rp-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34846

RealPage, Inc.

(Exact name of registrant as specified in its charter)


Delaware						75-2788861
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2201 Lakeside Boulevard, Richardson, Texas 75082-4305

(Address of principal executive offices)

(Zip Code)

(972) 820-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	RP	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						July 23, 2020
Common Stock, $0.001 par value						101,915,320

Table of Contents

INDEX


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)			1
Condensed Consolidated Statements of Operations (Unaudited)			1
Condensed Consolidated Statements of Comprehensive Income (Unaudited)			2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)			3
Condensed Consolidated Statements of Cash Flows (Unaudited)			7
Notes to the Condensed Consolidated Financial Statements (Unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			54
PART II—OTHER INFORMATION
Item 1. Legal Proceedings			55
Item 1A. Risk Factors			55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			61
Item 6. Exhibits			61
SIGNATURES AND EXHIBIT INDEX
Exhibit Index			62
Signatures			63

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

RealPage, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share and share amounts)


	June 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	638,556	$	197,154
Restricted cash	262,397		243,323
Accounts receivable, less allowances of $11,814 and $10,271 at June 30, 2020 and December 31, 2019, respectively	129,675		143,127
Prepaid expenses	28,613		24,539
Other current assets	28,354		27,387
Total current assets	1,087,595		635,530
Property, equipment, and software, net	169,222		163,282
Right-of-use assets	114,372		121,941
Goodwill	1,663,639		1,611,749
Intangible assets, net	348,620		372,996
Deferred tax assets, net	28,525		33,812
Other assets	28,473		30,507
Total assets	$	3,440,446	$	2,969,817
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	40,700	$	40,092
Accrued expenses and other current liabilities	98,624		89,038
Current portion of deferred revenue	132,796		134,148
Current portion of term loans	26,250		18,750
Convertible notes, net	311,638		—
Customer deposits held in restricted accounts	263,133		243,316
Total current liabilities	873,141		525,344
Deferred revenue	4,062		4,793

Revolving facility	—		230,000
Term loans, net	560,571		575,313
Convertible notes, net	283,122		305,188
Lease liabilities, net of current portion	125,697		133,313
Other long-term liabilities	34,038		22,940
Total liabilities	1,880,631		1,796,891
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value: 10,000,000 shares authorized and zero shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	—		—
Common stock, $0.001 par value: 250,000,000 shares authorized, 102,206,190 and 96,100,296 shares issued and 101,990,040 and 94,744,157 shares outstanding at June 30, 2020 and December 31, 2019, respectively	102		96
Additional paid-in capital	1,561,672		1,222,356
Treasury stock, at cost: 216,150 and 1,356,139 shares at June 30, 2020 and December 31, 2019, respectively	(4,527)		(39,483)
Retained earnings (deficit)	8,695		(7,695)
Accumulated other comprehensive loss	(6,127)		(2,348)
Total stockholders’ equity	1,559,815		1,172,926
Total liabilities and stockholders’ equity	$	3,440,446	$	2,969,817

See accompanying notes.

Table of Contents

RealPage, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue:
On demand	$	278,559	$	235,185	$	547,030	$	461,704
Professional and other	7,048		8,676		15,250		16,463
Total revenue	285,607		243,861		562,280		478,167
Cost of revenue	110,713		95,708		219,623		185,902
Amortization of product technologies	14,531		9,900		28,303		19,414
Gross profit	160,363		138,253		314,354		272,851
Operating expenses:
Product development	31,433		28,151		62,981		58,048
Sales and marketing	49,424		49,120		104,081		93,943
General and administrative	42,399		28,310		82,927		56,453
Amortization of intangible assets	11,247		10,402		22,666		20,238

Total operating expenses	134,503		115,983		272,655		228,682
Operating income	25,860		22,270		41,699		44,169
Interest expense and other, net	(12,692)		(8,029)		(25,427)		(14,009)
Income before income taxes	13,168		14,241		16,272		30,160
Income tax expense (benefit)	1,867		(822)		(634)		3,825
Net income	$	11,301	$	15,063	$	16,906	$	26,335

Net income per share attributable to common stockholders:
Basic	$	0.12	$	0.16	$	0.18	$	0.29
Diluted	$	0.11	$	0.16	$	0.17	$	0.27
Weighted average common shares outstanding:
Basic	95,752		91,914		94,203		91,703
Diluted	100,254		96,493		98,143		96,036

See accompanying notes.

Table of Contents

RealPage, Inc.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	11,301	$	15,063	$	16,906	$	26,335
Other comprehensive income (loss):
Unrealized loss on derivative instruments, net of tax	(414)		(991)		(3,963)		(1,576)
Reclassification adjustment for losses (gains) included in earnings on derivative instruments, net of tax	375		(223)		509		(444)
Foreign currency translation adjustment	180		118		(325)		19
Other comprehensive income (loss), net of tax	141		(1,096)		(3,779)		(2,001)
Comprehensive income	$	11,442	$	13,967	$	13,127	$	24,334

See accompanying notes.

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RealPage, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Six-Month Period Ended June 30, 2020

	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)	Treasury Stock						Total Stockholders’ Equity
	Shares	Amount											Shares			Amount
Balance as of January 1, 2020	96,100	$	96	$	1,222,356	$	(2,348)	$	(7,695)	1,356	$	(39,483)		$	1,172,926


Public offering of common stock, net	5,847	6		334,120		—		—		—	—			334,126
Stock option exercises	232	—		(676)		—		—		(250)	8,398			7,722
Issuance of restricted stock	37	—		(40,752)		—		—		(1,376)	40,752			—
Treasury stock purchased, at cost	—	—		7,951		—		—		486	(14,194)			(6,243)
Retirement of treasury stock	(10)	—		(124)		—		(516)		—	—			(640)
Stock-based compensation	—	—		26,341		—		—		—	—			26,341
Purchase of capped call instrument	—	—		(39,365)		—		—		—	—			(39,365)
Equity component of convertible senior notes, net of issuance costs and deferred tax	—	—		51,821		—		—		—	—			51,821
Other comprehensive loss - derivative instruments	—	—		—		(3,454)		—		—	—			(3,454)
Foreign currency translation	—	—		—		(325)		—		—	—			(325)
Net income	—	—		—		—		16,906		—	—			16,906
Balance as of June 30, 2020	102,206	$	102	$	1,561,672	$	(6,127)	$	8,695	216	$	(4,527)		$	1,559,815

See accompanying notes.

Table of Contents

RealPage, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited


	Three-Month Period Ended June 30, 2020

	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)	Treasury Stock						Total Stockholders’ Equity
	Shares	Amount											Shares			Amount
Balance as of April 1, 2020	96,288	$	96	$	1,199,209	$	(6,268)	$	(2,090)	11	$	(104)		$	1,190,843


Public offering of common stock, net	5,847	6		334,120		—		—		—	—			334,126
Stock option exercises	44	—		(1,026)		—		—		(99)	3,842			2,816
Issuance of restricted stock	37	—		(303)		—		—		(31)	303			—
Treasury stock purchased, at cost	—	—		5,818		—		—		335	(8,568)			(2,750)
Retirement of treasury stock	(10)	—		(124)		—		(516)		—	—			(640)
Stock-based compensation	—	—		11,522		—		—		—	—			11,522
Purchase of capped call instrument	—	—		(39,365)		—		—		—	—			(39,365)
Equity component of convertible senior notes, net of issuance costs and deferred tax	—	—		51,821		—		—		—	—			51,821
Other comprehensive loss - derivative instruments	—	—		—		(39)		—		—	—			(39)
Foreign currency translation	—	—		—		180		—		—	—			180
Net income	—	—		—		—		11,301		—	—			11,301
Balance as of June 30, 2020	102,206	$	102	$	1,561,672	$	(6,127)	$	8,695	216	$	(4,527)		$	1,559,815

See accompanying notes.

Table of Contents

RealPage, Inc.

Condensed Consolidated Statements of Stockholders’ Equity, continued

(in thousands)

(unaudited)


	Six-Month Period Ended June 30, 2019

	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)	Treasury Stock						Total Stockholders’ Equity
	Shares	Amount											Shares			Amount
Balance as of January 1, 2019	95,991	$	96	$	1,187,683	$	(492)	$	(58,793)	2,341	$	(65,470)		$	1,063,024
Cumulative effect of adoption of ASU 2017-12	—	—		—		25		(25)		—	—			—
Issuance of common stock in connection with our acquisitions	154	—		9,846		—		—		—	—			9,846
Stock option exercises	19	—		(1,277)		—		—		(138)	4,346			3,069
Issuance of restricted stock	—	—		(38,999)		—		—		(1,268)	38,999			—
Treasury stock purchased, at cost	—	—		1,620		—		—		369	(12,728)			(11,108)
Retirement of treasury stock	(12)	—		(152)		—		(592)		(12)	744			—
Stock-based compensation	—	—		31,154		—		—		—	—			31,154
Other comprehensive loss- derivative instruments	—	—		—		(2,020)		—		—	—			(2,020)
Foreign currency translation	—	—		—		19		—		—	—			19
Net income	—	—		—		—		26,335		—	—			26,335
Balance as of June 30, 2019	96,152	$	96	$	1,189,875	$	(2,468)	$	(33,075)	1,292	$	(34,109)		$	1,120,319

See accompanying notes.

Table of Contents

RealPage, Inc.

Condensed Consolidated Statements of Stockholders’ Equity, continued

(in thousands)

(unaudited)


	Three-Month Period Ended June 30, 2019

	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)	Treasury Stock						Total Stockholders’ Equity
	Shares	Amount											Shares			Amount
Balance as of April 1, 2019	95,998	$	96	$	1,167,950	$	(1,372)	$	(47,546)	1,265	$	(33,753)		$	1,085,375

Issuance of common stock in connection with our acquisitions	154	—		9,846		—		—		—	—			9,846
Stock option exercises	12	—		(440)		—		—		(49)	1,632			1,192
Issuance of restricted stock	—	—		(4,543)		—		—		(138)	4,543			—
Treasury stock purchased, at cost	—	—		1,183		—		—		226	(7,275)			(6,092)
Retirement of treasury stock	(12)	—		(152)		—		(592)		(12)	744			—
Stock-based compensation	—	—