,000,000 and 125,000,000 shares authorized, 96,100,296 and 95,991,162 shares issued and 94,744,157 and 93,650,127 shares outstanding at December 31, 2019 and 2018, respectively

 

96

 

 

96

 

Additional paid-in capital

 

1,222,356

 

 

1,187,683

 

Treasury stock, at cost: 1,356,139 and 2,341,035 shares at December 31, 2019 and 2018, respectively

 

(39,483

)

 

(65,470

)

Accumulated deficit

 

(7,695

)

 

(58,793

)

Accumulated other comprehensive loss

 

(2,348

)

 

(492

)

Total stockholders’ equity

 

1,172,926

 

 

1,063,024

 

Total liabilities and stockholders’ equity

$

2,969,817

 

$

2,097,773

 

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

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Revenue:
On demand

$

246,235

 

$

218,051

 

$

953,576

 

$

833,709

 

Professional and other

 

8,532

 

 

8,923

 

 

34,560

 

 

35,771

 

Total revenue

 

254,767

 

 

226,974

 

 

988,136

 

 

869,480

 

Cost of revenue(1)

 

101,027

 

 

88,063

 

 

385,712

 

 

328,382

 

Amortization of product technologies

 

10,732

 

 

9,429

 

 

40,461

 

 

35,797

 

Gross profit

 

143,008

 

 

129,482

 

 

561,963

 

 

505,301

 

Operating expenses:
Product development(1)

 

26,308

 

 

29,772

 

 

112,222

 

 

118,525

 

Sales and marketing(1)

 

48,113

 

 

45,084

 

 

193,962

 

 

166,607

 

General and administrative(1)

 

35,354

 

 

32,638

 

 

123,056

 

 

118,208

 

Amortization of intangible assets

 

9,621

 

 

9,588

 

 

40,303

 

 

35,911

 

Total operating expenses

 

119,396

 

 

117,082

 

 

469,543

 

 

439,251

 

Operating income

 

23,612

 

 

12,400

 

 

92,420

 

 

66,050

 

Interest expense and other, net

 

(9,089

)

 

(6,746

)

 

(31,862

)

 

(31,750

)

Income before income taxes

 

14,523

 

 

5,654

 

 

60,558

 

 

34,300

 

Income tax (benefit) expense

 

(5,646

)

 

(618

)

 

2,350

 

 

(425

)

Net income

$

20,169

 

$

6,272

 

$

58,208

 

$

34,725

 

 
Net income per share attributable to common stockholders:
Basic

$

0.22

 

$

0.07

 

$

0.63

 

$

0.40

 

Diluted

$

0.21

 

$

0.07

 

$

0.60

 

$

0.38

 

Weighted average common shares outstanding:
Basic

 

92,412

 

 

91,492

 

 

92,017

 

 

87,290

 

Diluted

 

95,824

 

 

95,108

 

 

96,282

 

 

91,531

 

 
 
(1) Includes stock-based expense as follows:

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Cost of revenue

$

1,401

 

$

1,254

 

$

5,604

 

$

4,403

 

Product development

 

1,715

 

 

2,595

 

 

8,159

 

 

9,923

 

Sales and marketing

 

5,887

 

 

4,320

 

 

23,978

 

 

16,573

 

General and administrative

 

6,284

 

 

4,980

 

 

24,822

 

 

19,742

 

$

15,287

 

$

13,149

 

$

62,563

 

$

50,641

 

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

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

20,169

 

 

$

6,272

 

 

$

58,208

 

 

$

34,725

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

28,846

 

 

 

26,168

 

 

 

114,952

 

 

 

100,186

 

Amortization of debt discount and issuance costs

 

3,511

 

 

 

3,192

 

 

 

13,700

 

 

 

12,464

 

Amortization of right-of-use assets

 

2,749

 

 

 

-

 

 

 

11,433

 

 

 

-

 

Deferred taxes

 

(5,755

)

 

 

541

 

 

 

2,276

 

 

 

(2,179

)

Stock-based expense

 

15,287

 

 

 

13,149

 

 

 

62,563

 

 

 

50,641

 

Asset impairment and loss on disposal of assets

 

2,277

 

 

 

3,294

 

 

 

2,536

 

 

 

6,733

 

Change in fair value of equity investment

 

-

 

 

 

-

 

 

 

(2,600

)

 

 

-

 

Acquisition-related consideration

 

(87

)

 

 

(522

)

 

 

1,006

 

 

 

284

 

Change in customer deposits

 

83,665

 

 

 

63,591

 

 

 

82,631

 

 

 

57,230

 

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

 

(19,834

)

 

 

(5,840

)

 

 

(29,732

)

 

 

(15,277

)

Net cash provided by operating activities

 

130,828

 

 

 

109,845

 

 

 

316,973

 

 

 

244,807

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, equipment, and software

 

(12,989

)

 

 

(13,646

)

 

 

(51,500

)

 

 

(50,933

)

Acquisition of businesses, net of cash and restricted cash acquired

 

(615,785

)

 

 

(48,089

)

 

 

(665,844

)

 

 

(278,563

)

Purchase of other investments

 

-

 

 

 

-

 

 

 

(1,750

)

 

 

(1,800

)

Net cash used in investing activities

 

(628,774

)

 

 

(61,735

)

 

 

(719,094

)

 

 

(331,296

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments on and proceeds from debt, net

 

525,930

 

 

 

(4,034

)

 

 

517,628

 

 

 

(65,252

)

Payments on finance lease obligations

 

(772

)

 

 

(8

)

 

 

(3,651

)

 

 

(227

)

Payments of acquisition-related consideration

 

(4,098

)

 

 

(278

)

 

 

(30,441

)

 

 

(28,388

)

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

 

-

 

 

 

107

 

 

 

-

 

 

 

441,901

 

Proceeds from exercise of stock options

 

1,379

 

 

 

3,210

 

 

 

5,833

 

 

 

13,163

 

Purchase of treasury stock related to stock-based compensation

 

(4,096

)

 

 

(6,908

)

 

 

(20,867

)

 

 

(29,030

)

Purchase of treasury stock under share repurchase program

 

(8,491

)

 

 

(28,082

)

 

 

(8,491

)

 

 

(28,082

)

Net cash provided by (used in) financing activities

 

509,852

 

 

 

(35,993

)

 

 

460,011

 

 

 

304,085

 

Net increase in cash and cash equivalents

 

11,906

 

 

 

12,117

 

 

 

57,890

 

 

 

217,596

 

Effect of exchange rate on cash

 

(448

)

 

 

(150

)

 

 

(171

)

 

 

(183

)

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

Beginning of period

 

429,019

 

 

 

370,791

 

 

 

382,758

 

 

 

165,345

 

End of period

$

440,477

 

 

$

382,758

 

 

$

440,477

 

 

$

382,758

 

 

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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Revenue (GAAP)

$

254,767

$

226,974

$

988,136

$

869,480

Acquisition-related deferred revenue

 

449

 

1,056

 

868

 

1,890

Non-GAAP Total Revenue

$

255,216

$

228,030

$

989,004

$

871,370

 
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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Gross profit (GAAP)

$

143,008

$

129,482

$

561,963

$

505,301

Acquisition-related deferred revenue

 

449

 

1,056

 

868

 

1,890

Depreciation

 

3,970

 

3,048

 

15,665

 

12,072

Amortization of product technologies

 

10,732

 

9,429

 

40,461

 

35,797

Impairment of product technologies

 

1,618

 

-

 

1,618

 

-

Organizational realignment

 

16

 

-

 

141

 

-

Stock-based expense

 

1,401

 

1,254

 

5,604

 

4,403

Adjusted Gross Profit

$

161,194

$

144,269

$

626,320

$

559,463

 
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

 

Twelve Months Ended

December 31,

 

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net income (GAAP)

 

20,169

 

 

6,272

 

 

58,208

 

 

34,725

 

Acquisition-related deferred revenue

 

449

 

 

1,056

 

 

868

 

 

1,890

 

Depreciation, asset impairment, and loss on disposal of assets

 

10,769

 

 

10,445

 

 

36,724

 

 

35,211

 

Amortization of product technologies and intangible assets

 

20,353

 

 

19,017

 

 

80,764

 

 

71,708

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

-

 

Loss due to cyber incident, net of recoveries

 

-

 

 

4,952

 

 

-

 

 

4,952

 

Acquisition-related expense (income)

 

3,594

 

 

(257

)

 

4,754

 

 

2,437

 

Organizational realignment

 

849

 

 

-

 

 

1,533

 

 

-

 

Regulatory and legal matters

 

898

 

 

-

 

 

1,465

 

 

78

 

Stock-based expense

 

15,287

 

 

13,149

 

 

62,563

 

 

50,641

 

Interest expense, net

 

9,443

 

 

6,780

 

 

35,056

 

 

29,959

 

Income tax (benefit) expense

 

(5,646

)

 

(618

)

 

2,350

 

 

(425

)

Adjusted EBITDA

$

76,165

 

$

60,796

 

$

281,685

 

$

231,176

 

 
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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Product development expense (GAAP)

$

26,308

$

29,772

$

112,222

$

118,525

Less: Organizational realignment

 

84

 

-

 

400

 

-

Stock-based expense

 

1,715

 

2,595

 

8,159

 

9,923

Non-GAAP Product Development Expense

$

24,509

$

27,177

$

103,663

$

108,602

 
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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Sales and marketing expense (GAAP)

$

48,113

$

45,084

$

193,962

$

166,607

Less: Organizational realignment

 

62

 

-

 

170

 

-

Asset impairment

 

363

 

2,720

 

363

 

2,720

Stock-based expense

 

5,887

 

4,320

 

23,978

 

16,573

Non-GAAP Sales and Marketing Expense

$

41,801

$

38,044

$

169,451

$

147,314

 
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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

General and administrative expense (GAAP)

$

35,354

$

32,638

 

$

123,056

$

118,208

Less: Organizational realignment

 

687

 

-

 

 

822

 

-

Asset impairment and loss on disposal of assets

 

296

 

574

 

 

555

 

2,013

Loss due to cyber incident, net of recoveries

 

-

 

4,952

 

 

-

 

4,952

Acquisition-related expense (income)

 

3,594

 

(257

)

 

4,754

 

2,437

Regulatory and legal matters

 

898

 

-

 

 

1,465

 

78

Stock-based expense

 

6,284

 

4,980

 

 

24,822

 

19,742

Non-GAAP General and Administrative Expense

$

23,595

$

22,389

 

$

90,638

$

88,986

 
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

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Operating expense (GAAP)

$

119,396

$

117,082

 

$

469,543

$

439,251

Less: Organizational realignment

 

833

 

-

 

 

1,392

 

-

Asset impairment and loss on disposal of assets

 

659

 

3,294

 

 

918

 

4,733

Amortization of intangible assets

 

9,621

 

9,588

 

 

40,303

 

35,911

Loss due to cyber incident, net of recoveries

 

-

 

4,952

 

 

-

 

4,952

Acquisition-related expense (income)

 

3,594

 

(257

)

 

4,754

 

2,437

Regulatory and legal matters

 

898

 

-

 

 

1,465

 

78

Stock-based expense

 

13,886

 

11,895

 

 

56,959

 

46,238

Non-GAAP Operating Expense

$

89,905

$

87,610

 

$

363,752

$

344,902

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

Twelve Months Ended

December 31,

December 31,

2019

2018

2019

2018

Operating income (GAAP)

$

23,612

$

12,400

 

$

92,420

$

66,050

Acquisition-related deferred revenue

 

449

 

1,056

 

 

868

 

1,890

Asset impairment and loss on disposal of assets

 

2,277

 

3,294

 

 

2,536

 

4,733

Amortization of product technologies and intangible assets

 

20,353

 

19,017

 

 

80,764

 

71,708

Loss due to cyber incident, net of recoveries

 

-

 

4,952

 

 

-

 

4,952

Acquisition-related expense (income)

 

3,594

 

(257

)

 

4,754

 

2,437

Organizational realignment

 

849

 

-

 

 

1,533

 

-

Regulatory and legal matters

 

898

 

-

 

 

1,465

 

78

Stock-based expense

 

15,287

 

13,149

 

 

62,563

 

50,641

Non-GAAP Operating Income

$

67,319

$

53,611

 

$

246,903

$

202,489

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 Twelve Months Ended

December 31,

December 31,

2019

2018

2019

2018

Net income (GAAP)

$

20,169

 

$

6,272

 

$

58,208

 

$

34,725

 

Income tax (benefit) expense

 

(5,646

)

 

(618

)

 

2,350

 

 

(425

)

Income before income taxes

 

14,523

 

 

5,654

 

 

60,558

 

 

34,300

 

 
Acquisition-related deferred revenue

 

449

 

 

1,056

 

 

868

 

 

1,890

 

Asset impairment and loss on disposal of assets

 

2,277

 

 

3,294

 

 

2,536

 

 

6,733

 

Amortization of product technologies and intangible assets

 

20,353

 

 

19,017

 

 

80,764

 

 

71,708

 

Change in fair value of equity investment

 

-

 

 

-

 

 

(2,600

)

 

-

 

Loss due to cyber incident, net of recoveries

 

-

 

 

4,952

 

 

-

 

 

4,952

 

Acquisition-related expense (income)

 

3,594

 

 

(257

)

 

4,754

 

 

2,437

 

Organizational realignment

 

849

 

 

-

 

 

1,533

 

 

-

 

Regulatory and legal matters

 

898

 

 

-

 

 

1,465

 

 

78

 

Amortization of convertible note discount

 

2,797

 

 

2,639

 

 

10,946

 

 

10,324

 

Stock-based expense

 

15,287

 

 

13,149

 

 

62,563

 

 

50,641

 

Non-GAAP income before income taxes

 

61,027

 

 

49,504

 

 

223,387

 

 

183,063

 

Assumed rate for income tax expense (1)

 

26.0

%

 

26.0

%

 

26.0

%

 

26.0

%

Assumed provision for non-GAAP income tax expense

 

15,867

 

 

12,871

 

 

58,080

 

 

47,596

 

Non-GAAP Net Income

$

45,160

 

$

36,633

 

$

165,307

 

$

135,467

 

 
Net income per diluted share

$

0.21

 

$

0.07

 

$

0.60

 

$

0.38

 

Non-GAAP Net Income per Diluted Share

$

0.48

 

$

0.39

 

$

1.76

 

$

1.51

 

 
Weighted average outstanding shares - basic

 

92,412

 

 

91,492

 

 

92,017

 

 

87,290

 

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

 

95,824

 

 

95,108

 

 

96,282

 

 

91,531

 

Dilution offset from convertible note hedge transactions

 

(2,172

)

 

(1,621

)

 

(2,406

)

 

(1,876

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

 

93,652

 

 

93,487

 

 

93,876

 

 

89,655

 

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

Twelve Months Ended

December 31,

December 31,

2019

2018

2019

2018

On demand revenue (GAAP)

$

246,235

$

218,051

$

953,576

$

833,709

Acquisition-related deferred revenue

 

449

 

1,056

 

868

 

1,890

Non-GAAP On Demand Revenue

$

246,684

$

219,107

$

954,444

$

835,599

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 Twelve Months Ended
December 31, December 31,

2019

2018

2019

2018

Ending On Demand Units

 

18,475

 

16,219

18,475

16,219

Average On Demand Units

 

17,627

 

16,146

16,758

14,847

 
ACV

$

1,039,588

$

876,637

RPU

$

56.27

$

54.05

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 March 31, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the
Three Months Ending
Guidance Range for the
Twelve Months Ending
March 31, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Revenue (GAAP)

$

276,070

$

280,070

$

1,162,770

$

1,182,770

Acquisition-related deferred revenue

 

930

 

930

 

2,230

 

2,230

Non-GAAP Total Revenue

$

277,000

$

281,000

$

1,165,000

$

1,185,000

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 March 31, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the
Three Months Ending
Guidance Range for the
Twelve Months Ending
March 31, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Non-GAAP Net Income:
Net (loss) income (GAAP)

$

(400

)

$

1,760

 

$

27,990

 

$

34,450

 

Income tax (benefit) expense

 

(130

)

 

560

 

 

8,840

 

 

10,880

 

(Loss) income before income taxes

 

(530

)

 

2,320

 

 

36,830

 

 

45,330

 

 
Acquisition-related deferred revenue

 

930

 

 

930

 

 

2,230

 

 

2,230

 

Amortization of product technologies and intangible assets

 

25,550

 

 

25,400

 

 

101,790

 

 

100,990

 

Acquisition-related expense

 

2,970

 

 

2,970

 

 

10,030

 

 

9,730

 

Organizational realignment

 

890

 

 

790

 

 

1,240

 

 

790

 

Amortization of convertible note discount

 

2,840

 

 

2,840

 

 

11,610

 

 

11,610

 

Stock-based expense

 

18,050

 

 

17,950

 

 

78,820

 

 

78,270

 

Non-GAAP income before income taxes

 

50,700

 

 

53,200

 

 

242,550

 

 

248,950

 

Expected effective tax rate (1)

 

24.0

%

 

24.0

%

 

24.0

%

 

24.0

%

Assumed provision for income tax expense

 

12,168

 

 

12,768

 

 

58,212

 

 

59,748

 

Non-GAAP Net Income

$

38,532

 

$

40,432

 

$

184,338

 

$

189,202

 

 
Net income per diluted share

$

0.00

 

$

0.02

 

$

0.29

 

$

0.35

 

Non-GAAP Net Income per Diluted Share

$

0.41

 

$

0.43

 

$

1.95

 

$

2.00

 

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

 

96,007

 

 

96,007

 

 

97,097

 

 

97,097

 

Dilution offset from convertible note hedge transactions

 

(2,160

)

 

(2,160

)

 

(2,584

)

 

(2,584

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

 

93,847

 

 

93,847

 

 

94,513

 

 

94,513

 

Adjusted EBITDA Guidance
Set forth below is a presentation of the company’s "Adjusted EBITDA" guidance for the three months ending March 31, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the
Three Months Ending
Guidance Range for the
Twelve Months Ending
March 31, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Adjusted EBITDA:
Net (loss) income (GAAP)

$

(400

)

$

1,760

$

27,990

$

34,450

Acquisition-related deferred revenue

 

930

 

 

930

 

2,230

 

2,230

Depreciation, asset impairment, and loss on disposal of assets

 

8,650

 

 

8,450

 

36,090

 

35,190

Amortization of product technologies and intangible assets

 

25,550

 

 

25,400

 

101,790

 

100,990

Acquisition-related expense

 

2,970

 

 

2,970

 

10,030

 

9,730

Organizational realignment

 

890

 

 

790

 

1,240

 

790

Stock-based expense

 

18,050

 

 

17,950

 

78,820

 

78,270

Interest expense, net

 

13,490

 

 

13,190

 

52,970

 

51,470

Income tax (benefit) expense

 

(130

)

 

560

 

8,840

 

10,880

Adjusted EBITDA

$

70,000

 

$

72,000

$

320,000

$

324,000

 

(1)

In 2019, a 26.0% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate. For 2020 guidance purposes, the Company uses a 24.0% tax rate 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.