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RealPage Reports Q3 2011 Financial Results
Nov 01, 2011 (04:11 PM EDT)


- 2011 Q3 Non-GAAP total revenue increases 41.4% to $67.9 million

- 2011 Q3 adjusted EBITDA increases 65.2% to $15.0 million

- 2011 Q3 Non-GAAP earnings per share increases 150.0% to $0.10 per diluted share

CARROLLTON, Texas, Nov. 1, 2011 /PRNewswire/ -- 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 quarter ended September 30, 2011.  

(Logo: http://photos.prnewswire.com/prnh/20110912/DA66533LOGO)

Steve Winn, chairman and CEO of RealPage, said, "The third quarter of 2011 was strong and significant for RealPage.  We displayed robust financial performance highlighted by annual contract value year-over-year growth of 48.9% and on demand organic growth of 25.8%.  This demonstrates our ability to expand market share and cross sell additional software products and services into our installed base.  As we previously announced during the quarter, we also completed the strategic acquisition of MyNewPlace®, which vastly expanded our capabilities around organic lead generation, performance-based lead generation and consumer Internet marketing."

Third Quarter 2011 Financial Highlights

  • Non-GAAP total revenue was $67.9 million, an increase of 41.4% year-over-year;
  • Non-GAAP on demand revenue was $63.0 million, an increase of 46.3% year-over-year;
  • Adjusted EBITDA was $15.0 million, an increase of 65.2% year-over-year;
  • Non-GAAP net income was $7.0 million, or $0.10 per diluted share, a year-over-year increase of 124.3% and 150.0%, respectively;
  • GAAP net loss attributable to common stockholders was $1.1 million, or $0.02 per diluted share, a year-over-year increase of 238.2% and 100.0%, respectively; and
  • Net cash provided by operating activities was $10.5 million, an increase of 60.1% year-over-year.

Financial Outlook

RealPage management expects to achieve the following results during its fourth quarter ended December 31, 2011:

  • Non-GAAP total revenue is expected to be in the range of $73.0 million to $74.5 million;
  • Adjusted EBITDA is expected to be in the range of $15.6 million to $16.1 million;
  • Non-GAAP net income is expected to be in the range of $7.0 million to $7.3 million, or $0.10 per diluted share;
  • Tax rate of approximately 40.0%; and
  • Weighted average shares outstanding of approximately 72.8 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2011:

  • Non-GAAP total revenue is expected to be in the range of $260.4 million to $261.9 million;
  • Adjusted EBITDA is expected to be in the range of $56.5 million to $57.0 million;
  • Non-GAAP net income is expected to be in the range of $25.3 million to $25.6 million, or $0.35 to $0.36 per diluted share;
  • Tax rate of approximately 40.0%; and
  • Full year weighted average shares outstanding of approximately 72.4 million.

Please note that the above statements are forward looking and that Non-GAAP total revenue includes an adjustment for the effect of deferred revenue from acquired companies that is required to be written down for GAAP purposes under purchase accounting rules.  In addition, the above statements also include the impact of acquisitions and exclude any impact resulting from the Yardi Systems litigation.  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. EDT 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 23528150, until November 11, 2011.

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 on demand product lines include OneSite® property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, tax credit, student living, senior living and military housing properties; LeaseStar™ expert managed marketing that enables owners to originate, syndicate, manage and capture leads more effectively and at less overall cost; YieldStar® asset optimization systems that enable owners and managers to optimize rents to achieve the overall highest yield, or combination of rent and occupancy, at each property; 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; OpsTechnology® spend management systems that help owners manage and control operating expenses; and Compliance Depot™ vendor management and qualification services to assist a community in managing its compliance vendor program.  Supporting this family of SaaS products is a suite of shared cloud services including electronic payments, document management, decision support and learning. RealPage's MyNewPlace® subsidiary is one of the nation's largest apartment and home rental websites, offering apartment owners and managers qualified, prospective residents through subscription, pay-per-lead and LeaseMatch pay-per-lease programs. 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 MyNewPlace as well as market performance, 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 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; (g) litigation; and (h) such other risk and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission ("SEC"), including RealPage's Form 10-Q previously filed with the SEC on August 9, 2011. 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. These measures differ from GAAP in that they exclude amortization of intangible assets, stock-based compensation expenses, any impact related to the Yardi Systems litigation, acquisition-related deferred revenue adjustments, and acquisition related expenses (including any purchase accounting adjustments). Reconciliation tables comparing GAAP financial measures to non-GAAP financial measures are included at the end of this release.

We define Adjusted EBITDA as net (loss) income plus acquisition-related deferred revenue adjustment, depreciation and asset impairment, amortization of intangible assets, net interest expense, income tax expense (benefit), stock-based compensation expense, any impact related to the Yardi Systems litigation 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 and any impact related to the Yardi Systems litigation, 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.

Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2011 and 2010

(unaudited, in thousands, except per share data)














Three Months Ended


Nine Months Ended




September 30,


September 30,




2011


2010


2011


2010

Revenue:









On demand

$ 62,765


$ 43,097


$ 172,741


$ 120,393


On premise

1,772


2,127


5,045


6,419


Professional and other

3,118


2,804


9,052


7,403



Total revenue

67,655


48,028


186,838


134,215

Cost of revenue(1)

27,585


20,203


78,078


56,595

Gross profit

40,070


27,825


108,760


77,620

Operating expense:









Product development(1)

11,230


9,127


32,083


26,431


Sales and marketing(1)

17,688


9,428


44,992


25,793


General and administrative(1)

11,840


6,969


31,190


20,230



Total operating expense

40,758


25,524


108,265


72,454

Operating income (loss)

(688)


2,301


495


5,166

Interest expense and other, net

(684)


(1,822)


(2,582)


(4,749)

Net income (loss) before income taxes

(1,372)


479


(2,087)


417

Income tax expense (benefit)

(266)


187


(615)


164

Net income (loss) income

$ (1,106)


$      292


$   (1,472)


$        253











Net loss attributable to common








stockholders










Basic

$ (1,106)


$    (327)


$   (1,472)


$   (2,691)



Diluted

$ (1,106)


$    (327)


$   (1,472)


$   (2,691)

Net loss per share attributable








to common stockholders










Basic

$   (0.02)


$   (0.01)


$     (0.02)


$     (0.08)



Diluted

$   (0.02)


$   (0.01)


$     (0.02)


$     (0.08)

Weighted average shares used in








computing net income (loss) per share








attributable to common stockholders










Basic

68,792


43,636


68,096


31,878



Diluted

68,792


43,636


68,096


31,878





















(1)

Includes stock-based compensation

Three Months Ended


Nine Months Ended


expense as follows:

September 30,


September 30,




2011


2010


2011


2010



Cost of revenue

$      459


$      140


$     1,069


$        407



Product development

1,258


627


3,343


1,664



Sales and marketing

3,433


201


8,793


541



General and administrative

1,258


391


3,025


1,133




$   6,408


$   1,359


$   16,230


$     3,745



Condensed Consolidated Balance Sheets

At September 30, 2011 and December 31, 2010

(unaudited, in thousands except share data)










September 30,


December 31,




2011


2010

Assets




Current assets:





Cash and cash equivalents 

$            47,491


$        118,010


Restricted cash 

20,334


15,346


Accounts receivable, less allowance for doubtful accounts of $1,003 and $1,370 at






September 30, 2011 and December 31, 2010, respectively

36,739


29,577


Deferred tax asset, net of valuation allowance

601


1,529


Other current assets 

12,111


6,060



Total current assets

117,276


170,522

Property, equipment and software, net

26,552


24,515

Goodwill

128,632


73,885

Identified intangible assets, net

115,141


54,361

Deferred tax asset, net of valuation allowance

2,760


17,322

Other assets

2,855


2,187



Total assets

$          393,216


$        342,792

Liabilities and stockholders' equity




Current liabilities:





Accounts payable

$              8,259


$            4,787


Accrued expenses and other current liabilities

27,401


15,436


Current portion of deferred revenue 

51,204


47,717


Current portion of long-term debt

10,768


10,781


Customer deposits held in restricted accounts 

20,278


15,253



Total current liabilities

117,910


93,974

Deferred revenue 

8,910


7,947

Long-term debt, less current portion 

47,173


55,258

Other long-term liabilities

5,926


13,029



Total liabilities

179,919


170,208

Stockholders' equity:





Preferred stock, $0.001 par value, 10,000,000 shares authorized and zero shares





 outstanding at September 30, 2011 and December 31, 2010, respectively

-


-


Common stock, $0.001 par value per share: 125,000,000 shares authorized,





 72,027,632 and  68,703,366 shares issued and 71,766,288 and 68,490,277 shares





 outstanding at September 30, 2011 and December 31, 2010, respectively

72


69


Additional paid-in capital

306,220


263,219


Treasury stock, at cost: 261,344 and 213,089 shares at September 30, 2011 and

(1,741)


(958)


 December 31, 2010, respectively





Accumulated deficit

(91,202)


(89,730)


Accumulated other comprehensive loss

(52)


(16)



Total stockholders' equity

213,297


172,584



Total liabilities and stockholders' equity

$          393,216


$        342,792



Condensed Consolidated Statements of Cash Flows

For the Three and Nine Months Ended September 30, 2011 and 2010

(unaudited, in thousands)
















Three Months Ended


Nine Months Ended





September 30,


September 30,





2011


2010


2011


2010

Cash flows from operating activities:









Net (loss) income

$              (1,106)


$      292


$ (1,472)


$      253


Adjustments to reconcile net (loss) income to net cash










provided by operating activities:










Depreciation and amortization

7,442


5,312


21,458


14,856



Deferred tax benefit

(663)


(76)


(1,430)


(162)



Stock-based compensation

6,408


1,359


16,230


3,745



Loss on sale of assets

3


54


398


57



Acquisition-related contingent consideration

(3)


39


102


39



Changes in assets and liabilities, net of assets acquired











and liabilities assumed in business combinations:

(1,603)


(436)


(5,587)


(4,047)















Net cash provided by operating activities

10,478


6,544


29,699


14,741

Cash flows from investing activities:









Purchases of property, equipment and software

(5,140)


(2,709)


(10,782)


(7,427)


Acquisition of businesses, net of cash acquired

(67,786)


(3,939)


(87,817)


(17,231)




Net cash used by investing activities

(72,926)


(6,648)


(98,599)


(24,658)

Cash flows from financing activities:









Stock issuance costs from public offerings

$                       -


$ 57,688


$    (775)


$ 57,688


Payments on debt, net 

(2,782)


(23,081)


(8,524)


(12,763)


Preferred stock dividend

-


(666)


-


(666)


Issuance of common stock

1,062


447


8,499


664


Purchase of treasury stock

(310)


(16)


(783)


(20)




Net cash (used) provided by financing activities

(2,030)


34,372


(1,583)


44,903




Net (decrease) increase in cash and cash equivalents

(64,478)


34,268


(70,483)


34,986




Effect of exchange rate on cash

(16)


(6)


(36)


(19)

Cash and cash equivalents:









Beginning of period

111,985


5,132


118,010


4,427


End of period

$             47,491


$ 39,394


$ 47,491


$ 39,394




Reconciliation of GAAP to Non-GAAP Measures


For the Three and Nine Months Ended September 30, 2011 and 2010


(unaudited, in thousands)


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010














Revenue:


$   67,655


$   48,028


$ 186,838


$ 134,215



Acquisition-related deferred revenue adjustment

276


-


520


-


Non-GAAP revenue

$   67,931


$   48,028


$ 187,358


$ 134,215


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Adjusted Gross Profit:










Gross profit

$   40,070


$   27,825


$ 108,760


$   77,620




Acquisition-related deferred revenue adjustment

276


-


520


-




Depreciation

1,428


1,328


4,437


3,947




Amortization of intangible assets

2,323


1,980


6,730


4,965




Stock-based compensation expense

459


140


1,069


407



Adjusted gross profit

$   44,556


$   31,273


$ 121,516


$   86,939















Adjusted gross profit

65.6%


65.1%


64.9%


64.8%


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Adjusted EBITDA:










Net (loss) income

$   (1,106)


$        292


$   (1,472)


$        253




Acquisition-related deferred revenue adjustment

276


-


520


-




Depreciation, asset impairment and loss on sale of asset

2,696


2,606


8,570


7,657




Amortization of intangible assets

4,749


2,760


13,286


7,256




Interest expense, net

684


1,823


2,199


4,759




Income tax expense (benefit)

(266)


187


(615)


164




Litigation-related expense

605


-


961


-




Stock-based compensation expense

6,408


1,359


16,230


3,745




Acquisition-related expense

969


60


1,199


453



Adjusted EBITDA

$   15,015


$     9,087


$   40,878


$   24,287















Adjusted EBITDA Margin

22.1%


18.9%


21.8%


18.1%


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Total Product Development:










Product Development

$   11,230


$     9,127


$   32,083


$   26,431




Less: Stock-based compensation expense

1,258


627


3,343


1,664



Non-GAAP Total Product Development:

$     9,972


$     8,500


$   28,740


$   24,767















Non-GAAP Total Product Development as % of Revenue:

14.7%


17.7%


15.3%


18.5%


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Total Sales and Marketing:










Sales and Marketing

$   17,688


$     9,428


$   44,992


$   25,793




Less: Amortization of intangible assets

2,426


780


6,556


2,291




         Stock-based compensation expense

3,433


201


8,793


541



Non-GAAP Total Sales and Marketing:

$   11,829


$     8,447


$   29,643


$   22,961















Non-GAAP Total Sales and Marketing as % of Revenue:

17.4%


17.6%


15.8%


17.1%
















Reconciliation of GAAP to Non-GAAP Measures


For the Three and Nine Months Ended September 30, 2011 and 2010


(unaudited, in thousands)


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Total General and Administrative:










General and Administrative

$   11,840


$     6,969


$   31,190


$   20,230




Less: Acquisition-related expense

969


60


1,199


453




        Stock-based compensation expense

1,258


391


3,025


1,133




        Litigation related expense

605


-


961


-



Non-GAAP Total General and Administrative:

$     9,008


$     6,518


$   26,005


$   18,644















Non-GAAP Total General and Administrative as % of Revenue:

13.3%


13.6%


13.9%


13.9%


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Total Operating Expenses:










Operating Expenses

$   40,758


$   25,524


$ 108,265


$   72,454




Less:  Amortization of intangible assets

2,426


780


6,556


2,291




         Acquisition-related expense

969


60


1,199


453




         Stock-based compensation expense

5,949


1,219


15,161


3,338




         Litigation related expense

605


-


961


-



Non-GAAP Total Operating Expenses:

$   30,809


$   23,465


$   84,388


$   66,372















Non-GAAP Total Operating Expenses as % of Revenue:

45.4%


48.9%


45.0%


49.5%


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Operating Income:










Operating (loss) income

$      (688)


$     2,301


$        495


$     5,166




Acquisition-related deferred revenue adjustment

276


-


520


-




Amortization of intangible assets

4,749


2,760


13,286


7,256




Stock-based compensation expense

6,408


1,359


16,230


3,745




Acquisition-related expense

969


60


1,199


453




Litigation related expense

605


-


961


-



Non-GAAP operating income

$   12,319


$     6,480


$   32,691


$   16,620















Non-GAAP operating margin

18.1%


13.5%


17.4%


12.4%
















Reconciliation of GAAP to Non-GAAP Measures


For the Three and Nine Months Ended September 30, 2011 and 2010


(unaudited, in thousands, except per share data)


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Non-GAAP Net Income:










Net (loss) income

$   (1,106)


$        292


$   (1,472)


$        253




Acquisition-related deferred revenue adjustment

276


-


520


-




Amortization of intangible assets

4,749


2,760


13,286


7,256




Stock-based compensation expense

6,408


1,359


16,230


3,745




Accelerated interest expense related to preferred notes payable

-


530


-


530




Acquisition-related expense

969


60


1,199


453




Litigation related expense

605


-


961


-




Loss on sale of assets

1


-


398


-





Subtotal of tax deductible items

13,008


4,709


32,594


11,984
















Tax impact of tax deductible items(1)

(5,203)


(1,884)


(13,038)


(4,794)




Tax expense resulting from applying effective tax rate(2)

283


(5)


220


(3)



Non-GAAP net income

$     6,982


$     3,112


$   18,304


$     7,440















Non-GAAP net income per share - diluted

$       0.10


$       0.04


$       0.26


$       0.12















Weighted average shares - diluted

68,792


43,636


68,096


31,878




Conversion of redeemable convertible preferred stock(3)

-


29,044


-


29,044




Weighted average effect of dilutive securities

3,025


3,477


3,363


2,037



Non-GAAP weighted average shares - diluted

71,817


76,157


71,459


62,959














(1)

Reflects the removal of the tax benefit associated with the amortization of intangible assets, stock-based compensation expense,





acquisition-related deferred revenue adjustment and acquisition-related expense.









(2)

Represents adjusting to a normalized effective tax rate of 40%.









(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.

























Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010


Annualized on demand revenue per average on demand unit:










On demand revenue

$   62,765


$   43,097


$ 172,741


$ 120,393




Acquisition-related deferred revenue adjustment

276


-


520


-



Non-GAAP on demand revenue

$   63,041


$   43,097


$ 173,261


$ 120,393















Ending on demand units

7,074


5,567


7,074


5,567



Average on demand units

6,727


5,387


6,370


5,059















Annualized on demand revenue per average on demand unit

$     37.49


$     32.00


$     36.27


$     31.73















Annual value of on demand revenue(1)

$ 265,204


$ 178,144


















(1)

This metric represents management's estimate for the current annual run-rate value of on demand customer relationships.  This metric  



is calculated by multiplying ending on demand units times annualized on demand revenue per average on demand unit for the periods  



presented.










SOURCE RealPage, Inc.