RealPage Reports First Quarter 2020 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 first quarter ended March 31, 2020.

First Quarter 2020 Financial Highlights

  • GAAP total revenue of $276.7 million, an increase of 18% year-over-year;
  • Net income of $5.6 million, or $0.06 in net income per diluted share, a year-over-year decrease of 50%;
  • Adjusted EBITDA of $71.5 million, an increase of 10% year-over-year; and
  • Non-GAAP net income of $40.3 million, or $0.43 in non-GAAP net income per diluted share, a year-over-year increase of 7% and 8%, respectively.

Comments on the News

“In the face of COVID-19 headwinds that began to impact our business in March, we are reporting solid first quarter results that include revenue growth of 18% and, excluding changes in restricted cash relating to accounting treatment changes, operating cash flow growth of 22%, both compared to the prior year period,” said Steve Winn, Chairman and CEO of RealPage. “While our range of financial expectations for 2020 includes anticipated headwinds related to lower leasing velocity and delayed new client projects, we remain focused on leading the industry through the storm, including rapidly delivering innovative solutions to optimize rental housing operations such as those that facilitate virtual leasing, living and payments.”

“We are reducing our full year revenue growth outlook by 300 to 500 basis points and our adjusted EBITDA margin guidance by 150 basis points,” said Tom Ernst, CFO and Treasurer of RealPage. “This reduction is driven by lower expectations for bookings in the first half, and slower leasing velocity. While we intend to adjust variable costs due to lower revenue and the realization of some productivity improvements, we do not expect to reduce product development or sales & marketing spend given our view that clients will have an increased need for products and services that help them accelerate their transition to more virtual operations.”

2020 Financial Outlook

RealPage management expects to achieve the following results during the second quarter ending June 30, 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 $0.05;
  • Non-GAAP total revenue is expected to be in the range of $276 million to $280 million;
  • Adjusted EBITDA is expected to be in the range of $66 million to $70 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $0.38 to $0.42;
  • 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, 2020:

  • GAAP total revenue is expected to be in the range of $1,114 million to $1,154 million;
  • GAAP net income per diluted share is expected to be in the range of $0.22 to $0.33;
  • Non-GAAP total revenue is expected to be in the range of $1,115 million to $1,155 million;
  • Adjusted EBITDA is expected to be in the range of $290 million to $300 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $1.74 to $1.84;
  • 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 to view the company’s presentation slides at https://78449.themediaframe.com/dataconf/productusers/rlpg/mediaframe/37741/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 second quarter ending June 30, 2020 and calendar year ending December 31, 2020, and that the range of financial expectations for 2020 includes anticipated headwinds related to lower leasing velocity and delayed new client projects; our focus on leading the industry through the storm, including rapidly delivering innovative solutions to optimize rental housing operations such as those that facilitate virtual leasing, living and payments; the impact on our financial outlook due to lower expectations for bookings in the first half, slower leasing velocity, and the intent to adjust variable costs due to lower revenue and the realization of some productivity improvements, but not product development or sales and marketing spend given our view that clients will have an increased need for products and services that help them accelerate their transition to more virtual operations. 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, including the uncertainty associated with the potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations. 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 other uncertainty, and conditions and uncertainty caused by the COVID-19 pandemic, 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, Simple Bills, Hipercept, and Lease Term 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 March 2, 2020. 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) organizational realignment costs and (5) 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) acquisition-related expense, (6) organizational realignment costs, (7) regulatory and legal matters, (8) stock-based expense, (9) interest expense, net, and (10) 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 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 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) acquisition-related expense, (4) regulatory and legal matters, and (5) 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) acquisition-related expense, (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 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) acquisition-related expense, (5) organizational realignment costs, (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 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) acquisition-related expense, (7) organizational realignment costs, (8) regulatory and legal matters, (9) amortization of convertible note discount, and (10) stock-based expense, less (11) 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 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 2019, the company used 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 uses a non-GAAP tax rate of 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. This non-GAAP tax rate 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 – This item is 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 – This item comprises losses on the disposal and impairment of long-lived assets, and impairment of intangible assets, which are not reflective of the company’s ongoing operations. We believe exclusion of this item 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 is therefore not considered by management in making operating decisions.
  • Amortization of product technologies and intangible assets – Intangible assets are amortized over their estimated useful lives and generally cannot be changed or influenced by the company after initial capitalization. Accordingly, this item is 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 this item facilitates a more accurate comparison of our results of operations between periods as this item is not reflective of our ongoing operations.
  • Acquisition-related expense – This item consists 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 costs 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 This item consists 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 costs facilitates a more accurate comparison of our ongoing results of operations between periods.
  • 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 costs 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 costs 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.
 
Condensed Consolidated Balance Sheets
(in thousands, except per share and share amounts)
(unaudited)
 

March 31,

December 31,

 

2020

 

 

2019

 

 
Assets
Current assets:
Cash and cash equivalents

$

184,309

 

$

197,154

 

Restricted cash

 

241,310

 

 

243,323

 

Accounts receivable, less allowances of $10,622 and $10,271 at March 31, 2020 and December 31, 2019, respectively

 

131,613

 

 

143,127

 

Prepaid expenses

 

26,886

 

 

24,539

 

Other current assets

 

27,519

 

 

27,387

 

Total current assets

 

611,637

 

 

635,530

 

Property, equipment, and software, net

 

165,957

 

 

163,282

 

Right-of-use assets

 

118,741

 

 

121,941

 

Goodwill

 

1,663,142

 

 

1,611,749

 

Intangible assets, net

 

369,942

 

 

372,996

 

Deferred tax assets, net

 

34,249

 

 

33,812

 

Other assets

 

28,819

 

 

30,507

 

Total assets

$

2,992,487

 

$

2,969,817

 

 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable

$

40,210

 

$

40,092

 

Accrued expenses and other current liabilities

 

87,337

 

 

89,038

 

Current portion of deferred revenue

 

137,904

 

 

134,148

 

Current portion of term loans

 

22,500

 

 

18,750

 

Customer deposits held in restricted accounts

 

241,759

 

 

243,316

 

Total current liabilities

 

529,710

 

 

525,344

 

Deferred revenue

 

4,490

 

 

4,793

 

Revolving facility

 

230,000

 

 

230,000

 

Term loans, net

 

567,942

 

 

575,313

 

Convertible notes, net

 

308,389

 

 

305,188

 

Lease liabilities, net of current portion

 

131,099

 

 

133,313

 

Other long-term liabilities

 

30,014

 

 

22,940

 

Total liabilities

 

1,801,644

 

 

1,796,891

 

Stockholders’ equity:
Common stock, $0.001 par value: 250,000,000 shares authorized, 96,288,420 and 96,100,296 shares issued and 96,277,515 and 94,744,157 shares outstanding at March 31, 2020 and December 31, 2019, respectively

 

96

 

 

96

 

Additional paid-in capital

 

1,199,209

 

 

1,222,356

 

Treasury stock, at cost: 10,905 and 1,356,139 shares at March 31, 2020 and December 31, 2019, respectively

 

(104

)

 

(39,483

)

Accumulated deficit

 

(2,090

)

 

(7,695

)

Accumulated other comprehensive loss

 

(6,268

)

 

(2,348

)

Total stockholders’ equity

 

1,190,843

 

 

1,172,926

 

Total liabilities and stockholders’ equity

$

2,992,487

 

$

2,969,817

 

 
 
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
March 31,

 

2020

 

 

2019

 

Revenue:
On demand

$

268,471

 

$

226,519

 

Professional and other

 

8,202

 

 

7,787

 

Total revenue

 

276,673

 

 

234,306

 

Cost of revenue(1)

 

108,910

 

 

90,194

 

Amortization of product technologies

 

13,772

 

 

9,514

 

Gross profit

 

153,991

 

 

134,598

 

Operating expenses:
Product development(1)

 

31,548

 

 

29,897

 

Sales and marketing(1)

 

54,657

 

 

44,823

 

General and administrative(1)

 

40,528

 

 

28,143

 

Amortization of intangible assets

 

11,419

 

 

9,836

 

Total operating expenses

 

138,152

 

 

112,699

 

Operating income

 

15,839

 

 

21,899

 

Interest expense and other, net

 

(12,735

)

 

(5,980

)

Income before income taxes

 

3,104

 

 

15,919

 

Income tax (benefit) expense

 

(2,501

)

 

4,647

 

Net income

$

5,605

 

$

11,272

 

 
Net income per share attributable to common stockholders:
Basic

$

0.06

 

$

0.12

 

Diluted

$

0.06

 

$

0.12

 

Weighted average common shares outstanding:
Basic

 

92,654

 

 

91,490

 

Diluted

 

95,919

 

 

95,561

 

 
 
(1) Includes stock-based expense as follows:
Three Months Ended
March 31,

 

2020

 

 

2019

 

Cost of revenue

$

2,010

 

$

1,331

 

Product development

 

1,937

 

 

2,480

 

Sales and marketing

 

5,888

 

 

5,350

 

General and administrative

 

6,366

 

 

5,752

 

$

16,201

 

$

14,913

 

 
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended
March 31,

 

2020

 

 

2019

 

Cash flows from operating activities:
Net income

$

5,605

 

$

11,272

 

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

 

33,562

 

 

27,824

 

Amortization of debt discount and issuance costs

 

3,474

 

 

3,234

 

Amortization of right-of-use assets

 

3,603

 

 

3,005

 

Deferred taxes

 

(2,992

)

 

2,550

 

Stock-based expense

 

16,201

 

 

14,913

 

Loss on disposal and impairment of other long-lived assets

 

12

 

 

286

 

Change in fair value of equity investment

 

-

 

 

(2,600

)

Acquisition-related consideration

 

489

 

 

405

 

Change in customer deposits

 

(5,007

)

 

(50,252

)

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

 

6,635

 

 

(6,645

)

Net cash provided by operating activities

 

61,582

 

 

3,992

 

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

 

(13,254

)

 

(10,873

)

Acquisition of businesses, net of cash and restricted cash acquired

 

(59,462

)

 

-

 

Net cash used in investing activities

 

(72,716

)

 

(10,873

)

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

 

(3,750

)

 

(4,033

)

Payments on finance lease obligations

 

(811

)

 

(769

)

Payments of acquisition-related consideration

 

(45

)

 

(11,412

)

Proceeds from exercise of stock options

 

4,906

 

 

1,877

 

Purchase of treasury stock related to stock-based compensation

 

(3,493

)

 

(5,016

)

Other financing activities, net

 

(26

)

 

-

 

Net cash used in financing activities

 

(3,219

)

 

(19,353

)

Net decrease in cash, cash equivalents and restricted cash

 

(14,353

)

 

(26,234

)

Effect of exchange rate on cash

 

(505

)

 

(99

)

 
Cash, cash equivalents and restricted cash:
Beginning of period

 

440,477

 

 

382,758

 

End of period

$

425,619

 

$

356,425

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
COMPARABLE GAAP MEASURES
(unaudited, in thousands, except per share and share amounts)
 
The following is a reconciliation of the non-GAAP financial measures used by RealPage to 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
March 31,

 

2020

 

 

2019

 

Revenue (GAAP)

$

276,673

 

$

234,306

 

Acquisition-related deferred revenue

 

400

 

 

224

 

Non-GAAP Total Revenue

$

277,073

 

$

234,530

 

 
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
March 31,

 

2020

 

 

2019

 

Gross profit (GAAP)

$

153,991

 

$

134,598

 

Acquisition-related deferred revenue

 

400

 

 

224

 

Depreciation

 

3,780

 

 

3,671

 

Amortization of product technologies

 

13,772

 

 

9,514

 

Organizational realignment

 

198

 

 

-

 

Stock-based expense

 

2,010

 

 

1,331

 

Adjusted Gross Profit

$

174,151

 

$

149,338

 

 
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
March 31,

 

2020

 

 

2019

 

Net income (GAAP)

$

5,605

 

$

11,272

 

Acquisition-related deferred revenue

 

400

 

 

224

 

Depreciation, asset impairment, and loss on disposal of assets

 

8,383

 

 

8,760

 

Amortization of product technologies and intangible assets

 

25,191

 

 

19,350

 

Change in fair value of equity investment

 

-

 

 

(2,600

)

Acquisition-related expense

 

3,724

 

 

29

 

Organizational realignment

 

1,211

 

 

-

 

Regulatory and legal matters

 

359

 

 

-

 

Stock-based expense

 

16,201

 

 

14,913

 

Interest expense, net

 

12,905

 

 

8,581

 

Income tax (benefit) expense

 

(2,501

)

 

4,647

 

Adjusted EBITDA

$

71,478

 

$

65,176

 

 
 
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
March 31,

 

2020

 

2019

Product development expense (GAAP)

$

31,548

$

29,897

Less: Organizational realignment

 

233

 

-

Stock-based expense

 

1,937

 

2,480

Non-GAAP Product Development Expense

$

29,378

$

27,417

 
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
March 31,

 

2020

 

2019

Sales and marketing expense (GAAP)

$

54,657

$

44,823

Less: Organizational realignment

 

611

 

-

Stock-based expense

 

5,888

 

5,350

Non-GAAP Sales and Marketing Expense

$

48,158

$

39,473

 
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
March 31,

 

2020

 

2019

General and administrative expense (GAAP)

$

40,528

$

28,143

Less: Organizational realignment

 

169

 

-

Asset impairment and loss on disposal of assets

 

12

 

286

Acquisition-related expense

 

3,724

 

29

Regulatory and legal matters

 

359

 

-

Stock-based expense

 

6,366

 

5,752

Non-GAAP General and Administrative Expense

$

29,898

$

22,076

 
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
March 31,

 

2020

 

2019

Operating expense (GAAP)

$

138,152

$

112,699

Less: Organizational realignment

 

1,013

 

-

Asset impairment and loss on disposal of assets

 

12

 

286

Amortization of intangible assets

 

11,419

 

9,836

Acquisition-related expense

 

3,724

 

29

Regulatory and legal matters

 

359

 

-

Stock-based expense

 

14,191

 

13,582

Non-GAAP Operating Expense

$

107,434

$

88,966

 
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
March 31,

 

2020

 

 

2019

 

Operating income (GAAP)

$

15,839

 

$

21,899

 

Acquisition-related deferred revenue

 

400

 

 

224

 

Asset impairment and loss on disposal of assets

 

12

 

 

286

 

Amortization of product technologies and intangible assets

 

25,191

 

 

19,350

 

Acquisition-related expense

 

3,724

 

 

29

 

Organizational realignment

 

1,211

 

 

-

 

Regulatory and legal matters

 

359

 

 

-

 

Stock-based expense

 

16,201

 

 

14,913

 

Non-GAAP Operating Income

$

62,937

 

$

56,701

 

 
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
March 31,

 

2020

 

 

2019

 

Net income (GAAP)

$

5,605

 

$

11,272

 

Income tax (benefit) expense

 

(2,501

)

 

4,647

 

Income before income taxes

 

3,104

 

 

15,919

 

 
Acquisition-related deferred revenue

 

400

 

 

224

 

Asset impairment and loss on disposal of assets

 

12

 

 

286

 

Amortization of product technologies and intangible assets

 

25,191

 

 

19,350

 

Change in fair value of equity investment

 

-

 

 

(2,600

)

Acquisition-related expense

 

3,724

 

 

29

 

Organizational realignment

 

1,211

 

 

-

 

Regulatory and legal matters

 

359

 

 

-

 

Amortization of convertible note discount

 

2,838

 

 

2,676

 

Stock-based expense

 

16,201

 

 

14,913

 

Non-GAAP income before income taxes

 

53,040

 

 

50,797

 

Assumed rate for income tax expense (1)

 

24.0

%

 

26.0

%

Assumed provision for non-GAAP income tax expense

 

12,730

 

 

13,207

 

Non-GAAP Net Income

$

40,310

 

$

37,590

 

 
Net income per diluted share

$

0.06

 

$

0.12

 

Non-GAAP Net Income per Diluted Share

$

0.43

 

$

0.40

 

 
Weighted average outstanding shares - basic

 

92,654

 

 

91,490

 

Non-GAAP Adjusted Diluted Weighted Average Shares Outstanding:
Weighted average outstanding shares - diluted

 

95,919

 

 

95,561

 

Dilution offset from convertible note hedge transactions

 

(2,170

)

 

(2,207

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

 

93,749

 

 

93,354

 

 
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
March 31,

 

2020

 

 

2019

 

On demand revenue (GAAP)

$

268,471

 

$

226,519

 

Acquisition-related deferred revenue

 

400

 

 

224

 

Non-GAAP On Demand Revenue

$

268,871

 

$

226,743

 

 
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
March 31,

 

2020

 

 

2019

 

Ending on demand units

 

18,949

 

 

16,401

 

Average on demand units

 

18,712

 

 

16,310

 

 
ACV

$

1,089,189

 

$

912,060

 

RPU

$

57.48

 

$

55.61

 

 
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 June 30, 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
June 30, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Revenue (GAAP)

$

275,580

 

$

279,580

 

$

1,113,720

 

$

1,153,720

 

Acquisition-related deferred revenue

 

420

 

 

420

 

 

1,280

 

 

1,280

 

Non-GAAP Total Revenue

$

276,000

 

$

280,000

 

$

1,115,000

 

$

1,155,000

 

 
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 June 30, 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
June 30, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Non-GAAP Net Income:
Net income (GAAP)

$

210

 

$

4,510

 

$

21,500

 

$

31,870

 

Income tax expense

 

120

 

 

1,220

 

 

2,820

 

 

6,250

 

Income before income taxes

 

330

 

 

5,730

 

 

24,320

 

 

38,120

 

 
Acquisition-related deferred revenue

 

420

 

 

420

 

 

1,280

 

 

1,280

 

Asset impairment and loss on disposal of assets

 

-

 

 

-

 

 

20

 

 

20

 

Amortization of product technologies and intangible assets

 

25,860

 

 

25,660

 

 

101,250

 

 

100,650

 

Acquisition-related expense

 

2,520

 

 

2,420

 

 

10,780

 

 

10,480

 

Organizational realignment

 

350

 

 

150

 

 

1,560

 

 

1,360

 

Regulatory and legal matters

 

-

 

 

-

 

 

360

 

 

360

 

Amortization of convertible note discount

 

2,880

 

 

2,880

 

 

11,610

 

 

11,610

 

Stock-based expense

 

15,080

 

 

14,880

 

 

65,410

 

 

64,810

 

Non-GAAP income before income taxes

 

47,440

 

 

52,140

 

 

216,590

 

 

228,690

 

Expected effective tax rate (1)

 

24.0

%

 

24.0

%

 

24.0

%

 

24.0

%

Assumed provision for income tax expense

 

11,386

 

 

12,514

 

 

51,982

 

 

54,886

 

Non-GAAP Net Income

$

36,054

 

$

39,626

 

$

164,608

 

$

173,804

 

 
Net income per diluted share

$

-

 

$

0.05

 

$

0.22

 

$

0.33

 

Non-GAAP Net Income per Diluted Share

$

0.38

 

$

0.42

 

$

1.74

 

$

1.84

 

 
Non-GAAP Adjusted Diluted Weighted Average Shares Outstanding:
Weighted average outstanding shares - diluted

 

97,233

 

 

97,233

 

 

96,889

 

 

96,889

 

Dilution offset from convertible note hedge transactions

 

(2,569

)

 

(2,569

)

 

(2,537

)

 

(2,537

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

 

94,664

 

 

94,664

 

 

94,352

 

 

94,352

 

 
Adjusted EBITDA Guidance
Set forth below is a presentation of the company’s "Adjusted EBITDA" guidance for the three months ending June 30, 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
June 30, 2020 December 31, 2020
Low (3) High (3) Low (3) High (3)
Adjusted EBITDA:
Net income (GAAP)

$

210

$

4,510

$

21,500

$

31,870

Acquisition-related deferred revenue

 

420

 

420

 

1,280

 

1,280

Depreciation, asset impairment, and loss on disposal of assets

 

9,390

 

9,190

 

37,060

 

36,460

Amortization of product technologies and intangible assets

 

25,860

 

25,660

 

101,250

 

100,650

Acquisition-related expense

 

2,520

 

2,420

 

10,780

 

10,480

Organizational realignment

 

350

 

150

 

1,560

 

1,360

Regulatory and legal matters

 

-

 

-

 

360

 

360

Stock-based expense

 

15,080

 

14,880

 

65,410

 

64,810

Interest expense, net

 

12,050

 

11,550

 

47,980

 

46,480

Income tax expense

 

120

 

1,220

 

2,820

 

6,250

Adjusted EBITDA

$

66,000

$

70,000

$

290,000

$

300,000

 
 

(1) 

For 2020, 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.