Annual report pursuant to Section 13 and 15(d)

Acquisitions

v2.4.1.9
Acquisitions
12 Months Ended
Dec. 31, 2014
Business Combinations [Abstract]  
Acquisitions
Acquisitions
2014 Acquisitions
In January 2014, we acquired certain assets from Bookt LLC, including the InstaManager product (“InstaManager”). InstaManager is a software-as-a-service vacation rental booking engine used by professional managers of vacation rental properties. InstaManager offers marketing websites, online pricing and availability, online booking, automated reservations, payment processing and insurance sales. The acquisition of InstaManager expanded our product offerings to include property management software for the vacation rental market. We acquired InstaManager for a purchase price of $9.2 million, consisting of a cash payment of $6.0 million at closing, a deferred cash payment of up to $1.0 million payable over two years after the acquisition date, and additional cash payments totaling up to $7.0 million contingent upon meeting certain revenue targets for the years ended March 31, 2015 and March 31, 2016. The initial fair value of the deferred and contingent cash payments was $0.8 million and $2.4 million, respectively. The fair value of the deferred cash payments was estimated based on the present value, as of the date of acquisition, of anticipated future payments. The fair value of the contingent cash payments was based on management’s estimate of the fair value of the cash payment using a probability weighted discount model on the achievement of certain revenue targets and is evaluated quarterly. This acquisition was financed from cash flows provided by operations. Acquired intangibles were recorded at their estimated 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. The trade name acquired has an indefinite useful life as we do not plan to cease using the trade name in the marketplace. 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating InstaManager into our existing operating structure. The aggregate fair value of the contingent cash payments was $2.3 million at December 31, 2014. During the year ended December 31, 2014 we recognized a net gain of less than $0.1 million due to the changes in the estimated fair value of the contingent cash payments.
In March 2014, we acquired certain assets from Virtual Maintenance Manager LLC, including the Virtual Maintenance Manager product (“VMM”). VMM is a software-as-a-service application that facilitates the management of the end-to-end maintenance life cycle for single family and multifamily rental properties and provides property managers visibility into their maintenance costs, manages resources and provides business control for property managers. We integrated VMM into our existing Propertyware products. We acquired the VMM assets for a purchase price of $1.2 million, consisting of a cash payment of $1.0 million at closing, a deferred cash payment of up to $0.2 million payable over two years after the acquisition date, and additional cash payments of up to $2.0 million if certain revenue targets are met for the twelve months ended June 30, 2015 and June 30, 2016. The initial fair value of the deferred and contingent cash payments was $0.2 million and less than $0.1 million, respectively. The fair value of the deferred cash payments was estimated based on the present value, as of the date of acquisition, of anticipated future payments. The fair value of the contingent cash payments was based on management’s estimate of the fair value of the cash payments using a probability weighted discount model on the achievement of certain revenue targets and will be evaluated quarterly. This acquisition was financed from cash flows provided by operations. Acquired intangibles were recorded at their estimated fair value based on assumptions made by us. The acquired developed product technologies have a useful life of three years to be 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating VMM into our existing operating structure and from anticipated synergies with our existing products. The aggregate fair value of the contingent cash payments was less than $0.1 million at December 31, 2014. During the year ended December 31, 2014 we recognized a gain of less than $0.1 million due to the changes in the estimated fair value of the contingent cash payments.
In May 2014, we acquired certain assets from Notivus Multi-Family LLC ("Notivus"). Notivus is a software-as-a-service application that provides an outsourced vendor credentialing solution to assist multifamily owners and managers in the credentialing and ongoing monitoring of its current and prospective vendors, suppliers and independent contractors. We are integrating Notivus into our existing Compliance Depot products. We acquired the Notivus assets for a purchase price of $4.4 million, consisting of a cash payment of $3.6 million at closing and a deferred cash payment of up to $0.8 million payable over two years after the acquisition date. The initial fair value of the deferred cash payment was approximately $0.8 million. The fair value of the deferred cash payments was estimated based on the present value, as of the date of acquisition, of anticipated future payments. This acquisition was financed from cash flows provided by operations. Acquired intangibles were recorded at their estimated fair value based on assumptions made by us. The acquired developed product technologies have a useful life of three years to be amortized on a straight-line basis. 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating Notivus into our existing operating structure and from anticipated synergies with our existing products.
In June 2014, we acquired all of the issued and outstanding stock of Kigo, Inc. ("Kigo"). Kigo is a software-as-a-service vacation rental booking system based in the United States with operations in Spain. Kigo offers services for vacation rental property management that include vacation rental calendars, scheduling, reservations, accounting, channel management, website design, payment processing and other tasks to aid the management of leads, revenue, resources and lodging calendars. We plan to integrate Kigo with our existing vacation rental products. We acquired Kigo for a purchase price of $36.2 million, consisting of a cash payment of $30.7 million and a deferred cash payment of up to $5.5 million, to be payable over two and a half years after the acquisition date. This acquisition was financed from our revolving line of credit and cash flows provided by operations. Direct acquisition costs were $0.5 million and expensed as incurred. The acquired developed product technologies have a useful life of three years to be 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. The trade name acquired has an indefinite useful life as we do not plan to cease using the trade name in the marketplace. Goodwill and identified intangibles associated with this acquisition are not deductible for tax purposes. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating Kigo into our existing operating structure and from anticipated synergies with our existing products. We included the results of operations of this acquisition in our consolidated financial statements from the effective date of this acquisition.
We preliminarily allocated the purchase price for InstaManager, VMM, Notivus and Kigo as follows:
 
 
InstaManager
 
VMM
 
Notivus
 
Kigo
 
 
(in thousands)
Intangible assets:
 
 
 
 
 
 
 
 
Developed product technologies
 
$
4,490

 
$
671

 
$
1,840

 
$
2,570

Customer relationships
 

 
200

 

 
1,120

Trade names
 
527

 

 

 
602

Goodwill
 
4,135

 
358

 
2,852

 
32,996

Deferred revenue
 
(33
)
 

 
(156
)
 

Net deferred taxes
 

 

 

 
(495
)
Net other assets (liabilities)
 
55

 

 
(141
)
 
(547
)
Total purchase price
 
$
9,174

 
$
1,229

 
$
4,395

 
$
36,246


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 have integrated 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. These cash payments were paid in October 2013 and August 2014. This acquisition was financed from cash flows provided by 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 and are amortized on a straight-line basis. Acquired customer relationships have a useful life of five years and are 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating SFL into our existing operating structure and from anticipated synergies with our existing products.
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 multifamily industry. RentSocial is an apartment search service that simplifies and incorporates the social marketing platform into the process of finding an apartment. We have integrated 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 tranches of 36,250 shares of our common stock which are issuable 12 months and 24 months after the acquisition date, respectively. The initial fair value of the shares of common stock issued at acquisition and the contingent shares of common stock were $1.5 million and $1.4 million, respectively. As of December 31, 2014, 33,868 shares had been issued. This acquisition was financed from cash flows provided by 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 and are amortized on a straight-line basis. Acquired customer relationships have a useful life of nine years and are 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating RentSentinel into our existing operating structure and from anticipated synergies with our existing products.
In October 2013, we acquired substantially all of the operating assets of Windsor Compliance Services, Inc. (“Windsor Compliance”) for a purchase price of $2.7 million, which included a cash payment of $1.3 million at closing and additional cash payments of $1.0 million and $0.5 million due 12 months and 24 months after the acquisition date, respectively, which are contingent on Windsor Compliance providing services to a specified number of units on or before those dates. The first payment of $1.0 million was paid in October 2014. The initial fair value of the cash payments was $1.4 million. The fair value was based on management’s estimate of the fair value of the cash payment using a probability weighted discount model on the achievement of the servicing targets discussed above. Windsor Compliance is a firm specializing in compliance with tax credits and regulations for the affordable housing industry. We plan to integrate Windsor Compliance with our other affordable HUD products. This acquisition was financed from cash flows provided by operations. Acquired intangibles were recorded at fair value based on assumptions made by us. Acquired customer relationships have a useful life of ten years and are 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 deductible for tax purposes. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating Windsor Compliance into our existing operating structure and from anticipated synergies with our existing products.
In October 2013, we acquired all of the issued and outstanding capital stock of MyBuilding Inc. ("MyBuilding") for a purchase price of $6.9 million, consisting of a cash payment of $5.2 million at closing, a deferred cash payment of up to $1.5 million payable over two years after the acquisition date and additional cash payments totaling up to $1.1 million if certain revenue targets are met for the years ended December 31, 2014 and December 31, 2015. The initial fair value of the deferred and contingent cash payments were $1.4 million and $0.3 million, respectively. During 2014 a cash payment of $0.7 million was made against the deferred cash payment obligation. The fair value of the deferred cash payments was estimated based on the present value, as of the date of acquisition, of anticipated future payments. The fair value of the contingent cash payments was based on management’s estimate of the fair value of the cash payment using a probability weighted discount model on the achievement of certain revenue targets. MyBuilding provides software-as-a-service solutions that facilitate the creation of online communities that connect renters to multifamily property managers, local vendors and other renters. We have integrated Active Building with our Resident Portal software solutions. This acquisition was financed from cash flows provided by 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 and are amortized on a straight-line basis. Acquired customer relationships have a useful life of ten years and are amortized proportionately to the expected discounted cash flows derived from the asset. The trade name acquired has an indefinite useful life as we do not plan to cease using the trade names in the marketplace. 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating MyBuilding into our existing operating structure and from anticipated synergies with our existing products. The aggregate fair value of the contingent cash payments was $0.2 million and $0.3 million at December 31, 2014 and 2013, respectively. During the year ended December 31, 2014, we recognized a gain of $0.1 million due to the changes in the estimated fair value of the contingent cash payments. No gain or loss was recognized due to changes in the estimated fair value of the contingent cash payments during the year ended December 31, 2013.
In October 2013, we acquired all of the membership interests of Active Building, LLC ("Active Building") for a purchase price of $14.4 million, consisting of a cash payment of $11.3 million at closing, a deferred cash payment of up to $2.0 million payable over three years after the acquisition date and additional cash payments totaling up to $6.5 million if certain revenue targets are met for the years ended December 31, 2014 and December 31, 2015. The initial fair value of the deferred and contingent cash payments was $1.7 million and $1.4 million, respectively. A deferred cash payment in the amount of $0.7 million was made in November 2014. The fair value of the deferred cash payments was estimated based on the present value, as of the date of acquisition, of anticipated future payments. The fair value of the contingent cash payments was based on management’s estimate of the fair value of the cash payment using a probability weighted discount model on the achievement of certain revenue targets. Active Building provides software-as-a-service solutions that facilitate the creation of online communities that connect renters to multifamily property managers, local vendors and other renters. We have integrated Active Building with our Resident Portal software solutions. This acquisition was financed from cash flows provided by 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 and are amortized on a straight-line basis. Acquired customer relationships have a useful life of ten years and are amortized proportionately to the expected discounted cash flows derived from the asset. The trade name acquired has an indefinite useful life as we do not plan to cease using the trade names in the marketplace. 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating Active Building into our existing operating structure and from anticipated synergies with our existing products. The aggregate fair value of the contingent cash payments was $1.6 million and $1.4 million at December 31, 2014 and 2013, respectively. During the year ended December 31, 2014, we recognized a gain of $0.2 million due to the changes in the estimated fair value of the contingent cash payments. No gain or loss was recognized due to changes in the estimated fair value of the contingent cash payments during the year ended December 31, 2013.
We preliminarily allocated the purchase price for SFL, RentSentinel, Windsor Compliance, MyBuilding and Active Building as follows:
 
 
SFL
 
RentSentinel
 
Windsor Compliance
 
MyBuilding
 
Active Building
 
 
(in thousands)
Intangible assets:
 
 
 
 
 
 
 
 
 
 
Developed product technologies
 
$
1,406

 
$
4,238

 
$

 
$
1,450

 
$
3,850

Customer relationships
 
161

 
2,390

 
1,230

 
1,000

 
2,650

Trade names
 

 

 

 
328

 
597

Goodwill
 
1,035

 
3,633

 
1,302

 
5,043

 
7,198

Deferred revenue
 

 
(304
)
 
(107
)
 
(258
)
 

Net deferred taxes
 

 
226

 

 
(813
)
 

Net other assets
 
88

 
313

 
226

 
111

 
76

Total purchase price, net of cash acquired
 
$
2,690

 
$
10,496

 
$
2,651

 
$
6,861

 
$
14,371


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 were not met for the six months ended June 30, 2012. Revenue targets were met and the amount was not adjusted. The two additional cash payments were made in 2013 and 2014. This acquisition was financed 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 and are amortized on a straight-line basis. Acquired customer relationships have a useful life of ten years and are 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating Vigilan into our existing operating structure and from anticipated synergies with our existing products.
In July 2012, we acquired all of the issued and outstanding shares of Rent Mine Online, Inc. (“RMO”). The acquisition of RMO expanded our renter 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 under 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 is subject to a downward adjustment if certain revenue targets 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. 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. As of December 31, 2013, 22,000 shares had been issued and a cash payment of $0.7 million had been made. This acquisition was financed using cash flows from operations. 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. Goodwill arising from the acquisition consists largely of the economies of scale expected from integrating RMO into our existing operating structure and from anticipated synergies with our existing products. As of December 31, 2013, we recognized a loss of $1.3 million due to changes in the estimated fair value of the cash acquisition-related contingent consideration. As of December 31, 2013, we recognized no income or expense and expense of $0.3 million due to changes in the common shares and the conversion option, respectively. In 2014, the remaining obligations relating to the deferred cash and earn out payments were settled through a cash payment of $0.6 million.
We 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


Pro Forma Results of Acquisitions
The following table presents unaudited pro forma results of operations for 2014 and 2013 as if the aforementioned acquisitions had occurred at the beginning of each period presented. The pro forma financial information as of December 31, 2014 and 2013, respectively, includes the business combination accounting effects resulting from these acquisitions including $0.8 million and $6.2 million of amortization charges from acquired intangible assets. 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.
 
 
Year Ended December 31,
 
 
2014
Pro Forma
 
2013
Pro Forma
 
 
(in thousands, except per share amounts)
 
 
(unaudited)
 
(unaudited)
Revenue:
 
 
 
 
On demand
 
$
391,949

 
$
369,362

On premise
 
3,094

 
3,691

Professional and other
 
10,835

 
11,019

Total revenue
 
405,878

 
384,072

Net (loss) income
 
$
(10,746
)
 
$
15,980

Net (loss) income per share:
 
 
 
 
Basic
 
$
(0.14
)
 
$
0.21

Diluted
 
$
(0.14
)
 
$
0.21