Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v2.4.0.8
Acquisitions
6 Months Ended
Jun. 30, 2013
Acquisitions

3. Acquisitions

2013 Acquisitions

In February 2013, we acquired certain assets of Seniors for Living, Inc. (“SFL”). SFL is a leading performance-based marketing company that provides senior housing communities and home care companies with industry-leading referral and marketing services to help them achieve their occupancy goals. We plan to integrate SFL with our existing senior living software solutions. We acquired SFL for a purchase price of $2.7 million which consisted of a cash payment of $2.3 million and additional cash payments of $0.2 million each due 6 months and 12 months after the acquisition date. This acquisition was financed from proceeds from cash flows from operations. Acquired intangibles were recorded at fair value based on assumptions made by us. The acquired developed product technologies have a useful life of three years amortized on a straight-line basis. Acquired customer relationships have a useful life of five years which will be amortized proportionately to the expected discounted cash flows derived from the asset. Direct acquisition costs were less than $0.1 million and expensed as incurred. We included the results of operations of this acquisition in our consolidated financial statements from the effective date of the acquisition. Goodwill and identified intangibles associated with this acquisition are deductible for tax purposes.

 

In March 2013, we acquired certain assets from Yield Technologies, Inc., including RentSentinel and RentSocial (together, “RentSentinel”). The RentSentinel software-as-a-service platform is a fully featured apartment marketing management solution for the multi-family industry. RentSocial is an apartment search service that simplifies and incorporates the social marketing platform into the process of finding an apartment. We plan to integrate RentSentinel with our existing LeaseStar product family. We acquired RentSentinel for a purchase price of $10.5 million which consisted of a cash payment of $7.6 million, an issuance of 72,500 shares of our common stock and two traunches of 36,250 shares of our common stock which are issuable 12 months and 24 months after the acquisition date, respectively. This acquisition was financed from proceeds from cash flows from operations and our common stock. Acquired intangibles were recorded at fair value based on assumptions made by us. The acquired developed product technologies have a useful life of three years amortized on a straight-line basis. Acquired customer relationships have a useful life of nine years which will be amortized proportionately to the expected discounted cash flows derived from the asset. Direct acquisition costs were $0.1 million and expensed as incurred. We included the results of operations of this acquisition in our consolidated financial statements from the effective date of the acquisition. Goodwill and identified intangibles associated with this acquisition are not deductible for tax purposes.

We have allocated the purchase price for SFL and RentSentinel (preliminary) as follows:

 

     SFL      RentSentinel  
     (in thousands)  

Intangible assets:

  

Developed product technologies

   $ 1,406       $ 3,640   

Customer relationships

     161         3,060   

Goodwill

     1,035         4,566   

Net deferred taxes

     —           (779

Net other assets

     88         9   
  

 

 

    

 

 

 

Total purchase price

   $ 2,690       $ 10,496   
  

 

 

    

 

 

 

2012 Acquisitions

In January 2012, we acquired substantially all of the operating assets of Vigilan, Incorporated (“Vigilan”). A provider of assisted living software-as-a-service solutions, Vigilan products allow assisted living communities to monitor and schedule detailed care, manage labor costs, provide accurate billing and maintain regulatory compliance through its comprehensive compliance module. This asset acquisition allowed us to integrate Vigilan with existing senior living software solutions to further expand the RealPage Senior Living product solutions. We acquired Vigilan for a purchase price of $5.0 million consisting of a cash payment of $4.0 million and two additional cash payments of up to $0.5 million each due 12 months and 24 months after the acquisition date. The $1.0 million withheld from the purchase consideration was subject to a downward adjustment if certain revenue targets (a level 3 input) were not met for the six months ended June 30, 2012. Revenue targets were met and the amount was not adjusted. As of June 30, 2013, the first additional cash payment was made. This acquisition was financed from proceeds from cash flows from operations. Acquired intangibles were recorded at fair value based on assumptions made by us. The acquired developed product technologies have a useful life of three years amortized on a straight-line basis. Acquired customer relationships have a useful life of ten years which will be amortized proportionately to the expected discounted cash flows derived from the asset. All direct acquisition costs were $0.1 million and expensed as incurred. We included the results of operations of this acquisition in our consolidated financial statements from the effective date of the acquisition. Goodwill and identified intangibles associated with this acquisition are deductible for tax purposes.

In July 2012, we acquired all of the issued and outstanding shares of Rent Mine Online, Inc. (“RMO”). The acquisition of RMO expanded our resident referral capabilities into the multifamily residential rental housing market. We acquired RMO for a purchase price consisting of a cash payment of $5.5 million at closing, a deferred cash payment of up to $3.5 million and a contingent deferred earn out payment of up to 300,000 shares of our common stock, payable based on the achievement of certain revenue targets on or before December 31, 2014. In addition, the purchase agreement included a conversion option on the contingent common shares, in which the seller can elect to receive, in lieu of common shares, an amount per share equal to the lesser of the average market price or an established threshold, up to one half of the common shares earned. The $3.5 million withheld from the purchase price was subject to a downward adjustment if certain revenue targets (a level 3 input) were not met as of March 31, 2013. The initial fair value for the future cash payment and the common shares and conversion option were $0.2 million and $0.3 million, respectively. The fair value of the future cash payment was $1.3 million and the fair value of the common shares and conversion option was $0.4 million as of June 30, 2013. These fair values were based on management’s estimate of the fair value of the cash, common shares and conversion option using a probability weighted discount model on the achievement of certain revenue targets. This acquisition was financed using cash flows from operations and our common stock. Acquired intangibles were recorded at fair value based on assumptions determined by us. The acquired developed product technologies have a useful life of three years amortized on a straight-line basis. Acquired customer relationships have a useful life of ten years which will be amortized proportionately to the expected discounted cash flows derived from the asset. Direct acquisition costs were $0.1 million and expensed as incurred. We included the results of operations of this acquisition in our consolidated financial statements from the effective date of the acquisition. Goodwill and identified intangible assets are not deductible for tax purposes. For the three and six months ended June 30, 2013, we recognized a gain of $0.4 million and a loss of $1.3 million due to changes in the estimated fair values of the contingent cash, respectively. For the three and six months ended June 30, 2013, we recognized a gain of $0.7 million and a loss of $0.3 million due to changes in the common shares and the conversion option, respectively.

 

We have allocated the purchase price for RMO and Vigilan as follows:

 

     RMO     Vigilan  
     (in thousands)  

Intangible assets:

  

Developed product technologies

   $ 2,460      $ 1,430   

Customer relationships

     1,770        1,150   

Goodwill

     3,439        2,454   

Net deferred taxes

     (1,502     —     

Net other assets

     (410     (34
  

 

 

   

 

 

 

Total purchase price, net of cash acquired

   $ 5,757      $ 5,000   
  

 

 

   

 

 

 

Other Acquisition-Related Fair Value Adjustments

We have acquired companies in previous years for which acquisition-related contingent consideration was included in the purchase price and recorded at fair value. The liability established for the acquisition-related contingent consideration will continue to be re-evaluated and recorded at an estimated fair value based on the probabilities, as determined by management, of achieving the related targets. This evaluation will be performed until all of the targets have been met or terms of the agreement expire.

In July 2011, we acquired Senior-Living.com, Inc., operating under the name SeniorLiving.net (“SLN”). The purchase price included an estimated cash payment payable (acquisition-related contingent consideration). At the acquisition date, we recorded a liability for the estimated fair value of the acquisition-related contingent consideration of $0.3 million. The fair value was based on management’s estimate of the fair value of the cash using a probability weighted discounted cash flow model on the achievement of certain revenue targets. The cash payment has a maximum value of $0.5 million. The liability established for the acquisition-related contingent consideration will continue to be re-evaluated and recorded at an estimated fair value based on the probabilities, as determined by management, of achieving the related targets (a level 3 input). This evaluation will be performed until all of the targets have been met or terms of the agreement expire. As of June 30, 2013, our liability for the estimated cash payment was $0.2 million. We recognized losses of less than $0.1 million for the three months ended June 30, 2013, and losses of $0.0 million and $0.1 million for the six months ended June 30, 2013 and 2012, respectively, due to changes in the estimated fair value of the cash acquisition-related contingent consideration.

In August 2011, we acquired Multifamily Technology Solutions, Inc. (“MTS”), which owns the Internet listing service for rental properties called MyNewPlace. The purchase agreement included a put option on the RealPage restricted common shares, in which, if the average market price of our common shares falls below an established threshold, we will pay the difference between the average market price and the established threshold in cash. We established a liability of $1.2 million for the put option which is based on its estimated fair value at the acquisition date. The fair values of the put option was based on the Black-Scholes option pricing model using inputs consistent with those used in the valuation of our stock options. The liability established for the put option on the restricted common shares will continue to be re-evaluated and recorded at an estimated fair value based on the changes in market prices of our common stock (a level 2 input). We recognized gains of less than $0.1 million and $0.3 million as of the three months ended, and a gain of $0.1 million and loss of less than $0.1 million as of six months ended June 30, 2013 and 2012, respectively, due to changes in the estimated fair value of the put option for restricted common shares.

Pro Forma Results of Acquisitions

The following table presents unaudited actual results of operations for the three months ended June 30, 2013 and pro forma results of operations for the six months ended June 30, 2013 and the three and six months ended June 30, 2012 as if the SFL, RentSentinel, and RMO acquisitions had occurred at the beginning of the periods presented. The pro forma financial information for the six months ended June 30, 2013, includes the business combination accounting effects resulting from these acquisitions including: interest expense of $0.1 million; tax benefit of $0.6 million; and approximately $0.5 million of amortization charges from acquired intangible assets as though the aforementioned companies were combined as of the beginning of fiscal year 2013. The pro forma financial information for the three and six months ended June 30, 2012, respectively, includes the business combination accounting effects resulting from these acquisitions including: interest expense of $0.1 million and $0.1 million; tax benefit of $0.6 million and $1.0 million; and approximately $0.8 million and $1.6 million of amortization charges from acquired intangible assets as though the aforementioned companies were combined as of the beginning of fiscal year 2012. We prepared the pro forma financial information for the combined entities for comparative purposes only, and it is not indicative of what actual results would have been if the acquisitions had taken place at the beginning of the periods presented, or of future results:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013
Actual
     2012
Pro Forma
    2013
Pro Forma
     2012
Pro Forma
 
     (in thousands, except per share amounts)  

Revenue:

  

On demand

   $ 90,825       $ 77,007      $ 177,019       $ 150,130   

On premise

     1,011         1,261        1,961         2,677   

Professional and other

     2,615         2,593        5,324         4,876   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue

     94,451         80,861        184,304         157,683   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss)

   $ 4,610       $ (3,237   $ 4,715       $ (2,167

Net income (loss) per share:

          

Basic

   $ 0.06       $ (0.05   $ 0.06       $ (0.03

Diluted

   $ 0.06       $ (0.05   $ 0.06       $ (0.03