RealPage Reports Fourth Quarter and Full Year 2019 Financial Results
RealPage, Inc. (NASDAQ:RP), a leading global provider of software and data analytics to the real estate industry, today announced financial results for the fourth quarter and year ended December 31, 2019, exceeding guidance for both revenue and Adjusted EBITDA.
Fourth Quarter 2019 Financial Highlights
GAAP total revenue of $254.8 million, an increase of 12% year-over-year; Net income of $20.2 million, or $0.21 in net income per diluted share, a year-over-year increase of 222% and 200%, respectively; Adjusted EBITDA of $76.2 million, an increase of 25% year-over-year; and Non-GAAP net income of $45.2 million, or $0.48 in non-GAAP net income per diluted share, a year-over-year increase of 23% and 23%, respectively.Full Year 2019 Financial Highlights
GAAP total revenue of $988.1 million, an increase of 14% year-over-year; Net income of $58.2 million, or $0.60 in net income per diluted share, a year-over-year increase of 68% and 58%, respectively; Adjusted EBITDA of $281.7 million, an increase of 22% year-over-year; and Non-GAAP net income of $165.3 million, or $1.76 in non-GAAP net income per diluted share, a year-over-year increase of 22% and 17%, respectively.Comments on the News
“2019 was a key year of organic and inorganic investment to fuel our long-term strategy to accelerate innovation and make RealPage an easier company to do business with,” said Steve Winn, Chairman and CEO of RealPage. “Financial performance for the year shows healthy progress toward execution of that strategy, with total revenue growth of 14% and adjusted EBITDA growth of 22%. We have released one of the largest waves of innovation in the company’s history and we must build on that momentum. Whether in our traditional multifamily market or our SMB category recently augmented with the acquisition of Buildium, our platform is thinly penetrated into an enormous market opportunity.”
“We finished 2019 strong with fourth quarter total revenue growth of 12% year-over-year and adjusted EBITDA growth of 25%,” said Tom Ernst, CFO and Treasurer of RealPage. “Our efforts on improving our Yes-To-Success customer journeys, our internal wave of innovation, and our 2019 strategic acquisition efforts have laid a solid foundation to accelerate our organic revenue growth profile. 2020 will be about leveraging and extending these efforts to expand shareholder value.”
2020 Financial Outlook
RealPage management expects to achieve the following results during the first quarter ending March 31, 2020:
GAAP total revenue is expected to be in the range of $276 million to $280 million; GAAP net income per diluted share is expected to be in the range of $0.00 to $0.02; Non-GAAP total revenue is expected to be in the range of $277 million to $281 million; Adjusted EBITDA is expected to be in the range of $70 million to $72 million; Non-GAAP net income per diluted share is expected to be in the range of $0.41 to $0.43; Non-GAAP diluted weighted average shares outstanding are expected to be approximately 93.8 million.RealPage management expects to achieve the following results during the calendar year ending December 31, 2020:
GAAP total revenue is expected to be in the range of $1,163 million to $1,183 million; GAAP net income per diluted share is expected to be in the range of $0.29 to $0.35; Non-GAAP total revenue is expected to be in the range of $1,165 million to $1,185 million; Adjusted EBITDA is expected to be in the range of $320 million to $324 million; Non-GAAP net income per diluted share is expected to be in the range of $1.95 to $2.00; Non-GAAP diluted weighted average shares outstanding are expected to be approximately 94.5 million.Conference Call Information; Presentation Slides
The Company will host a conference call at 5 p.m. EST today to discuss its financial results. Participants are encouraged to listen to the presentation via a live web broadcast and to view the company’s presentation slides at https://78449.themediaframe.com/dataconf/productusers/rlpg/mediaframe/34658/indexl.html. In addition, a live dial-in is available domestically at 877-407-9128 and internationally at 201-493-6752. A replay will be available at 877-660-6853 or 201-612-7415.
About RealPage
RealPage provides a technology platform that enables real estate owners and managers to change how people experience and use rental space. Clients use the platform to gain transparency in asset performance, leverage data insights and monetize space to create incremental yields. Founded in 1998 and headquartered in Richardson, Texas, RealPage currently serves over 18 million units worldwide from offices in North America, Europe and Asia. For more information about RealPage, please visit https://www.RealPage.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking” statements relating to RealPage, Inc.’s strategy, goals, future focus areas, and expected, possible or assumed future results, including its financial outlook for the first quarter ending March 31, 2020, and calendar year ending December 31, 2020, that our platform is thinly penetrated into an enormous market opportunity, that we have laid a solid foundation to accelerate our organic revenue growth profile, the potential market opportunity for our platform in the traditional multifamily business and the SMB business recently augmented with the acquisition of Buildium, and the ability of our Yes-To-Success customer journeys, internal innovation and 2019 strategic acquisitions to accelerate organic revenue growth and expand shareholder value in 2020. 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. These 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 contained herein upon finalizing its review of quarterly and full-year results and completion of the annual audit, 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, could 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 client cancellations; (d) the inability to increase sales to existing clients and to attract new clients; (e) RealPage’s failure to integrate recent or future acquired businesses successfully or to achieve expected synergies, including the recently completed acquisitions of Modern Message, Buildium, Investor Management Services, SimpleBills, Hipercept and LeaseTerm Solutions; (f) the timing and success of new product introductions by RealPage or its competitors; (g) changes in RealPage’s pricing policies or those of its competitors; (h) legal or regulatory proceedings; (i) the inability to achieve revenue growth or to enable margin expansion; (j) changes in RealPage’s estimates with respect to its long-term corporate tax rate or any other impact from the Tax Cuts and Jobs Act; and (k) 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 Annual Report on Form 10-K previously filed with the SEC on February 27, 2019 (as amended on November 5, 2019) and its Quarterly Report on Form 10-Q previously filed with the SEC on November 8, 2019. 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.
Explanation of Non-GAAP Financial Measures
The company reports its financial results in accordance with accounting principles generally accepted in the United States of America, or GAAP. However, the company believes that, in order to properly understand its short-term and long-term financial, operational and strategic trends, it may be helpful for investors to exclude certain non-cash or non-recurring items when used as a supplement to financial performance measures in accordance with GAAP. These items result from facts and circumstances that vary in both frequency and impact on continuing operations. The company also uses results of operations excluding such items to evaluate the operating performance of RealPage and compare it against prior periods, make operating decisions, determine executive compensation, and serve as a basis for long-term strategic planning. These non-GAAP financial measures provide the company with additional means to understand and evaluate the operating results and trends in its ongoing business by eliminating certain non-cash expenses and other items that RealPage believes might otherwise make comparisons of its ongoing business with prior periods more difficult, obscure trends in ongoing operations, reduce management’s ability to make useful forecasts, or obscure the ability to evaluate the effectiveness of certain business strategies and management incentive structures. In addition, the company also believes that investors and financial analysts find this information to be helpful in analyzing the company’s financial and operational performance and comparing this performance to the company’s peers and competitors.
The company defines “Non-GAAP Total Revenue” as total revenue plus acquisition-related deferred revenue. The company believes it is useful to include deferred revenue written down for GAAP purposes under purchase accounting rules in order to appropriately measure the underlying performance of its business operations in the period of activity and associated expense. Further, the company believes this measure is useful to investors as a way to evaluate the company’s ongoing performance because it provides a more accurate depiction of revenue arising from our strategic acquisitions.
The company defines “Adjusted Gross Profit” as gross profit, plus (1) acquisition-related deferred revenue, (2) depreciation, (3) amortization of product technologies, (4) impairment of product technologies, (5) organizational realignment costs and (6) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.
The company defines “Adjusted EBITDA” as net income, plus (1) acquisition-related deferred revenue, (2) depreciation, asset impairment, and loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) change in fair value of equity investment, (5) loss due to cyber incident, net of recoveries, (6) acquisition-related expense (income), (7) organizational realignment costs, (8) regulatory and legal matters, (9) stock-based expense, (10) interest expense, net, and (11) income tax (benefit) expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.
The company defines “Non-GAAP Product Development Expense” as product development expense, excluding organizational realignment costs and stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ongoing expenditures related to product innovation.
The company defines “Non-GAAP Sales and Marketing Expense” as sales and marketing expense, excluding (1) organizational realignment costs, (2) asset impairment, and (3) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ongoing expenditures related to its sales and marketing strategies.
The company defines “Non-GAAP General and Administrative Expense” as general and administrative expense, excluding (1) organizational realignment costs, (2) asset impairment and loss on disposal of assets, (3) loss due to cyber incident, net of recoveries, (4) acquisition-related expense (income), (5) regulatory and legal matters, and (6) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s underlying expense structure to support corporate activities and processes.
The company defines “Non-GAAP Operating Expense” as operating expense, excluding (1) organizational realignment costs, (2) asset impairment and loss on disposal of assets, (3) amortization of intangible assets, (4) loss due to cyber incident, net of recoveries, (5) acquisition-related expense (income), (6) regulatory and legal matters, and (7) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s underlying expense structure to support ongoing operations.
The company defines “Non-GAAP Operating Income” as operating income, plus (1) acquisition-related deferred revenue, (2) asset impairment and loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) loss due to cyber incident, net of recoveries, (5) acquisition-related expense (income), (6) organizational realignment costs, (7) regulatory and legal matters, and (8) stock-based expense. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.
The company defines “Non-GAAP Net Income” as net income, plus (1) income tax (benefit) expense, (2) acquisition-related deferred revenue, (3) asset impairment and loss on disposal of assets, (4) amortization of product technologies and intangible assets, (5) change in fair value of equity investment, (6) loss due to cyber incident, net of recoveries, (7) acquisition-related expense (income), (8) organizational realignment costs, (9) regulatory and legal matters, (10) amortization of convertible note discount, and (11) stock-based expense, less (12) provision for income tax expense based on an assumed rate in order to approximate the company’s long-term effective corporate tax rate. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.
The company defines “Non-GAAP Net Income per Diluted Share” as Non-GAAP Net Income divided by Non-GAAP Diluted Weighted Average Shares Outstanding. The company believes that investors and financial analysts find this non-GAAP financial measure to be useful in analyzing the company’s financial and operational performance, comparing this performance to the company’s peers and competitors, and understanding the company’s ability to generate income from ongoing business operations.
The company defines "Non-GAAP Diluted Weighted Average Shares Outstanding" as diluted weighted average shares outstanding excluding the impact of shares that are issuable upon conversions of our convertible notes. It is the current intent of the company to settle conversions of the convertible notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of our common stock. We exclude these shares that are issuable upon conversions of our convertible notes because we expect that the dilution from such shares will be offset by the convertible note hedge transactions entered into in May 2017 in connection with the issuance of the convertible notes.
The company defines “Non-GAAP On Demand Revenue” as total on demand revenue plus acquisition-related deferred revenue. The company believes it is useful to include deferred revenue written down for GAAP purposes under purchase accounting rules in order to appropriately measure the underlying performance of the company’s business operations in the period of activity and associated expense. Further, the company believes that investors and financial analysts find this measure to be useful in evaluating the company’s ongoing performance because it provides a more accurate depiction of on demand revenue arising from our strategic acquisitions.
The company defines “Ending On Demand Units” as the number of rental housing units managed by our clients with one or more of our on demand software solutions at the end of the period. We use ending on demand units to measure the success of our strategy of increasing the number of rental housing units managed with our on demand software solutions. Property unit counts are provided to us by our customers as new sales orders are processed. Property unit counts may be adjusted periodically as information related to our clients’ properties is updated or supplemented, which could result in adjustments to the number of units previously reported.
The company defines “Average On Demand Units” as the average of the beginning and ending on demand units for each quarter in the period presented. The company’s management monitors this metric to measure its success in increasing the number of on demand software solutions utilized by our clients to manage their rental housing units, our overall revenue, and profitability.
The company defines “ACV,” or Annual Client Value, as management’s estimate of the annual value of the company’s on demand revenue contracts at a point in time. The company’s management monitors this metric to measure its success in increasing the number of on demand units, and the amount of software solutions utilized by its clients to manage their rental housing units.
The company defines “RPU,” or Revenue Per Unit, as ACV divided by ending on demand units. The company monitors this metric to measure its success in increasing the penetration of on demand software solutions utilized by its clients to manage their rental housing units.
The company excludes or adjusts each of the items identified below from the applicable non-GAAP financial measure referenced above for the reasons set forth with respect to each excluded item:
December 31,
December 31,
2019
2018
(Unaudited) Assets Current assets: Cash and cash equivalents
$
197,154
$
228,159
Restricted cash
243,323
154,599
Accounts receivable, less allowances of $10,271 and $8,850 at December 31, 2019 and 2018, respectively
143,127
123,596
Prepaid expenses
24,539
19,214
Other current assets
27,387
15,185
Total current assets
635,530
540,753
Property, equipment, and software, net
163,282
153,528
Right-of-use assets
121,941
-
Goodwill
1,611,749
1,053,119
Intangible assets, net
372,996
287,378
Deferred tax assets, net
33,812
42,602
Other assets
30,507
20,393
Total assets
$
2,969,817
$
2,097,773
Liabilities and stockholders’ equity Current liabilities: Accounts payable
$
40,092
$
25,312
Accrued expenses and other current liabilities
89,038
95,482
Current portion of deferred revenue
134,148
120,704
Current portion of term loans
18,750
16,133
Customer deposits held in restricted accounts
243,316
154,601
Total current liabilities
525,344
412,232
Deferred revenue
4,793
4,902
Revolving facility
230,000
-
Term loans, net
575,313
287,582
Convertible notes, net
305,188
292,843
Lease liabilities, net of current portion
133,313
-
Other long-term liabilities
22,940
37,190
Total liabilities
1,796,891
1,034,749
Stockholders’ equity: Common stock, $0.001 par value: 250,000,000 and 125,000,000 shares authorized, 96,100,296 and 95,991,162 shares issued and 94,744,157 and 93,650,127 shares outstanding at December 31, 2019 and 2018, respectively
96
96
Additional paid-in capital
1,222,356
1,187,683
Treasury stock, at cost: 1,356,139 and 2,341,035 shares at December 31, 2019 and 2018, respectively
(39,483
)
(65,470
)
Accumulated deficit
(7,695
)
(58,793
)
Accumulated other comprehensive loss
(2,348
)
(492
)
Total stockholders’ equity
1,172,926
1,063,024
Total liabilities and stockholders’ equity
$
2,969,817
$
2,097,773
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue: On demand
$
246,235
$
218,051
$
953,576
$
833,709
Professional and other
8,532
8,923
34,560
35,771
Total revenue
254,767
226,974
988,136
869,480
Cost of revenue(1)
101,027
88,063
385,712
328,382
Amortization of product technologies
10,732
9,429
40,461
35,797
Gross profit
143,008
129,482
561,963
505,301
Operating expenses: Product development(1)
26,308
29,772
112,222
118,525
Sales and marketing(1)
48,113
45,084
193,962
166,607
General and administrative(1)
35,354
32,638
123,056
118,208
Amortization of intangible assets
9,621
9,588
40,303
35,911
Total operating expenses
119,396
117,082
469,543
439,251
Operating income
23,612
12,400
92,420
66,050
Interest expense and other, net
(9,089
)
(6,746
)
(31,862
)
(31,750
)
Income before income taxes
14,523
5,654
60,558
34,300
Income tax (benefit) expense
(5,646
)
(618
)
2,350
(425
)
Net income$
20,169
$
6,272
$
58,208
$
34,725
Net income per share attributable to common stockholders: Basic
$
0.22
$
0.07
$
0.63
$
0.40
Diluted
$
0.21
$
0.07
$
0.60
$
0.38
Weighted average common shares outstanding: Basic
92,412
91,492
92,017
87,290
Diluted
95,824
95,108
96,282
91,531
(1) Includes stock-based expense as follows:
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Cost of revenue
$
1,401
$
1,254
$
5,604
$
4,403
Product development
1,715
2,595
8,159
9,923
Sales and marketing
5,887
4,320
23,978
16,573
General and administrative
6,284
4,980
24,822
19,742
$
15,287
$
13,149
$
62,563
$
50,641
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Cash flows from operating activities:
Net income
$
20,169
$
6,272
$
58,208
$
34,725
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
28,846
26,168
114,952
100,186
Amortization of debt discount and issuance costs
3,511
3,192
13,700
12,464
Amortization of right-of-use assets
2,749
-
11,433
-
Deferred taxes
(5,755
)
541
2,276
(2,179
)
Stock-based expense
15,287
13,149
62,563
50,641
Asset impairment and loss on disposal of assets
2,277
3,294
2,536
6,733
Change in fair value of equity investment
-
-
(2,600
)
-
Acquisition-related consideration
(87
)
(522
)
1,006
284
Change in customer deposits
83,665
63,591
82,631
57,230
Other changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations
(19,834
)
(5,840
)
(29,732
)
(15,277
)
Net cash provided by operating activities
130,828
109,845
316,973
244,807
Cash flows from investing activities:
Purchases of property, equipment, and software
(12,989
)
(13,646
)
(51,500
)
(50,933
)
Acquisition of businesses, net of cash and restricted cash acquired
(615,785
)
(48,089
)
(665,844
)
(278,563
)
Purchase of other investments
-
-
(1,750
)
(1,800
)
Net cash used in investing activities
(628,774
)
(61,735
)
(719,094
)
(331,296
)
Cash flows from financing activities:
Payments on and proceeds from debt, net
525,930
(4,034
)
517,628
(65,252
)
Payments on finance lease obligations
(772
)
(8
)
(3,651
)
(227
)
Payments of acquisition-related consideration
(4,098
)
(278
)
(30,441
)
(28,388
)
Proceeds from public offering, net of underwriters’ discount and offering costs
-
107
-
441,901
Proceeds from exercise of stock options
1,379
3,210
5,833
13,163
Purchase of treasury stock related to stock-based compensation
(4,096
)
(6,908
)
(20,867
)
(29,030
)
Purchase of treasury stock under share repurchase program
(8,491
)
(28,082
)
(8,491
)
(28,082
)
Net cash provided by (used in) financing activities
509,852
(35,993
)
460,011
304,085
Net increase in cash and cash equivalents
11,906
12,117
57,890
217,596
Effect of exchange rate on cash
(448
)
(150
)
(171
)
(183
)
Cash, cash equivalents and restricted cash:
Beginning of period
429,019
370,791
382,758
165,345
End of period
$
440,477
$
382,758
$
440,477
$
382,758
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
COMPARABLE GAAP MEASURES
(unaudited, in thousands, except per share data)
The following is a reconciliation of the non-GAAP financial measures used by RealPage to describe its financial results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). An explanation of these measures is also included under the heading “Explanation of Non-GAAP Financial Measures.”
While the company believes that these non-GAAP financial measures provide useful supplemental information to investors regarding the underlying performance of our business operations, investors are reminded to consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition, it should be noted that these non-GAAP financial measures may be different from non-GAAP measures used by other companies, and the company may utilize other measures to illustrate performance in the future. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP.
Non-GAAP Total Revenue Set forth below is a presentation of the company’s “Non-GAAP Total Revenue.” Please reference the “Explanation of Non-GAAP Financial Measures” section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue (GAAP)$
254,767
$
226,974
$
988,136
$
869,480
Acquisition-related deferred revenue
449
1,056
868
1,890
Non-GAAP Total Revenue$
255,216
$
228,030
$
989,004
$
871,370
Adjusted Gross Profit Set forth below is a presentation of the company’s “Adjusted Gross Profit.” Please reference the “Explanation of Non-GAAP Financial Measures” section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Gross profit (GAAP)$
143,008
$
129,482
$
561,963
$
505,301
Acquisition-related deferred revenue
449
1,056
868
1,890
Depreciation
3,970
3,048
15,665
12,072
Amortization of product technologies
10,732
9,429
40,461
35,797
Impairment of product technologies
1,618
-
1,618
-
Organizational realignment
16
-
141
-
Stock-based expense
1,401
1,254
5,604
4,403
Adjusted Gross Profit$
161,194
$
144,269
$
626,320
$
559,463
Adjusted EBITDA Set forth below is a presentation of the company’s "Adjusted EBITDA." Please reference the "Explanation of Non-GAAP Financial Measures" section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Net income (GAAP)
20,169
6,272
58,208
34,725
Acquisition-related deferred revenue
449
1,056
868
1,890
Depreciation, asset impairment, and loss on disposal of assets
10,769
10,445
36,724
35,211
Amortization of product technologies and intangible assets
20,353
19,017
80,764
71,708
Change in fair value of equity investment
-
-
(2,600
)
-
Loss due to cyber incident, net of recoveries
-
4,952
-
4,952
Acquisition-related expense (income)
3,594
(257
)
4,754
2,437
Organizational realignment
849
-
1,533
-
Regulatory and legal matters
898
-
1,465
78
Stock-based expense
15,287
13,149
62,563
50,641
Interest expense, net
9,443
6,780
35,056
29,959
Income tax (benefit) expense
(5,646
)
(618
)
2,350
(425
)
Adjusted EBITDA$
76,165
$
60,796
$
281,685
$
231,176
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Product development expense (GAAP)$
26,308
$
29,772
$
112,222
$
118,525
Less: Organizational realignment
84
-
400
-
Stock-based expense
1,715
2,595
8,159
9,923
Non-GAAP Product Development Expense$
24,509
$
27,177
$
103,663
$
108,602
Non-GAAP Sales and Marketing Expense Set forth below is a presentation of the company’s "Non-GAAP Sales and Marketing Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Sales and marketing expense (GAAP)$
48,113
$
45,084
$
193,962
$
166,607
Less: Organizational realignment
62
-
170
-
Asset impairment
363
2,720
363
2,720
Stock-based expense
5,887
4,320
23,978
16,573
Non-GAAP Sales and Marketing Expense$
41,801
$
38,044
$
169,451
$
147,314
Non-GAAP General and Administrative Expense Set forth below is a presentation of the company’s "Non-GAAP General and Administrative Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
General and administrative expense (GAAP)$
35,354
$
32,638
$
123,056
$
118,208
Less: Organizational realignment
687
-
822
-
Asset impairment and loss on disposal of assets
296
574
555
2,013
Loss due to cyber incident, net of recoveries
-
4,952
-
4,952
Acquisition-related expense (income)
3,594
(257
)
4,754
2,437
Regulatory and legal matters
898
-
1,465
78
Stock-based expense
6,284
4,980
24,822
19,742
Non-GAAP General and Administrative Expense$
23,595
$
22,389
$
90,638
$
88,986
Non-GAAP Operating Expense Set forth below is a presentation of the company’s "Non-GAAP Operating Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Operating expense (GAAP)$
119,396
$
117,082
$
469,543
$
439,251
Less: Organizational realignment
833
-
1,392
-
Asset impairment and loss on disposal of assets
659
3,294
918
4,733
Amortization of intangible assets
9,621
9,588
40,303
35,911
Loss due to cyber incident, net of recoveries
-
4,952
-
4,952
Acquisition-related expense (income)
3,594
(257
)
4,754
2,437
Regulatory and legal matters
898
-
1,465
78
Stock-based expense
13,886
11,895
56,959
46,238
Non-GAAP Operating Expense$
89,905
$
87,610
$
363,752
$
344,902
Non-GAAP Operating Income
Set forth below is a presentation of the company’s "Non-GAAP Operating Income." Please reference the "Explanation of Non-GAAP Financial Measures" section.Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Operating income (GAAP)$
23,612
$
12,400
$
92,420
$
66,050
Acquisition-related deferred revenue
449
1,056
868
1,890
Asset impairment and loss on disposal of assets
2,277
3,294
2,536
4,733
Amortization of product technologies and intangible assets
20,353
19,017
80,764
71,708
Loss due to cyber incident, net of recoveries
-
4,952
-
4,952
Acquisition-related expense (income)
3,594
(257
)
4,754
2,437
Organizational realignment
849
-
1,533
-
Regulatory and legal matters
898
-
1,465
78
Stock-based expense
15,287
13,149
62,563
50,641
Non-GAAP Operating Income$
67,319
$
53,611
$
246,903
$
202,489
Non-GAAP Net Income Set forth below is a presentation of the company’s "Non-GAAP Net Income" and "Non-GAAP Net Income per Diluted Share." Please reference the "Explanation of Non-GAAP Financial Measures" section. Three Months Ended Twelve Months EndedDecember 31,
December 31,2019
2018
2019
2018
Net income (GAAP)$
20,169
$
6,272
$
58,208
$
34,725
Income tax (benefit) expense
(5,646
)
(618
)
2,350
(425
)
Income before income taxes
14,523
5,654
60,558
34,300
Acquisition-related deferred revenue
449
1,056
868
1,890
Asset impairment and loss on disposal of assets
2,277
3,294
2,536
6,733
Amortization of product technologies and intangible assets
20,353
19,017
80,764
71,708
Change in fair value of equity investment
-
-
(2,600
)
-
Loss due to cyber incident, net of recoveries
-
4,952
-
4,952
Acquisition-related expense (income)
3,594
(257
)
4,754
2,437
Organizational realignment
849
-
1,533
-
Regulatory and legal matters
898
-
1,465
78
Amortization of convertible note discount
2,797
2,639
10,946
10,324
Stock-based expense
15,287
13,149
62,563
50,641
Non-GAAP income before income taxes
61,027
49,504
223,387
183,063
Assumed rate for income tax expense (1)
26.0
%
26.0
%
26.0
%
26.0
%
Assumed provision for non-GAAP income tax expense
15,867
12,871
58,080
47,596
Non-GAAP Net Income
$
45,160
$
36,633
$
165,307
$
135,467
Net income per diluted share
$
0.21
$
0.07
$
0.60
$
0.38
Non-GAAP Net Income per Diluted Share
$
0.48
$
0.39
$
1.76
$
1.51
Weighted average outstanding shares - basic
92,412
91,492
92,017
87,290
Non-GAAP adjusted diluted weighted average shares outstanding: Weighted average outstanding shares - diluted
95,824
95,108
96,282
91,531
Dilution offset from convertible note hedge transactions
(2,172
)
(1,621
)
(2,406
)
(1,876
)
Non-GAAP Diluted Weighted Average Shares Outstanding (2)
93,652
93,487
93,876
89,655
Non-GAAP On Demand Revenue Set forth below is a presentation of the company’s "Non-GAAP On Demand Revenue." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
On demand revenue (GAAP)$
246,235
$
218,051
$
953,576
$
833,709
Acquisition-related deferred revenue
449
1,056
868
1,890
Non-GAAP On Demand Revenue$
246,684
$
219,107
$
954,444
$
835,599
2019
2018
2019
2018
Ending On Demand Units
18,475
16,219
18,475
16,219
Average On Demand Units
17,627
16,146
16,758
14,847
ACV$
1,039,588
$
876,637
RPU$
56.27
$
54.05
Non-GAAP Total Revenue Guidance Set forth below is a presentation of the company’s "Non-GAAP Total Revenue" guidance for the three months ending March 31, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section. Guidance Range for theThree Months Ending Guidance Range for the
Twelve Months Ending March 31, 2020 December 31, 2020 Low (3) High (3) Low (3) High (3) Revenue (GAAP)
$
276,070
$
280,070
$
1,162,770
$
1,182,770
Acquisition-related deferred revenue
930
930
2,230
2,230
Non-GAAP Total Revenue$
277,000
$
281,000
$
1,165,000
$
1,185,000
Non-GAAP Net Income Guidance Set forth below is a presentation of the company’s "Non-GAAP Net Income" and "Non-GAAP Net Income per Diluted Share" guidance for the three months ending March 31, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section. Guidance Range for theThree Months Ending Guidance Range for the
Twelve Months Ending March 31, 2020 December 31, 2020 Low (3) High (3) Low (3) High (3) Non-GAAP Net Income: Net (loss) income (GAAP)
$
(400
)
$
1,760
$
27,990
$
34,450
Income tax (benefit) expense
(130
)
560
8,840
10,880
(Loss) income before income taxes
(530
)
2,320
36,830
45,330
Acquisition-related deferred revenue
930
930
2,230
2,230
Amortization of product technologies and intangible assets
25,550
25,400
101,790
100,990
Acquisition-related expense
2,970
2,970
10,030
9,730
Organizational realignment
890
790
1,240
790
Amortization of convertible note discount
2,840
2,840
11,610
11,610
Stock-based expense
18,050
17,950
78,820
78,270
Non-GAAP income before income taxes
50,700
53,200
242,550
248,950
Expected effective tax rate (1)
24.0
%
24.0
%
24.0
%
24.0
%
Assumed provision for income tax expense
12,168
12,768
58,212
59,748
Non-GAAP Net Income
$
38,532
$
40,432
$
184,338
$
189,202
Net income per diluted share
$
0.00
$
0.02
$
0.29
$
0.35
Non-GAAP Net Income per Diluted Share
$
0.41
$
0.43
$
1.95
$
2.00
Non-GAAP adjusted diluted weighted average shares outstanding: Weighted average outstanding shares - diluted
96,007
96,007
97,097
97,097
Dilution offset from convertible note hedge transactions
(2,160
)
(2,160
)
(2,584
)
(2,584
)
Non-GAAP Diluted Weighted Average Shares Outstanding (2)
93,847
93,847
94,513
94,513
Three Months Ending Guidance Range for the
Twelve Months Ending March 31, 2020 December 31, 2020 Low (3) High (3) Low (3) High (3) Adjusted EBITDA: Net (loss) income (GAAP)
$
(400
)
$
1,760
$
27,990
$
34,450
Acquisition-related deferred revenue
930
930
2,230
2,230
Depreciation, asset impairment, and loss on disposal of assets
8,650
8,450
36,090
35,190
Amortization of product technologies and intangible assets
25,550
25,400
101,790
100,990
Acquisition-related expense
2,970
2,970
10,030
9,730
Organizational realignment
890
790
1,240
790
Stock-based expense
18,050
17,950
78,820
78,270
Interest expense, net
13,490
13,190
52,970
51,470
Income tax (benefit) expense
(130
)
560
8,840
10,880
Adjusted EBITDA$
70,000
$
72,000
$
320,000
$
324,000
(1)
In 2019, a 26.0% tax rate is assumed in order to approximate the Company's long-term effective corporate tax rate. For 2020 guidance purposes, the Company uses a 24.0% tax rate to approximate the Company's long-term effective corporate tax rate. Please reference the “Explanation of Non-GAAP Financial Measures” section.
(2)
It is the current intent of the Company to settle conversions of the Convertible Notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of our common stock. We exclude these shares that are issuable upon conversions of our convertible notes because we expect that the dilution from such shares will be offset by the convertible note hedge transactions entered into in May 2017 in connection with the issuance of the convertible notes.
(3)
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 quarterly and full year results, which could cause or contribute to such differences. 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. See additional discussion under "Cautionary Statement Regarding Forward-Looking Statements" above.
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