RealPage Reports Q3 2010 Financial Results

 
  Total Revenue of $48.0 Million, an Increase of 34.7% Year-Over-Year
 
  Adjusted EBITDA of $9.1 Million, an Increase of 44.1% Year-Over-Year

CARROLLTON, Texas, Nov. 3, 2010 (GLOBE NEWSWIRE) -- RealPage, Inc. (Nasdaq:RP), a leading provider of on-demand software and software-enabled services to the rental housing industry, today announced financial results for its third fiscal quarter ended September 30, 2010.

Steve Winn, chairman and CEO of RealPage, said, "We wish to thank our customers, shareholders and employees for their contribution to our consistent growth which culminated in our initial public offering in August of this year. Our financial results were excellent with strong revenue growth and operating cash flow for the quarter. This growth is attributable to the wide spread endorsement of our integrated software-as-a-service offerings that help owners lift revenue and reduce operating cost."

Q3 Financial Highlights

 
  Total revenue was $48.0 million, an increase of 34.7% year-over-year
 
  On demand revenue was $43.1 million, an increase of 30.3% year-over-year;
 
  GAAP net loss attributable to common stockholders was $0.3 million, or $0.01 per diluted share, a year-over-year decrease of 54.3% and 66.7%, respectively; Non-GAAP net income was $3.1 million, or $0.05 per diluted share, a year-over-year increase of 87.7% and 66.7%, respectively;
 
  Adjusted EBITDA was $9.1 million, an increase of 44.1% year-over-year;
 
  Net cash provided by operating activities was $6.5 million, an increase of 86.4% year-over-year.

Recent Business Highlights

 
  The company acquired Level One, a leading on demand apartment leasing center in the U.S., whose on-demand leasing service is designed to enable owners to lease more apartments, reduce overall marketing expense and free-up on-site leasing staff to focus more energy on resident satisfaction and renewals. The company plans to integrate Level One with its CrossFire product family and market the combined offering under the Level One brand.
 
  The company continued to increase new units managed with one or more RealPage SaaS products or services. 
 
  The company continued to penetrate its installed customer base with additional products and services thereby increasing average revenue per unit.
 
  The company closed four RealPage Cloud Service contracts providing Infrastructure-as-a-Service enabling owners to outsource IT functions and redirect internal IT resources to more strategic business process improvement initiatives. 

Financial Outlook

RealPage management expects to achieve the following results during its fourth fiscal quarter ended December 31, 2010:

 
  Total revenue is expected to be in the range of $53.0 million to $54.0 million;
 
  Adjusted EBITDA is expected to be in the range of $10.3 million to $10.8 million;
 
  Non-GAAP net income is expected to be in the range of $4.2 million to $4.5 million, or $0.06 to $0.07 per diluted share; and
 
  Weighted average shares outstanding of approximately 67.2 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2010:

 
  Total revenue is expected to be in the range of $187.0 million to $188.0 million;
 
  Adjusted EBITDA is expected to be in the range of $34.6 million to $35.1 million;
 
  Non-GAAP net income is expected to be in the range of $11.7 million to $12.0 million, or $0.19 to $0.20 per diluted share; and
 
  Full year weighted average shares outstanding of approximately 60.5 million.

RealPage management expects to achieve preliminary results for its calendar year ended December 31, 2011:

 
  Total revenue growth is expected to be in the range of $245.0 million to $255.0 million; and
 
  Adjusted EBITDA is expected to be in the range of $56.0 million to $59.0 million.

The above statements are based on current expectations and are inclusive of the impact of Level One. These statements are forward-looking, and actual results may differ materially. Please reference the information under the caption "Non-GAAP Financial Measures" as part of this press release.

Conference Call and Webcast

The Company will host a conference call today at 5:00 p.m. ET to discuss its financial results. Participants are encouraged to listen to the presentation via a live web broadcast at www.realpage.com on the Investor Relations section. In addition, a live dial-in is available domestically at 866-743-9666 and internationally at 760-298-5103. A replay will be available at 800-642-1687 or 706-645-9291, passcode 19437189, until November 13, 2010.

About RealPage

Located in Carrollton, Texas, a suburb of Dallas, RealPage provides on-demand (also referred to as "Software-as-a-Service" or "SaaS") products and services to apartment communities and single family rentals across the United States. Its six on-demand product lines include OneSite© property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, tax credit, student living, and military housing properties; Level One© (formerly CrossFire) that enable owners to originate, syndicate, manage and capture leads more effectively and at less overall cost; YieldStar© asset optimization systems that increase asset valuation and investment return; Velocity™ billing and utility management services that increase collections and reduce delinquencies; LeasingDesk© risk mitigation systems that are designed to reduce a community's exposure to risk and liability; and OpsTechnology™ spend management systems that help owners manage and control operating expenses. Supporting this family of SaaS products is a suite of shared cloud services including electronic payments, document management, decision support and learning. Through its Propertyware subsidiary, RealPage also provides software and services to single-family rentals and low density, centrally-managed multifamily housing. For more information, call 1-87-REALPAGE or visit www.realpage.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains "forward-looking" statements relating to RealPage, Inc.'s expected, possible or assumed future results of operations and potential growth and plans, management, branding and profit margins of Level One as well as market opportunities and developments. 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. 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. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the possibility that general economic conditions or uncertainty cause information technology spending, particularly in the rental housing industry, to be reduced or purchasing decisions to be delayed; (b) an increase in customer cancellations; (c) the inability to increase sales to existing customers and to attract new customers; (d) RealPage, Inc.'s failure to integrate acquired businesses, including Level One, and any future acquisitions successfully; (e) the timing and success of new product introductions by RealPage, Inc. or its competitors; (f) changes in RealPage, Inc.'s pricing policies or those of its competitors; and (g) such other risk and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission ("SEC"), including RealPage's Prospectus previously filed with SEC pursuant to Rule 424(b)(4) on August 12, 2010. All information provided in this release is as of the date hereof and RealPage, Inc. undertakes no duty to update this information except as required by law.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures: non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and non-GAAP operating income. These measures differ from GAAP in that they exclude amortization of intangible assets, stock-based compensation expenses and acquisition related expenses (including any purchase accounting adjustments). We define Adjusted EBITDA as net (loss) income plus depreciation and asset impairment, amortization of intangible assets, interest expense, net, income tax expense (benefit), stock-based compensation expense and acquisition-related expense. 

We believe that the use of Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:

 
  Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with our peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and
 
  it is useful to exclude certain non-cash charges, such as depreciation and asset impairment, amortization of intangible assets and stock-based compensation and non-core operational charges, such as acquisition-related expense, from Adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards, as the case may be.

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

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

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP measures used in this press release are included at the end of this release.

Condensed Consolidated Statements of Operations
                                                                     For the Three and Nine Months Ended September 30, 2010 and 2009
                                                                                    (unaudited, in thousands, except per share data)
                                                                                                                               
                                                             Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                           2010              2009             2010             2009
                                                      Revenue:                                                                  
                                                     On demand        $ 43,097        $ 33,069      $ 120,393       $ 93,185
                                                    On premise            2,127              468           6,419           3,346
                                        Professional and other            2,804            2,117           7,403           6,234
                                                 Total revenue           48,028           35,654         134,215         102,765
                                            Cost of revenue(1)           20,203           15,201          56,595          42,804
                                                  Gross profit           27,825           20,453          77,620          59,961
                                            Operating expense:                                                                  
                                        Product development(1)            9,127            6,675          26,431          20,273
                                        Sales and marketing(1)            9,428            7,363          25,793          20,376
                                 General and administrative(1)            6,969            4,552          20,230          13,275
                                       Total operating expense           25,524           18,590          72,454          53,924
                                              Operating income            2,301            1,863           5,166           6,037
                               Interest expense and other, net          (1,822)          (1,123)         (4,749)         (3,106)
                                Net income before income taxes              479              740             417           2,931
                                          Income tax expense               187               64             164             218
                                                    Net income           $ 292           $ 676          $ 253        $ 2,713
                                                                                                                               
               Net loss attributable to common  stockholders                                                                  
                                                         Basic         $ (327)         $ (715)      $ (2,691)      $ (1,559)
                                                       Diluted         $ (327)         $ (715)      $ (2,691)      $ (1,559)
        Net loss per share attributable to common stockholders                                                                  
                                                         Basic        $ (0.01)        $ (0.03)       $ (0.08)       $ (0.07)
                                                       Diluted        $ (0.01)        $ (0.03)       $ (0.08)       $ (0.07)
                          Weighted average shares used in computing net loss per 
       share attributable to common stockholders
                                                         Basic           43,636           23,904          31,878          23,856
                                                       Diluted           43,636           23,904          31,878          23,856
                                                                                                                               
                                                                                                                               
                                                                                                                                 
     (1)Includes stock-based compensation expense as follows :Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                           2010              2009             2010             2009
                                               Cost of revenue           $ 140           $ 103          $ 407          $ 255
                                           Product development              627              277           1,664             775
                                           Sales and marketing              201              135             541             350
                                    General and administrative              391              211           1,133             524
 
                                                                                                                                                                                                                                                       Condensed Consolidated Balance Sheets
                                                                                                                                                                                                                                     At September 30, 2010 (unaudited) and December 31, 2009
                                                                                                                                                                                                                                  (unaudited, in thousands, except share and per share data)
                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                   September 30, 2010     December 31, 2009
                                                                                                                                                                                                                                         Assets                                           
                                                                                                                                                                                                                                Current assets:                                           
                                                                                                                                                                                                                      Cash and cash equivalents             $ 39,394             $ 4,427
                                                                                                                                                                                                                                Restricted cash                12,941               14,886
                                                                                                       Accounts receivable, less allowance for doubtful accounts of $2,464 and $2,222 at September 30, 2010 and December 31, 2009, respectively                24,948               25,841
                                                                                                                                                                                                 Deferred tax asset, net of valuation allowance                 1,799                3,110
                                                                                                                                                                                                                           Other current assets                 6,595                2,739
                                                                                                                                                                                                                           Total current assets                85,677               51,003
                                                                                                                                                                                                          Property, equipment and software, net                21,048               20,749
                                                                                                                                                                                                                                       Goodwill                37,380               27,366
                                                                                                                                                                                                              Identified intangible assets, net                34,571               22,891
                                                                                                                                                                                                 Deferred tax asset, net of valuation allowance                16,628               17,803
                                                                                                                                                                                                                                   Other assets                 2,398                2,301
                                                                                                                                                                                                                                   Total assets            $ 197,702           $ 142,113
                                                                                                                                                         Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity                                           
                                                                                                                                                                                                                           Current liabilities:                                           
                                                                                                                                                                                                                               Accounts payable              $ 6,523             $ 3,705
                                                                                                                                                                                                 Accrued expenses and other current liabilities                11,449               10,830
                                                                                                                                                                                                            Current portion of deferred revenue                43,459               39,976
                                                                                                                                                                                                              Current portion of long-term debt                 6,281                8,412
                                                                                                                                                                                                  Customer deposits held in restricted accounts                12,857               15,127
                                                                                                                                                                                                                      Total current liabilities                80,569               78,050
                                                                                                                                                                                                                               Deferred revenue                 7,493                9,452
                                                                                                                                                                                                                      Revolving credit facility                 2,040                   --
                                                                                                                                                                                                           Long-term debt, less current portion                32,453               43,449
                                                                                                                                                                                                                    Other long-term liabilities                 5,307                5,806
                                                                                                                                                                                                                              Total liabilities               127,862              136,757
                                                                                                                                                                                                                  Commitments and contingencies                                           
                                                                                                                                                                                                         Redeemable convertible preferred stock                    --               71,832
                                                                                                                                                                                                                Stockholders' (deficit) equity:                                           
     Common stock, $0.001 par value per share: 125,000,000 and 67,500,000 shares authorized, 63,365,592 and 26,667,319 shares issued and 63,156,549 and 26,460,781 shares outstanding at September 30, 2010 and December 31, 2009, respectively                    63                   27
                                                                                                                                                                                                                     Additional paid-in capital               160,298               24,232
                                                                                                                                                Treasury stock, at cost: 209,043 and 206,538 shares at September 30, 2010 and December 31, 2010                 (958)                (938)
                                                                                                                                                                                                                            Accumulated deficit              (89,544)             (89,797)
                                                                                                                                                                                                           Accumulated other comprehensive loss                  (19)                   --
                                                                                                                                                                                                           Total stockholders' (deficit) equity                69,840             (66,476)
                                                                                                                                                            Total liabilities, redeemable convertible preferred stock and stockholders' deficit            $ 197,702           $ 142,113
 
                                                                                                                                       Condensed Consolidated Statements of Cash Flows
                                                                                                                       For the Three and Nine Months Ended September 30, 2010 and 2009
                                                                                                                                                             (unaudited, in thousands)
                                                                                                               Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                                                                             2010              2009             2010             2009
                                                                           Cash flows from operating activities:                                                                  
                                                                                                      Net income           $ 292           $ 676          $ 253        $ 2,713
                               Adjustments to reconcile net income to net cash provided by operating activities:                                                                  
                                                                                   Depreciation and amortization            5,312            3,699          14,856          10,703
                                                                                          Deferred tax (benefit)             (76)               --           (162)              --
                                                                                        Stock-based compensation            1,359              726           3,745           1,904
                                                                                      Loss on disposal of assets               54              (1)              57             192
                                                                                            Impairment of assets               --               --              --              --
                                                                    Acquisition-related contingent consideration               39               --              39              --
     Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:            (436)          (1,589)         (4,047)           2,029
                                                                                                                                                                                 
                                                                       Net cash provided by operating activities            6,544            3,511          14,741          17,541
                                                                           Cash flows from investing activities:                                                                  
                                                                                Purchases of property, equipment          (2,709)          (2,223)         (7,427)         (6,334)
                                                                 Acquisition of businesses, net of cash acquired          (3,939)          (3,022)        (17,231)         (3,787)
                                                                           Net cash used by investing activities          (6,648)          (5,245)        (24,658)        (10,121)
                                                                           Cash flows from financing activities:                                                                  
                          Proceeds from initial public offering, net of underwriting discount and offering costs        $ 57,688            $ --       $ 57,688           $ --
                                                                           Proceeds from (payments on) debt, net         (23,081)            9,838        (12,763)           4,410
                                                                                        Preferred stock dividend            (666)               --           (666)              --
                                                                                        Issuance of common stock              447              258             664             270
                                                                                      Purchase of treasury stock             (16)            (346)            (20)           (436)
                                                                       Net cash provided by financing activities           34,372            9,750          44,903           4,244
                                                                       Net increase in cash and cash equivalents           34,268            8,016          34,986          11,664
                                                                                 Effect of exchange rate on cash              (6)               --            (19)              --
                                                                                      Cash and cash equivalents:                                                                  
                                                                                             Beginning of period            5,132            7,896           4,427           4,248
                                                                                                   End of period        $ 39,394        $ 15,912       $ 39,394       $ 15,912
 
                                                                                          Reconciliation of GAAP to Non-GAAP Measures
                                                                      For the Three and Nine Months Ended September 30, 2010 and 2009
                                                                                     (unaudited, in thousands, except per share data)
                                                                                                                                
                                                              Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                            2010              2009             2010             2009
                                         Adjusted Gross Profit:                                                                  
                                                   Gross profit        $ 27,825        $ 20,453       $ 77,620       $ 59,961
             Depreciation and amortization of intangible assets            3,308            1,767           8,912           5,056
                               Stock-based compensation expense              140              103             407             255
                                          Adjusted gross profit        $ 31,273        $ 22,323       $ 86,939       $ 65,272
                                                                                                                                
                                          Adjusted gross margin             65.1%             62.6%            64.8%            63.5%
                                                                                                                                
                                                              Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                            2010              2009             2010             2009
                                               Adjusted EBITDA:                                                                  
                                                     Net income           $ 292           $ 676          $ 253        $ 2,713
                              Depreciation and asset impairment            2,606            2,419           7,657           6,932
                              Amortization of intangible assets            2,760            1,279           7,256           3,963
                                          Interest expense, net            1,822            1,123           4,759           3,106
                                           Income tax expense               187               64             164             218
                               Stock-based compensation expense            1,359              726           3,745           1,904
                                    Acquisition-related expense               61               20             453              20
                                                Adjusted EBITDA         $ 9,087         $ 6,307       $ 24,287       $ 18,856
                                                                                                                                
                                           Adjust EBITDA Margin             18.9%             17.7%            18.1%            18.3%
                                                                                                                                
                                                              Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                            2010              2009             2010             2009
                            Non-GAAP Total Product Development:                                                                  
                                                      Expenses:         $ 9,127         $ 6,675       $ 26,431       $ 20,273
                              Amortization of intangible assets               --               --              --              --
                               Stock-based compensation expense              627              277           1,664             775
                            Non-GAAP Total Product Development:         $ 8,500         $ 6,398       $ 24,767       $ 19,498
                                                                                                                                
            Non-GAAP Total Product Development as % of Revenue:             17.7%             17.9%            18.5%            19.0%
                                                                                                                                
                                                              Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                            2010              2009             2010             2009
                            Non-GAAP Total Sales and Marketing:                                                                  
                                                      Expenses:         $ 9,428         $ 7,363       $ 25,793       $ 20,376
                              Amortization of intangible assets              780              732           2,291           2,301
                               Stock-based compensation expense              201              135             541             350
                            Non-GAAP Total Sales and Marketing:         $ 8,447         $ 6,496       $ 22,961       $ 17,725
                                                                                                                                
            Non-GAAP Total Sales and Marketing as % of Revenue:             17.6%             18.2%            17.1%            17.2%
                                                                                                                                
                                                              Three Months Ended 
    September 30,Nine Months Ended 
    September 30,
                                                                            2010              2009             2010             2009
                     Non-GAAP Total General and Administrative:                                                                  
                                             Operating Expenses         $ 6,969         $ 4,552       $ 20,230       $ 13,275
                                              Acquisition costs               61               20             453              20
                               Stock-based compensation expense              391              211           1,133             524
                     Non-GAAP Total General and Administrative:         $ 6,517         $ 4,321       $ 18,644       $ 12,731
                                                                                                                                
     Non-GAAP Total General and Administrative as % of Revenue:             13.6%             12.1%            13.9%            12.4%
 
                                                                                                                        Reconciliation of GAAP to Non-GAAP Measures
                                                                                                    For the Three and Nine Months Ended September 30, 2010 and 2009
                                                                                                                   (unaudited, in thousands, except per share data)
                                                                                                                                                              
                                                                                 Three Months Ended 
    September 30,        Nine Months Ended 
    September 30,
                                                                                           2010                   2009                  2010                  2009
                                       Non-GAAP Total Operating Expenses:                                                                                      
                                                       Operating Expenses             $ 25,524             $ 18,590            $ 72,454            $ 53,924
                                        Amortization of intangible assets                   780                   732                2,291                2,301
                                                        Acquisition costs                    61                    20                  453                   20
                                         Stock-based compensation expense                 1,219                   623                3,338                1,649
                                       Non-GAAP Total Operating Expenses:             $ 23,464             $ 17,215            $ 66,372            $ 49,954
                                                                                                                                                              
                       Non-GAAP Total Operating Expenses as % of Revenue:                  48.9%                  48.3%                 49.5%                 48.6%
                                                                                                                                                              
                                                                                 Three Months Ended 
    September 30,        Nine Months Ended 
    September 30,
                                                                                           2010                   2009                  2010                  2009
                                               Non-GAAP Operating Income:                                                                                      
                                                         Operating income              $ 2,301              $ 1,863             $ 5,166             $ 6,037
                                        Amortization of intangible assets                 2,760                 1,279                7,256                3,963
                                         Stock-based compensation expense                 1,359                   726                3,745                1,904
                                              Acquisition-related expense                    61                    20                  453                   20
                                                Non-GAAP operating income              $ 6,481              $ 3,888            $ 16,620            $ 11,924
                                                                                                                                                              
                                                Non-GAAP operating margin                  13.5%                  10.9%                 12.4%                 11.6%
                                                                                                                                                              
                                                                                 Three Months Ended 
    September 30,        Nine Months Ended 
    September 30,
                                                                                           2010                   2009                  2010                  2009
                                                     Non-GAAP Net Income:                                                                                      
                                                               Net income                $ 292                $ 676               $ 253             $ 2,713
                                        Amortization of intangible assets                 2,760                 1,279                7,256                3,963
                                         Stock-based compensation expense                 1,359                   726                3,745                1,904
          Accelerated interest expense related to preferred notes payable                   530                    --                  530                   --
                                              Acquisition-related expense                    61                    20                  453                   20
                                         Subtotal of tax deductible items                 4,710                 2,025               11,984                5,887
                                                                                                                                                              
                                    Tax impact of tax deductible items(1)               (1,884)                 (810)              (4,794)              (2,355)
                Tax expense resulting from applying effective tax rate(2)                   (5)                 (232)                  (3)                (954)
                                                      Non-GAAP net income              $ 3,113              $ 1,659             $ 7,441             $ 5,291
                                                                                                                                                              
                                  Non-GAAP net income per share - diluted               $ 0.05               $ 0.03              $ 0.13              $ 0.10
                                                                                                                                                              
                                        Weighted average shares - diluted                43,636                23,904               31,878               23,856
                  Conversion of redeemable convertible preferred stock(3)                15,153                29,044               24,362               29,044
                           Weighted average effect of dilutive securities                 3,476                   457                2,037                  431
                               Non-GAAP weighted average shares - diluted                62,265                53,405               58,277               53,331
                                                                                                                                                                  
(1) Reflects the removal of the tax benefit associated with the amortization of intangible assets, stock-based compensation expense, and acquisition-related expense.
               (2) Represents the adjusting income tax to a federal tax rate of 35% and a blended state tax rate of 5%.                                          
(3) Represents common shares from the conversion of redeemable convertible preferred shares as if the shares were converted as of the beginning of the indicated period.
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