RealPage Reports Second Quarter 2014 Financial Results

  RealPage Reports Second Quarter 2014 Financial Results  Business Wire  CARROLLTON, Texas -- August 4, 2014  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 second quarter ended June 30, 2014.  “Our revenue and profit results for the second quarter were below our expectations,” said Steve Winn, Chairman and CEO of RealPage. “Our revenue shortfall was primarily driven by less demand for our leasing and marketing solutions and lower than expected revenue from our renter’s insurance solutions. The shortfall in our leasing and marketing solutions was primarily attributed to a rental housing environment where we believe demand has significantly outpaced supply, driving resident renewal rates to some of the highest levels we have seen in five years.”  “Our subscription revenue excluding leasing and marketing solutions, which accounts for the majority of total revenue, grew nearly 14% during the second quarter compared to the prior year period,” Mr. Winn continued. “Our strategy will focus on creating incremental demand for all solutions through the addition of new features and functionality, pricing strategies, partnerships, continued investment in the sales force and our implementation infrastructure.”  Second Quarter 2014 Financial Highlights    *Non-GAAP total revenue was $94.8 million, flat year-over-year, while GAAP     total revenue was $95.0 million, an increase of 1% year-over-year;   *Non-GAAP on demand revenue was $91.4 million, an increase of 1%     year-over-year, while GAAP on demand revenue was $91.6 million, an     increase of 1% year-over-year;   *Adjusted EBITDA was $12.5 million, a decrease of 41% year-over-year;   *Non-GAAP net income was $4.6 million, or $0.06 per diluted share, a     year-over-year decrease of 56% and 57%, respectively; and   *GAAP net loss was $6.3 million, or $0.08 per diluted share, compared to     GAAP net income of $4.6 million, or $0.06 per diluted share, in the prior     year quarter.  Financial Outlook  RealPage management expects to achieve the following results during its third quarter ended September 30, 2014:    *Non-GAAP total revenue is expected to be in the range of $101.0 million to     $103.0 million;   *Adjusted EBITDA is expected to be in the range of $16.0 million to $17.0     million; and   *Non-GAAP net income per diluted share is expected to be in the range of     $0.08 to $0.09.  RealPage management expects to achieve the following results during its calendar year ended December 31, 2014:    *Non-GAAP total revenue is expected to be in the range of $400.0 million to     $405.0 million;   *Adjusted EBITDA is expected to be in the range of $70.0 million to $73.0     million; and   *Non-GAAP net income per diluted share is expected to be in the range of     $0.37 to $0.40.  Please note that the above statements are forward looking and that Non-GAAP total revenue includes an adjustment for the effect of acquisition-related and other deferred revenue. In addition, the above statements also include the impact of acquisitions. Actual results may differ materially. Please reference the information under the caption "Non-GAAP Financial Measures” as well as reconciliation tables of GAAP financial measures to non-GAAP financial measures as set forth in this press release.  Conference Call and Webcast  The Company will host a conference call onAugust 4, 2014at5 p.m. EDTto discuss its financial results. Participants are encouraged to listen to the presentation via a live Web broadcast 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 76947839, untilAugust 10, 2014.  AboutRealPage  RealPage, Inc.is a leading provider of comprehensive property management software solutions for the multifamily, commercial, single-family and vacation rental housing industries. These solutions help property owners increase efficiency, decrease expenses, enhance the resident experience and generate more revenue. Using its innovativeSaaSplatform,RealPage'son-demand software enables easy system integration and streamlines online property management. Its product line covers the full spectrum of property management solutions, including leasing, accounting, revenue management, marketing solutions, resident services, renter insurance, utility management, spend management and apartment market research. Founded in 1998 and headquartered inCarrollton, Texas.RealPagecurrently serves over 10,000 clients worldwide from offices inNorth America, EuropeandAsia. For more information about the company, visithttp://www.realpage.com.  Cautionary Statement Regarding Forward-Looking Statements  This press release contains "forward-looking" statements relating toRealPage, Inc.'s expected, possible or assumed future results and RealPage, Inc.’s strategic focus on creating incremental demand for all solutions through the addition of new features and functionality, pricing strategies, partnerships, continued investment in sales force and implementation infrastructure. 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. Those 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. The Company may be required to revise its results upon finalizing its review of second quarter results, which could cause or contribute to such differences. Additional factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the possibility that general economic conditions, including leasing velocity 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 insurance claims; (c) an increase in customer cancellations; (d) the inability to increase sales to existing customers and to attract new customers; (e)RealPage, Inc.'s failure to integrate acquired businesses and any future acquisitions successfully; (f) the timing and success of new product introductions byRealPage, Inc.or its competitors; (g) changes inRealPage, Inc.'s pricing policies or those of its competitors; (h) litigation; (i) inability to complete the integration of our LeaseStar products and deliver enhanced functionality on a timely basis; (j) the ability to enable margin expansion; and (k) such other risks and uncertainties described more fully in documents filed with or furnished to theSecurities and Exchange Commission ("SEC") byRealPage Inc., including its Quarterly Report on Form 10-Q previously filed with theSEConMay 12, 2014. All information provided in this release is as of the date hereof andRealPage 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 include acquisition-related and other deferred revenue and exclude amortization of intangible assets, stock-based compensation expenses, any impact related to the Yardi litigation (including related insurance litigation and settlement costs), and acquisition related expenses (including any purchase accounting adjustments) and include income taxes at a sustainable effective rate, which excludes the reversal of valuation allowances due to expected or realization of deferred tax assets.  We define non-GAAP total revenue as total revenue plus acquisition-related and other deferred revenue adjustment. We also define non-GAAP on demand revenue as on demand revenue plus acquisition-related and other deferred revenue adjustment. Non-GAAP net income is defined as net (loss) income plus acquisition-related and other deferred revenue adjustment, amortization of intangible assets, stock-based compensation expense, acquisition-related expense, any impact related to Yardi litigation (including related insurance litigation and settlement costs), loss on disposal of assets, and an adjustment to income tax expense (benefit) to reflect our effective tax rate.  We define Adjusted EBITDA as net (loss) income plus acquisition-related and other 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 related insurance litigation and settlement costs), and acquisition-related expenses.  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;   *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     expenses and any impact related to the Yardi litigation (including related     insurance litigation and settlement costs), 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; and   *it is useful to include deferred revenue written down for GAAP purposes     under purchase accounting rules and revenue deferred due to a lack of     historical experience determining the settlement of the contractual     obligation in order to appropriately measure the underlying performance of     our business operations in the period of activity and associated expense.  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 Balance Sheets At June 30, 2014 and December 31, 2013 (unaudited, in thousands except share data)                                                                                                                        June 30,      December 31,                                                      2014         2013     Assets Current assets:   Cash and cash equivalents                         $ 39,217      $  34,502   Restricted cash                                     46,927         71,941   Accounts receivable, less allowance for   doubtful accounts of $2,137 and $914 at           June 30, 2014 and December 31, 2013,        59,979         66,635           respectively   Deferred tax asset, net                             6,836          3,284   Other current assets                               8,308        7,453              Total current assets                        161,267        183,815 Property, equipment and software, net                 66,515         54,775 Goodwill                                              197,658        152,422 Identified intangible assets, net                     106,382        108,815 Other assets                                         4,167        3,386              Total assets                              $ 535,989    $  503,213  Liabilities and stockholders' equity Current liabilities:   Accounts payable                                  $ 21,579      $  11,978   Accrued expenses and other current liabilities      27,436         23,122   Current portion of deferred revenue                 66,695         66,085   Customer deposits held in restricted accounts      46,895       71,910             Total current liabilities                   162,605        173,095 Deferred revenue                                      6,838          5,671 Deferred tax liability, net                           1,081          1,379 Revolving credit facility                             25,000         - Other long-term liabilities                          14,647       8,564              Total liabilities                           210,171        188,709 Stockholders' equity:   Preferred stock, $0.001 par value, 10,000,000   shares authorized and zero shares   issued and outstanding at June 30, 2014 and         -              -   December 31, 2013, respectively   Common stock, $0.001 par value per share:   125,000,000 shares authorized,   82,016,928 and 80,511,791 shares issued and   79,082,594 and 78,433,626 shares   outstanding at June 30, 2014 and December 31,       82             81   2013, respectively   Additional paid-in capital                          415,127        390,854   Treasury stock, at cost: 2,934,334 and   2,078,165 shares at June 30, 2014 and   December 31, 2013, respectively                     (17,007 )      (11,183 )   Accumulated deficit                                 (72,213 )      (65,086 )   Accumulated other comprehensive loss               (171    )     (162    )           Total stockholders' equity                 325,818      314,504            Total liabilities and stockholders'       $ 535,989    $  503,213            equity                                                               Condensed Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited, in thousands except per share data)                                                                                                Three Months Ended        Six Months Ended                            June 30,                  June 30,                             2014       2013       2014        2013     Revenue:     On demand              $ 91,606     $ 90,825     $ 188,614     $ 176,147     On premise               826          1,011        1,691         1,961     Professional and        2,556      2,615      5,246       5,324        other          Total revenue       94,988       94,451       195,551       183,432 Cost of revenue             42,115     37,340     82,042      72,704   Gross profit                 52,873       57,111       113,509       110,728 Operating expense:     Product development      15,941       11,727       30,782        23,765     Sales and marketing      28,030       23,924       54,021        46,826     General and             16,819     12,819     37,748      29,326       administrative          Total operating    60,790     48,470     122,551     99,917            expense Operating income (loss)      (7,917 )     8,641        (9,042  )     10,811 Interest expense and        (204   )    (596   )    (426    )    (685    ) other income, net Income (loss) before         (8,121 )     8,045        (9,468  )     10,126 income taxes Income tax expense          (1,830 )    3,435      (2,341  )    4,498    (benefit) Net income (loss)          $ (6,291 )   $ 4,610     $ (7,127  )   $ 5,628                                                                        Net income (loss) per share          Basic             $ (0.08  )   $ 0.06       $ (0.09   )   $ 0.08          Diluted           $ (0.08  )   $ 0.06       $ (0.09   )   $ 0.07 Weighted average shares used in computing net income (loss) per share          Basic               77,283       74,541       77,004        74,278          Diluted             77,283       75,781       77,004        75,665                                                                 Condensed Consolidated Statements of Cash Flows   For the Three and Six Months Ended June 30, 2014 and 2013   (unaudited, in thousands)                                                                                                   Three Months Ended         Six Months Ended                             June 30,                   June 30,                              2014        2013       2014        2013       Cash flows from   operating activities:     Net income (loss)       $ (6,291  )   $ 4,610      $ (7,127  )   $ 5,628     Adjustments to     reconcile net income     (loss) to net cash       provided by       operating       activities:       Depreciation and        10,067        7,420        19,571        15,218       amortization       Deferred tax            (2,859  )     2,361        (3,850  )     3,046       expense (benefit)       Stock-based             10,033        6,061        19,258        13,306       compensation       Loss on disposal of     -             270          20            273       assets       Acquisition-related       contingent              (233    )     (1,193 )     (66     )     1,445       consideration       Changes in assets       and liabilities,       net of assets       acquired          and liabilities          assumed in           8,405         (2,151 )     14,942        (4,333  )          business          combinations:                                                                             Net cash          provided by         19,122      17,378     42,748      34,583            operating          activities   Cash flows from   investing activities:     Purchases of     property, equipment       (11,873 )     (5,669 )     (19,135 )     (13,393 )     and software, net     Acquisition of     businesses, net of        (34,874 )     (146   )     (42,053 )     (10,196 )     cash acquired     Intangible asset         -           -          -           (600    )     additions          Net cash used by          investing           (46,747 )    (5,815 )    (61,188 )    (24,189 )          activities   Cash flows from   financing activities:     Payments on and     proceeds from debt,       24,859        (137   )     24,720        (10,273 )     net     Payments of deferred     acquisition-related       (28     )     (179   )     (748    )     (486    )     consideration     Issuance of common        3,741         1,469        5,016         2,993     stock     Purchase of treasury     (3,831  )    (1,132 )    (5,824  )    (2,065  )     stock          Net cash          provided by          (used in)           24,741      21         23,164      (9,831  )          financing          activities          Net increase          (decrease) in        (2,884  )     11,584       4,724         563          cash and cash          equivalents          Effect of          exchange rate on     5             (26    )     (9      )     (48     )          cash   Cash and cash   equivalents:     Beginning of period      42,096      22,761     34,502      33,804       End of period           $ 39,217     $ 34,319    $ 39,217     $ 34,319                                                                   Reconciliation of GAAP to Non-GAAP Measures For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited, in thousands)                                                                                                Three Months Ended        Six Months Ended                            June 30,                  June 30,                             2014       2013       2014        2013     Non-GAAP revenue: Revenue (GAAP)             $ 94,988     $ 94,451     $ 195,551     $ 183,432 Acquisition-related and     (207   )    -          1,117       2        other deferred revenue Non-GAAP revenue           $ 94,781    $ 94,451    $ 196,668    $ 183,434                                                                                                 Three Months Ended        Six Months Ended                            June 30,                  June 30,                             2014       2013       2014        2013     Adjusted gross profit: Gross profit (GAAP)        $ 52,873     $ 57,111     $ 113,509     $ 110,728 Acquisition-related and      (207   )     -            1,117         2 other deferred revenue Depreciation                 2,013        1,444        3,871         3,287 Amortization of              2,447        2,028        4,870         3,995 intangible assets Stock-based compensation    866        676        1,873       1,426    expense Adjusted gross profit      $ 57,992    $ 61,259    $ 125,240    $ 119,438                                                                      Adjusted gross profit        61.2   %     64.9   %     63.7    %     65.1    % margin                                                                                                Three Months Ended        Six Months Ended                            June 30,                  June 30,                             2014       2013       2014        2013     Adjusted EBITDA: Net income (loss) (GAAP)   $ (6,291 )   $ 4,610      $ (7,127  )   $ 5,628 Acquisition-related and      (207   )     -            1,117         2 other deferred revenue Depreciation, asset impairment and loss on       4,581        3,398        8,790         7,086 disposal of asset Amortization of              5,486        4,292        10,801        8,405 intangible assets Interest expense, net        207          606          431           963 Income tax expense           (1,830 )     3,435        (2,341  )     4,498 (benefit) Litigation-related           168          (353   )     4,845         53 expense Stock-based compensation     10,033       6,061        19,258        13,306 expense Acquisition related         357        (949   )    1,238       1,825    expense Adjusted EBITDA            $ 12,504    $ 21,100    $ 37,012     $ 41,766                                                                       Adjusted EBITDA margin       13.2   %     22.3   %     18.8    %     22.8    %                                                                                                Three Months Ended        Six Months Ended                            June 30,                  June 30,                             2014       2013       2014        2013     Non-GAAP total product development: Product development        $ 15,941     $ 11,727     $ 30,782      $ 23,765 (GAAP) Less: Amortization of        1            1            3             1 intangible assets Stock-based compensation    2,144      721        4,056       1,852    expense Non-GAAP total product     $ 13,796    $ 11,005    $ 26,723     $ 21,912   development:                                                                     Non-GAAP total product development as % of          14.6   %     11.7   %     13.6    %     11.9    % non-GAAP revenue:                                                                  Reconciliation of GAAP to Non-GAAP Measures For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited, in thousands)                                                                                                  Three Months Ended        Six Months Ended                             June 30,                  June 30,                              2014       2013       2014        2013    Non-GAAP total sales and marketing: Sales and marketing         $ 28,030     $ 23,924     $ 54,021      $ 46,826 (GAAP) Less: Amortization of         2,847        2,264        5,739         4,410 intangible assets Stock-based compensation     3,101      2,004      6,244       5,205   expense Non-GAAP total sales and    $ 22,082    $ 19,656    $ 42,038     $ 37,211  marketing:                                                                      Non-GAAP total sales and marketing as % of             23.3   %     20.8   %     21.4    %     20.3   % non-GAAP revenue:                                                                                                  Three Months Ended        Six Months Ended                             June 30,                  June 30,                              2014       2013       2014        2013    Non-GAAP total general and administrative: General and                 $ 16,819     $ 12,819     $ 37,748      $ 29,326 administrative (GAAP) Less: Amortization of         192          -            192           - intangible assets Acquisition related           357          (949   )     1,238         1,825 expense Stock-based compensation      3,922        2,660        7,085         4,823 expense Litigation related           168        (353   )    4,845       53      expense Non-GAAP total general      $ 12,180    $ 11,461    $ 24,388     $ 22,625  and administrative:                                                                      Non-GAAP total general and administrative as %       12.9   %     12.1   %     12.4    %     12.3   % of non-GAAP revenue:                                                                                                  Three Months Ended        Six Months Ended                             June 30,                  June 30,                              2014       2013       2014        2013    Non-GAAP total operating expense: Operating expense (GAAP)    $ 60,790     $ 48,470     $ 122,551     $ 99,917 Less: Amortization of         3,040        2,264        5,934         4,410 intangible assets Acquisition related expense                       357          (949   )     1,238         1,825   Stock-based compensation      9,167        5,385        17,385        11,880 expense Litigation related           168        (353   )    4,845       53      expense Non-GAAP total operating    $ 48,058    $ 42,123    $ 93,149     $ 81,749  expense:                                                                      Non-GAAP total operating expense as % of non-GAAP      50.7   %     44.6   %     47.4    %     44.6   % revenue:                                                                                                  Three Months Ended        Six Months Ended                             June 30,                  June 30,                              2014       2013       2014        2013    Non-GAAP operating income: Operating income (loss)     $ (7,917 )   $ 8,641      $ (9,042  )   $ 10,811 (GAAP) Acquisition-related and       (207   )     -            1,117         2 other deferred revenue Amortization of               5,486        4,292        10,801        8,405 intangible assets Stock-based compensation      10,033       6,061        19,258        13,306 expense Acquisition related           357          (949   )     1,238         1,825 expense Litigation related           168        (353   )    4,845       53      expense Non-GAAP operating income   $ 7,920     $ 17,692    $ 28,217     $ 34,402                                                                       Non-GAAP operating margin     8.4    %     18.7   %     14.3    %     18.8   %                                                                      Reconciliation of GAAP to Non-GAAP Measures For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited, in thousands except per share data)                                         Three Months Ended          Six Months Ended                                June 30,                    June 30,                                 2014        2013        2014        2013       Non-GAAP net income:        Net income (loss)       $ (6,291  )   $ 4,610       $ (7,127  )   $ 5,628        (GAAP)          Acquisition-related          and other deferred      (207    )     -             1,117         2          revenue          Amortization of         5,486         4,292         10,801        8,405          intangible assets          Stock-based          compensation            10,033        6,061         19,258        13,306          expense          Acquisition related     357           (949    )     1,238         1,825          expense          Litigation related      168           (353    )     4,845         53          expense          Loss on disposal of    -           270         20          273               assets              Subtotal of tax              deductible          15,837        9,321         37,279        23,864              items                                                                                    Tax impact of tax          deductible              (6,335  )     (3,728  )     (14,912 )     (9,546  )          items^(1)          Tax expense          resulting from         1,418       217         1,446       448               applying effective          tax rate^(2)        Non-GAAP net income     $ 4,629       $ 10,420      $ 16,686      $ 20,394                                                                                  Non-GAAP net income     $ 0.06        $ 0.14        $ 0.21        $ 0.27        per share - diluted                                                                                  Weighted average          77,283        75,781        77,004        75,665        shares - diluted          Weighted average          effect of dilutive     912         -           1,016       -                 securities        Non-GAAP weighted        average shares -          78,195        75,781        78,020        75,665        diluted                                                                  ^(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%.                                                                                                          Three Months Ended          Six Months Ended                                June 30,                    June 30,                                 2014        2013        2014        2013       Annualized Non-GAAP on   demand revenue per average   on demand unit:        On demand revenue       $ 91,606      $ 90,825      $ 188,614     $ 176,147        (GAAP)          Acquisition-related          and other deferred     (207    )    -           1,117       2                 revenue        Non-GAAP on demand      $ 91,399      $ 90,825      $ 189,731     $ 176,149        revenue                                                                                  Ending on demand          9,371         8,616         9,371         8,616        units        Average on demand         9,328         8,580         9,241         8,455        units                                                                               Annualized Non-GAAP        on demand revenue per   $ 39.19      $ 42.34      $ 41.06      $ 41.67           average on demand        unit                                                                                  Annual customer value        of on demand            $ 367,249     $ 364,801        revenue^(1)                                                                  ^(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.  Contact:  RealPage, Inc. Rhett Butler, 972-820-3773 rhett.butler@realpage.com  
Press spacebar to pause and continue. Press esc to stop.