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RealPage Reports Q3 2012 Financial Results
[November 07, 2012]

RealPage Reports Q3 2012 Financial Results

CARROLLTON, Texas --(Business Wire)--

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, 2012.

"Third quarter financial results were solid," said Steve Winn, Chairman and CEO of RealPage. "Our core business metrics of organic on demand revenue, Adjusted EBITDA and annual customer value continue to grow in line with our long-term operating model. All product families reported growth with aggregate on demand revenue up over 25% for the quarter."

Third Quarter 2012 Financial Highlights

  • Non-GAAP total revenue was $83.2 million, an increase of 22.5% year-over-year;
  • Non-GAAP on demand revenue was $79.0 million, an increase of 25.3% year-over-year;
  • Adjusted EBITDA was $18.8 million, an increase of 25.0% year-over-year;
  • Non-GAAP net income was $8.9 million, or $0.12 per diluted share, a year-over-year increase of 27.5% and 20.0%, respectively;
  • GAAP net income was $2.1 million, or $0.03 per diluted share, compared to a GAAP net loss of $1.1 million, or $0.02 per diluted share, in the prior year quarter; and
  • Excluding the cash impact from Yardi related litigation, net cash provided by operating activities was $16.4 million, an increase of 45.4% year-over-year.

Financial Outlook

RealPage management expects to achieve the following results during its fourth quarter ended December 31, 2012:

  • Non-GAAP total revenue is expected to be in the range of $85.5 million to $87.5 million;
  • Adjusted EBITDA is expected to be in the range of $20.0 million to $21.5 million;
  • Non-GAAP net income is expected to be in the range of $9.7 million to $10.5 million, or $0.13 to $0.14 per diluted share;
  • Non-GAAP tax rate of approximately 40.0%; and
  • Weighted average shares outstanding of approximately 74.8 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2012:

  • Non-GAAP total revenue is expected to be in the range of $322.0 million to $324.0 million;
  • Adjusted EBITDA is expected to be in the range of $72.5 million to $74.0 million;
  • Non-GAAP net income is expected to be in the range of $34.4 million to $35.2 million, or $0.47 to $0.48 per diluted share;
  • Non-GAAP tax rate of approximately 40.0%; and
  • Full year weighted average shares outstanding of approximately 73.9 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 costs resulting from the Yardi litigation (including settlement costs and related insurance 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. EST 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 855-859-2056 or 404-537-3406, passcode 60388521, until November 17, 2012.

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™ multichannel 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. 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, growth, expenditures, tax rates, outstanding shares and potential benefits of completed acquisitions. 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; (h) inability to complete the integration of our LeaseStar products and deliver enhanced functionality on a timely basis; or (i) the discovery of facts and circumstances currently not available to management; and such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission ("SEC") by RealPage, including its Quarterly Report on Form 10-Q previously filed with the SEC on August 7, 2012, its Registration Statement on Form S-3ASR and related prospectus supplement previously filed with the SEC on September 13, 2012. All information provided in this release is as of the date hereof and RealPage 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 litigation (including settlement costs and related insurance 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 Yardi litigation (including settlement costs and related insurance 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 litigation (including settlement costs and related insurance 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, 2012 and 2011
(unaudited, in thousands, except per share data)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Revenue:
On demand $ 78,973 $ 62,765 $ 224,629 $ 172,741
On premise 1,226 1,772 3,903 5,045
Professional and other   3,040     3,118     7,916     9,052  
Total revenue 83,239 67,655 236,448 186,838
Cost of revenue(1)   32,897     27,585     95,358     78,078  
Gross profit 50,342 40,070 141,090 108,760
Operating expense:
Product development(1) 12,274 11,230 35,325 32,083
Sales and marketing(1) 21,792 17,688 57,186 44,992
General and administrative(1)   12,545     11,840     44,794     31,190  
Total operating expense   46,611     40,758     137,305     108,265  
Operating income (loss) 3,731 (688 ) 3,785 495
Interest expense and other, net   (407 )   (684 )   (1,620 )   (2,582 )
Income (loss) before income taxes 3,324 (1,372 ) 2,165 (2,087 )
Income tax expense (benefit)   1,211     (266 )   704     (615 )
Net income (loss) $ 2,113   $ (1,106 ) $ 1,461   $ (1,472 )
 
Net income (loss) per share
Basic $ 0.03 $ (0.02 ) $ 0.02 $ (0.02 )
Diluted $ 0.03 $ (0.02 ) $ 0.02 $ (0.02 )
Weighted average shares used in
computing net income (loss) per share
Basic 72,178 68,792 71,293 68,096
Diluted 74,282 68,792 73,689 68,096
                 
 

(1) Includes stock-based compensation

Three Months Ended Nine Months Ended
expense as follows: September 30, September 30,
2012 2011 2012 2011
Cost of revenue $ 649 $ 459 $ 2,088 $ 1,069
Product development 1,116 1,258 3,180 3,343
Sales and marketing 2,653 3,433 4,422 8,793
General and administrative   1,595     1,258     4,627     3,025  
$ 6,013   $ 6,408   $ 14,317   $ 16,230  
 
 

   
Condensed Consolidated Balance Sheets
At September 30, 2012 and December 31, 2011
(unaudited, in thousands except share data)
 
September 30, December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 36,220 $ 51,273
Restricted cash 22,443 19,098
Accounts receivable, less allowance for doubtful accounts of $1,015 and $979 at
September 30, 2012 and December 31, 2011, respectively 45,351 43,883
Deferred tax asset, net of valuation allowance 276 272
Other current assets   7,101     10,232  
Total current assets 111,391 124,758
Property, equipment and software, net 36,163 27,974
Goodwill 134,818 129,292
Identified intangible assets, net 106,212 112,308
Deferred tax asset, net of valuation allowance 2,342 2,539
Other assets   3,887     3,194  
Total assets $ 394,813   $ 400,065  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 10,448 $ 12,218
Accrued expenses and other current liabilities 20,515 25,816
Current portion of deferred revenue 56,372 57,325
Customer deposits held in restricted accounts   22,317     19,017  
Total current liabilities 109,652 114,376
Deferred revenue 9,947 8,693
Revolving credit facility 25,000 50,312
Other long-term liabilities   3,143     3,803  
Total liabilities 147,742 177,184
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized and zero shares
issued and outstanding at September 30, 2012 and December 31, 2011, respectively - -
Common stock, $0.001 par value per share: 125,000,000 shares authorized,
76,262,909 and 73,115,779 shares issued and 75,361,930 and 72,701,571 shares
outstanding at September 30, 2012 and December 31, 2011, respectively 76 73
Additional paid-in capital 342,078 316,964
Treasury stock, at cost: 900,979 and 414,208 shares at September 30, 2012 (5,526 ) (3,138 )
and December 31, 2011, respectively
Accumulated deficit (89,500 ) (90,961 )
Accumulated other comprehensive loss   (57 )   (57 )
Total stockholders' equity   247,071     222,881  
Total liabilities and stockholders' equity $ 394,813   $ 400,065  
 
 

       
Condensed Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2012 and 2011
(unaudited, in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Cash flows from operating activities:
Net income (loss) $ 2,113 $ (1,106 ) $ 1,461 $ (1,472 )
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,945 7,442 23,682 21,458
Deferred tax expense (benefit) 782 (663 ) (74 ) (1,430 )
Stock-based compensation 6,013 6,408 14,317 16,230
Loss on disposal of assets 8 3 387 398
Acquisition-related contingent consideration (604 ) (3 ) (422 ) 102
Changes in assets and liabilities, net of assets acquired
and liabilities assumed in business combinations:   (7,308 )   (1,603 )   1,804     (5,587 )
 
Net cash provided by operating activities 8,949 10,478 41,155 29,699
Cash flows from investing activities:
Purchases of property, equipment and software, net (8,696 ) (5,140 ) (18,601 ) (10,782 )
Acquisition of businesses, net of cash acquired (5,982 ) (67,786 ) (19,491 ) (87,817 )
Intangible asset additions   -     -     (225 )   -  
Net cash used by investing activities   (14,678 )   (72,926 )   (38,317 )   (98,599 )
Cash flows from financing activities:
Stock issuance costs from public offerings $ - $ - $ - $ (775 )
Payments on and proceeds from debt, net (10,000 ) (2,782 ) (25,377 ) (8,524 )
Issuance of common stock 6,871 1,062 9,874 8,499
Purchase of treasury stock   (764 )   (310 )   (2,388 )   (783 )
Net cash used in financing activities   (3,893 )   (2,030 )   (17,891 )   (1,583 )
Net decrease in cash and cash equivalents (9,622 ) (64,478 ) (15,053 ) (70,483 )
Effect of exchange rate on cash 5 (16 ) - (36 )
Cash and cash equivalents:
Beginning of period   45,837     111,985     51,273     118,010  
End of period $ 36,220   $ 47,491   $ 36,220   $ 47,491  
 
 

       
Reconciliation of GAAP to Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2012 and 2011
(unaudited, in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
 
Revenue: $ 83,239 $ 67,655 $ 236,448 $ 186,838
Acquisition related deferred revenue adjustment   3     276     86     520  
Non-GAAP revenue $ 83,242   $ 67,931   $ 236,534   $ 187,358  
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Adjusted gross profit:
Gross profit $ 50,342 $ 40,070 $ 141,090 $ 108,760
Acquisition related deferred revenue adjustment 3 276 86 520
Depreciation 1,707 1,428 4,917 4,437
Amortization of intangible assets 2,219 2,323 7,000 6,730
Stock-based compensation expense   649     459     2,088     1,069  
Adjusted gross profit $ 54,920   $ 44,556   $ 155,181   $ 121,516  
 
Adjusted gross profit margin 66.0 % 65.6 % 65.6 % 64.9 %
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Adjusted EBITDA:
Net income (loss) $ 2,113 $ (1,106 ) $ 1,461 $ (1,472 )
Acquisition related deferred revenue adjustment 3 276 86 520
Depreciation, asset impairment and loss on disposal of asset 3,416 2,696 10,018 8,570
Amortization of intangible assets 4,537 4,749 14,051 13,286
Interest expense, net 518 684 1,734 2,199
Income tax expense (benefit) 1,211 (266 ) 704 (615 )
Litigation-related expense 860 605 9,759 961
Stock-based compensation expense 6,013 6,408 14,317 16,230
Acquisition related (income) expense (572 ) 969 (256 ) 1,199
Stock registration costs   668     -     668     -  
Adjusted EBITDA $ 18,767   $ 15,015   $ 52,542   $ 40,878  
 
Adjusted EBITDA margin 22.5 % 22.1 % 22.2 % 21.8 %
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP total product development:
Product development $ 12,274 $ 11,230 $ 35,325 $ 32,083
Less: Amortization of intangible assets - - - -
Stock-based compensation expense   1,116     1,258     3,180     3,343  
Non-GAAP total product development: $ 11,158   $ 9,972   $ 32,145   $ 28,740  
 
Non-GAAP total product development as % of non-GAAP revenue: 13.4 % 14.7 % 13.6 % 15.3 %
 
 

 
Reconciliation of GAAP to Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2012 and 2011
(unaudited, in thousands)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP total sales and marketing:
Sales and marketing $ 21,792 $ 17,688 $ 57,186 $ 44,992
Less: Amortization of intangible assets 2,317 2,426 7,051 6,556
Stock-based compensation expense   2,653     3,433     4,422     8,793  
Non-GAAP total sales and marketing: $ 16,822   $ 11,829   $ 45,713   $ 29,643  
 
Non-GAAP total sales and marketing as % of non-GAAP revenue: 20.2 % 17.4 % 19.3 % 15.8 %
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP total general and administrative:
General and administrative $ 12,545 $ 11,840 $ 44,794 $ 31,190
Less: Acquisition related (income) expense (572 ) 969 (256 ) 1,199
Stock-based compensation expense 1,595 1,258 4,627 3,025
Litigation related expense 860 605 9,759 961
Stock registration costs   668     -     668     -  
Non-GAAP total general and administrative: $ 9,994   $ 9,008   $ 29,996   $ 26,005  
 
Non-GAAP total general and administrative as % of non-GAAP revenue: 12.0 % 13.3 % 12.7 % 13.9 %
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP total operating expense:
Operating expense $ 46,611 $ 40,758 $ 137,305 $ 108,265
Less: Amortization of intangible assets 2,317 2,426 7,051 6,556

Acquisition related (income) expense

(572 ) 969 (256 ) 1,199
Stock-based compensation expense 5,364 5,949 12,229 15,161
Litigation related expense 860 605 9,759 961
Stock registration costs   668     -     668     -  
Non-GAAP total operating expense: $ 37,974   $ 30,809   $ 107,854   $ 84,388  
 
Non-GAAP total operating expense as % of non-GAAP revenue: 45.6 % 45.4 % 45.6 % 45.0 %
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP operating income (loss):
Operating income (loss) $ 3,731 $ (688 ) $ 3,785 $ 495
Acquisition related deferred revenue adjustment 3 276 86 520
Amortization of intangible assets 4,537 4,749 14,051 13,286
Stock-based compensation expense 6,013 6,408 14,317 16,230
Acquisition related (income) expense (572 ) 969 (256 ) 1,199
Litigation related expense 860 605 9,759 961
Stock registration costs   668     -     668     -  
Non-GAAP operating income $ 15,240   $ 12,319   $ 42,410   $ 32,691  
 
Non-GAAP operating margin 18.3 % 18.1 % 17.9 % 17.4 %
 
 

 
Reconciliation of GAAP to Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2012 and 2011
(unaudited, in thousands, except per share data)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP net income:
Net income (loss) $ 2,113 $ (1,106 ) $ 1,461 $ (1,472 )
Acquisition related deferred revenue adjustment 3 276 86 520
Amortization of intangible assets 4,537 4,749 14,051 13,286
Stock-based compensation expense 6,013 6,408 14,317 16,230
Acquisition related (income) expense (572 ) 969 (256 ) 1,199
Litigation related expense 860 605 9,759 961
Loss on disposal of assets 8 1 387 398
Stock registration costs   668     -     668     -  
Subtotal of tax deductible items 11,517 13,008 39,012 32,594
 
Tax impact of tax deductible items(1) (4,607 ) (5,203 ) (15,605 ) (13,038 )
Tax expense resulting from applying effective tax rate(2)   (119 )   283     (162 )   220  
Non-GAAP net income $ 8,904 $ 6,982 $ 24,706 $ 18,304
 
Non-GAAP net income per share - diluted $ 0.12 $ 0.10 $ 0.34 $ 0.26
 
Weighted average shares - diluted 74,282 68,792 73,689 68,096
Weighted average effect of dilutive securities   -     3,025     -     3,363  
Non-GAAP weighted average shares - diluted 74,282 71,817 73,689 71,459
                 

(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 (income) expense.

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

 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Non-GAAP cash flows from operating activities:
Cash flows from operating activities $ 8,949 $ 10,478 $ 41,155 $ 29,699
Litigation related payments   7,486    

825

   

8,582

   

2,861

 
Non-GAAP cash flows from operating activities $ 16,435   $

11,303

  $

49,737

  $

32,560

 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Annualized Non-GAAP on demand revenue per average on demand unit:
On demand revenue $ 78,973 $ 62,765 $ 224,629 $ 172,741
Acquisition related deferred revenue adjustment   3     276     86     520  
Non-GAAP on demand revenue $ 78,976 $ 63,041 $ 224,715 $ 173,261
 
Ending on demand units 7,823 7,074 7,823 7,074
Average on demand units 7,680 6,727 7,510 6,370
       
Annualized Non-GAAP on demand revenue per average on demand unit $ 41.13   $ 37.49   $ 39.90   $ 36.27  
 
Annual customer value of on demand revenue(1) $ 321,760 $ 265,204
                 

(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 Non-GAAP on demand revenue per average on demand unit for the periods presented.


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