RealPage Reports Q3 2010 Financial Results


  • Total Revenue of $48.0 Million, an Increase of 34.7% Year-Over-Year
  • Adjusted EBITDA of $9.1 Million, an Increase of 44.1% Year-Over-Year

CARROLLTON, Texas, Nov. 3, 2010 (GLOBE NEWSWIRE) -- 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 fiscal quarter ended September 30, 2010.

Steve Winn, chairman and CEO of RealPage, said, "We wish to thank our customers, shareholders and employees for their contribution to our consistent growth which culminated in our initial public offering in August of this year. Our financial results were excellent with strong revenue growth and operating cash flow for the quarter. This growth is attributable to the wide spread endorsement of our integrated software-as-a-service offerings that help owners lift revenue and reduce operating cost."

Q3 Financial Highlights

  • Total revenue was $48.0 million, an increase of 34.7% year-over-year
  • On demand revenue was $43.1 million, an increase of 30.3% year-over-year;
  • GAAP net loss attributable to common stockholders was $0.3 million, or $0.01 per diluted share, a year-over-year decrease of 54.3% and 66.7%, respectively; Non-GAAP net income was $3.1 million, or $0.05 per diluted share, a year-over-year increase of 87.7% and 66.7%, respectively;
  • Adjusted EBITDA was $9.1 million, an increase of 44.1% year-over-year;
  • Net cash provided by operating activities was $6.5 million, an increase of 86.4% year-over-year.

Recent Business Highlights

  • The company acquired Level One, a leading on demand apartment leasing center in the U.S., whose on-demand leasing service is designed to enable owners to lease more apartments, reduce overall marketing expense and free-up on-site leasing staff to focus more energy on resident satisfaction and renewals. The company plans to integrate Level One with its CrossFire product family and market the combined offering under the Level One brand.
  • The company continued to increase new units managed with one or more RealPage SaaS products or services. 
  • The company continued to penetrate its installed customer base with additional products and services thereby increasing average revenue per unit.
  • The company closed four RealPage Cloud Service contracts providing Infrastructure-as-a-Service enabling owners to outsource IT functions and redirect internal IT resources to more strategic business process improvement initiatives. 

Financial Outlook

RealPage management expects to achieve the following results during its fourth fiscal quarter ended December 31, 2010:

  • Total revenue is expected to be in the range of $53.0 million to $54.0 million;
  • Adjusted EBITDA is expected to be in the range of $10.3 million to $10.8 million;
  • Non-GAAP net income is expected to be in the range of $4.2 million to $4.5 million, or $0.06 to $0.07 per diluted share; and
  • Weighted average shares outstanding of approximately 67.2 million.

RealPage management expects to achieve the following results during its calendar year ended December 31, 2010:

  • Total revenue is expected to be in the range of $187.0 million to $188.0 million;
  • Adjusted EBITDA is expected to be in the range of $34.6 million to $35.1 million;
  • Non-GAAP net income is expected to be in the range of $11.7 million to $12.0 million, or $0.19 to $0.20 per diluted share; and
  • Full year weighted average shares outstanding of approximately 60.5 million.

RealPage management expects to achieve preliminary results for its calendar year ended December 31, 2011:

  • Total revenue growth is expected to be in the range of $245.0 million to $255.0 million; and
  • Adjusted EBITDA is expected to be in the range of $56.0 million to $59.0 million.

The above statements are based on current expectations and are inclusive of the impact of Level One. These statements are forward-looking, and 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. ET 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 19437189, until November 13, 2010.

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 six on-demand product lines include OneSite© property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, tax credit, student living, and military housing properties; Level One© (formerly CrossFire) that enable owners to originate, syndicate, manage and capture leads more effectively and at less overall cost; YieldStar© asset optimization systems that increase asset valuation and investment return; 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; and OpsTechnology™ spend management systems that help owners manage and control operating expenses. 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 and potential growth and plans, management, branding and profit margins of Level One as well as market 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, including Level One, 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; and (g) such other risk and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission ("SEC"), including RealPage's Prospectus previously filed with SEC pursuant to Rule 424(b)(4) on August 12, 2010. 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: non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and non-GAAP operating income. These measures differ from GAAP in that they exclude amortization of intangible assets, stock-based compensation expenses and acquisition related expenses (including any purchase accounting adjustments). We define Adjusted EBITDA as net (loss) income plus depreciation and asset impairment, amortization of intangible assets, interest expense, net, income tax expense (benefit), stock-based compensation expense 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, 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.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP measures used in this press release are included at the end of this release.

Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2010 and 2009
(unaudited, in thousands, except per share data)
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Revenue:        
On demand  $ 43,097  $ 33,069  $ 120,393  $ 93,185
On premise  2,127  468  6,419  3,346
Professional and other  2,804  2,117  7,403  6,234
Total revenue  48,028  35,654  134,215  102,765
Cost of revenue(1)  20,203  15,201  56,595  42,804
Gross profit  27,825  20,453  77,620  59,961
Operating expense:        
Product development(1)  9,127  6,675  26,431  20,273
Sales and marketing(1)  9,428  7,363  25,793  20,376
General and administrative(1)  6,969  4,552  20,230  13,275
Total operating expense  25,524  18,590  72,454  53,924
Operating income  2,301  1,863  5,166  6,037
Interest expense and other, net  (1,822)  (1,123)  (4,749)  (3,106)
Net income before income taxes  479  740  417  2,931
Income tax expense   187  64  164  218
Net income  $ 292  $ 676  $ 253  $ 2,713
         
Net loss attributable to common  stockholders        
Basic  $ (327)  $ (715)  $ (2,691)  $ (1,559)
Diluted  $ (327)  $ (715)  $ (2,691)  $ (1,559)
Net loss per share attributable to common stockholders        
Basic  $ (0.01)  $ (0.03)  $ (0.08)  $ (0.07)
Diluted  $ (0.01)  $ (0.03)  $ (0.08)  $ (0.07)
Weighted average shares used in computing net loss per
   share attributable to common stockholders
Basic  43,636  23,904  31,878  23,856
Diluted  43,636  23,904  31,878  23,856
         
         
     
(1)Includes stock-based compensation expense as follows : Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Cost of revenue  $ 140  $ 103  $ 407  $ 255
Product development  627  277  1,664  775
Sales and marketing  201  135  541  350
General and administrative  391  211  1,133  524
 
Condensed Consolidated Balance Sheets
At September 30, 2010 (unaudited) and December 31, 2009
(unaudited, in thousands, except share and per share data)
     
     
  September 30, 2010 December 31, 2009
Assets    
Current assets:    
Cash and cash equivalents  $ 39,394  $ 4,427
Restricted cash  12,941  14,886
Accounts receivable, less allowance for doubtful accounts of $2,464 and $2,222 at September 30, 2010 and December 31, 2009, respectively  24,948  25,841
Deferred tax asset, net of valuation allowance  1,799  3,110
Other current assets  6,595  2,739
Total current assets  85,677  51,003
Property, equipment and software, net  21,048  20,749
Goodwill  37,380  27,366
Identified intangible assets, net  34,571  22,891
Deferred tax asset, net of valuation allowance  16,628  17,803
Other assets  2,398  2,301
Total assets  $ 197,702  $ 142,113
Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity    
Current liabilities:    
Accounts payable  $ 6,523  $ 3,705
Accrued expenses and other current liabilities  11,449  10,830
Current portion of deferred revenue  43,459  39,976
Current portion of long-term debt  6,281  8,412
Customer deposits held in restricted accounts  12,857  15,127
Total current liabilities  80,569  78,050
Deferred revenue  7,493  9,452
Revolving credit facility  2,040  --
Long-term debt, less current portion  32,453  43,449
Other long-term liabilities  5,307  5,806
Total liabilities  127,862  136,757
Commitments and contingencies    
Redeemable convertible preferred stock  --  71,832
Stockholders' (deficit) equity:    
Common stock, $0.001 par value per share: 125,000,000 and 67,500,000 shares authorized, 63,365,592 and 26,667,319 shares issued and 63,156,549 and 26,460,781 shares outstanding at September 30, 2010 and December 31, 2009, respectively  63  27
Additional paid-in capital  160,298  24,232
Treasury stock, at cost: 209,043 and 206,538 shares at September 30, 2010 and December 31, 2010  (958)  (938)
Accumulated deficit  (89,544)  (89,797)
Accumulated other comprehensive loss  (19)  --
Total stockholders' (deficit) equity  69,840  (66,476)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit  $ 197,702  $ 142,113
 
Condensed Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2010 and 2009
(unaudited, in thousands)
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Cash flows from operating activities:        
Net income  $ 292  $ 676  $ 253  $ 2,713
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  5,312  3,699  14,856  10,703
Deferred tax (benefit)  (76)  --  (162)  --
Stock-based compensation  1,359  726  3,745  1,904
Loss on disposal of assets  54  (1)  57  192
Impairment of assets  --  --  --  --
Acquisition-related contingent consideration  39  --  39  --
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:  (436)  (1,589)  (4,047)  2,029
         
Net cash provided by operating activities  6,544  3,511  14,741  17,541
Cash flows from investing activities:        
Purchases of property, equipment  (2,709)  (2,223)  (7,427)  (6,334)
Acquisition of businesses, net of cash acquired  (3,939)  (3,022)  (17,231)  (3,787)
Net cash used by investing activities  (6,648)  (5,245)  (24,658)  (10,121)
Cash flows from financing activities:        
Proceeds from initial public offering, net of underwriting discount and offering costs  $ 57,688  $ --  $ 57,688  $ --
Proceeds from (payments on) debt, net  (23,081)  9,838  (12,763)  4,410
Preferred stock dividend  (666)  --  (666)  --
Issuance of common stock  447  258  664  270
Purchase of treasury stock  (16)  (346)  (20)  (436)
Net cash provided by financing activities  34,372  9,750  44,903  4,244
Net increase in cash and cash equivalents  34,268  8,016  34,986  11,664
Effect of exchange rate on cash  (6)  --  (19)  --
Cash and cash equivalents:        
Beginning of period  5,132  7,896  4,427  4,248
End of period  $ 39,394  $ 15,912  $ 39,394  $ 15,912
 
Reconciliation of GAAP to Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2010 and 2009
(unaudited, in thousands, except per share data)
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Adjusted Gross Profit:        
Gross profit  $ 27,825  $ 20,453  $ 77,620  $ 59,961
Depreciation and amortization of intangible assets  3,308  1,767  8,912  5,056
Stock-based compensation expense  140  103  407  255
Adjusted gross profit  $ 31,273  $ 22,323  $ 86,939  $ 65,272
         
Adjusted gross margin 65.1% 62.6% 64.8% 63.5%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Adjusted EBITDA:        
Net income  $ 292  $ 676  $ 253  $ 2,713
Depreciation and asset impairment  2,606  2,419  7,657  6,932
Amortization of intangible assets  2,760  1,279  7,256  3,963
Interest expense, net  1,822  1,123  4,759  3,106
Income tax expense   187  64  164  218
Stock-based compensation expense  1,359  726  3,745  1,904
Acquisition-related expense  61  20  453  20
Adjusted EBITDA  $ 9,087  $ 6,307  $ 24,287  $ 18,856
         
Adjust EBITDA Margin 18.9% 17.7% 18.1% 18.3%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Total Product Development:        
Expenses:  $ 9,127  $ 6,675  $ 26,431  $ 20,273
Amortization of intangible assets  --  --  --  --
Stock-based compensation expense  627  277  1,664  775
Non-GAAP Total Product Development:  $ 8,500  $ 6,398  $ 24,767  $ 19,498
         
Non-GAAP Total Product Development as % of Revenue: 17.7% 17.9% 18.5% 19.0%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Total Sales and Marketing:        
Expenses:  $ 9,428  $ 7,363  $ 25,793  $ 20,376
Amortization of intangible assets  780  732  2,291  2,301
Stock-based compensation expense  201  135  541  350
Non-GAAP Total Sales and Marketing:  $ 8,447  $ 6,496  $ 22,961  $ 17,725
         
Non-GAAP Total Sales and Marketing as % of Revenue: 17.6% 18.2% 17.1% 17.2%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Total General and Administrative:        
Operating Expenses  $ 6,969  $ 4,552  $ 20,230  $ 13,275
Acquisition costs  61  20  453  20
Stock-based compensation expense  391  211  1,133  524
Non-GAAP Total General and Administrative:  $ 6,517  $ 4,321  $ 18,644  $ 12,731
         
Non-GAAP Total General and Administrative as % of Revenue: 13.6% 12.1% 13.9% 12.4%
 
Reconciliation of GAAP to Non-GAAP Measures
For the Three and Nine Months Ended September 30, 2010 and 2009
(unaudited, in thousands, except per share data)
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Total Operating Expenses:        
Operating Expenses  $ 25,524  $ 18,590  $ 72,454  $ 53,924
Amortization of intangible assets  780  732  2,291  2,301
Acquisition costs  61  20  453  20
Stock-based compensation expense  1,219  623  3,338  1,649
Non-GAAP Total Operating Expenses:  $ 23,464  $ 17,215  $ 66,372  $ 49,954
         
Non-GAAP Total Operating Expenses as % of Revenue: 48.9% 48.3% 49.5% 48.6%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Operating Income:        
Operating income  $ 2,301  $ 1,863  $ 5,166  $ 6,037
Amortization of intangible assets  2,760  1,279  7,256  3,963
Stock-based compensation expense  1,359  726  3,745  1,904
Acquisition-related expense  61  20  453  20
Non-GAAP operating income  $ 6,481  $ 3,888  $ 16,620  $ 11,924
         
Non-GAAP operating margin 13.5% 10.9% 12.4% 11.6%
         
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2010 2009 2010 2009
Non-GAAP Net Income:        
Net income  $ 292  $ 676  $ 253  $ 2,713
Amortization of intangible assets  2,760  1,279  7,256  3,963
Stock-based compensation expense  1,359  726  3,745  1,904
Accelerated interest expense related to preferred notes payable  530  --  530  --
Acquisition-related expense  61  20  453  20
Subtotal of tax deductible items  4,710  2,025  11,984  5,887
         
Tax impact of tax deductible items(1)  (1,884)  (810)  (4,794)  (2,355)
Tax expense resulting from applying effective tax rate(2)  (5)  (232)  (3)  (954)
Non-GAAP net income  $ 3,113  $ 1,659  $ 7,441  $ 5,291
         
Non-GAAP net income per share - diluted  $ 0.05  $ 0.03  $ 0.13  $ 0.10
         
Weighted average shares - diluted  43,636  23,904  31,878  23,856
Conversion of redeemable convertible preferred stock(3)  15,153  29,044  24,362  29,044
Weighted average effect of dilutive securities  3,476  457  2,037  431
Non-GAAP weighted average shares - diluted  62,265  53,405  58,277  53,331
 
(1) Reflects the removal of the tax benefit associated with the amortization of intangible assets, stock-based compensation expense, and acquisition-related expense.
(2) Represents the adjusting income tax to a federal tax rate of 35% and a blended state tax rate of 5%.    
(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.


            

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