RealPage Reports Second Quarter 2020 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 second quarter ended June 30, 2020.

Second Quarter 2020 Financial Highlights

  • GAAP total revenue of $285.6 million, an increase of 17% year-over-year;
  • Net income of $11.3 million, or $0.11 in net income per diluted share, a year-over-year decrease of 25% and 31%, respectively;
  • Adjusted EBITDA of $79.9 million, an increase of 17% year-over-year; and,
  • Non-GAAP net income of $47.4 million, or $0.49 in non-GAAP net income per diluted share, a year-over-year increase of 19% and 14%, respectively.

Comments on the News

“Second quarter financial performance was better than expected with total revenue growing 17% to $286 million, and Adjusted EBITDA growing 17% to nearly $80 million – both compared to last year. Numbers were exceptionally strong relative to our guidance because the impact of COVID-19 was not as impactful as we feared and there is surging demand for solutions that facilitate virtual leasing and living offered by RealPage,” said Steve Winn, Chairman and CEO of RealPage.

“We are raising the mid-point of our full year revenue growth outlook by $10.0 million and our Adjusted EBITDA margin guidance by over 50 basis points,” said Tom Ernst, CFO and Treasurer of RealPage. “Our investment in product development and sales and marketing will remain at elevated levels to capitalize on the changing dynamics of the way renters live and work in a post-COVID world. We believe these investments position us for sustained long term growth.”

2020 Financial Outlook

RealPage management expects to achieve the following results during the third quarter ending September 30, 2020:

  • GAAP total revenue is expected to be in the range of $288 million to $294 million;
  • GAAP net income per diluted share is expected to be in the range of $0.05 to $0.10;
  • Non-GAAP total revenue is expected to be in the range of $288 million to $294 million;
  • Adjusted EBITDA is expected to be in the range of $74 million to $78 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $0.43 to $0.46;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 101.6 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 $1,134 million to $1,154 million;
  • GAAP net income per diluted share is expected to be in the range of $0.30 to $0.38;
  • Non-GAAP total revenue is expected to be in the range of $1,135 million to $1,155 million;
  • Adjusted EBITDA is expected to be in the range of $300 million to $308 million;
  • Non-GAAP net income per diluted share is expected to be in the range of $1.77 to $1.84;
  • Non-GAAP diluted weighted average shares outstanding are expected to be approximately 98.6 million.

Conference Call Information; Presentation Slides

The company will host a conference call at 5:00 p.m. EDT 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/39699/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 approximately 19 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 third quarter ending September 30, 2020 and calendar year ending December 31, 2020, the surging demand for solutions that facilitate virtual leasing and living offered by RealPage, the anticipated investment in product development and sales and marketing at elevated levels to capitalize on the changing dynamics of the way renters live and work in a post-COVID world, and our belief that these investments position us for sustained long term growth. 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, including the uncertainty associated with the potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations. 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 other uncertainty, and conditions and uncertainty caused by the COVID-19 pandemic, 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, Simple Bills, Hipercept, and Lease Term 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 March 2, 2020 and its Quarterly Report on Form 10-Q previously filed with the SEC on May 8, 2020. 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) organizational realignment costs and (5) 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) acquisition-related expense, (6) organizational realignment costs, (7) regulatory and legal matters, (8) stock-based expense, (9) interest expense, net, and (10) income tax expense (benefit). 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 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 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 (gain) loss on disposal of assets, (3) acquisition-related expense, (4) regulatory and legal matters, and (5) 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 (gain) loss on disposal of assets, (3) amortization of intangible assets, (4) acquisition-related expense, (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 ongoing operations.

The company defines “Non-GAAP Operating Income” as operating income, plus (1) acquisition-related deferred revenue, (2) asset impairment and (gain) loss on disposal of assets, (3) amortization of product technologies and intangible assets, (4) acquisition-related expense, (5) organizational realignment costs, (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 ability to generate income from ongoing business operations.

The company defines “Non-GAAP Net Income” as net income, plus (1) income tax expense (benefit), (2) acquisition-related deferred revenue, (3) asset impairment and (gain) loss on disposal of assets, (4) amortization of product technologies and intangible assets, (5) change in fair value of equity investment, (6) acquisition-related expense, (7) organizational realignment costs, (8) regulatory and legal matters, (9) amortization of convertible notes’ discount, and (10) stock-based expense, less (11) 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 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 and capped call transactions entered into in May 2017 and May 2020, respectively, 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:

  • Non-GAAP tax rate – The GAAP tax rate includes certain tax items which may include, but are not limited to: income tax expenses or benefits that are not related to ongoing business operations in the current year; unusual or infrequently occurring items; benefits from stock compensation deductions for tax purposes that exceed the stock compensation expense recognized for GAAP; tax adjustments associated with fluctuations in foreign currency re-measurement; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets and liabilities; and changes in tax law. The non-GAAP tax rate excludes the tax effect of these items. We believe excluding these items assists investors and analysts in understanding the tax provision and the effective tax rate related to non-GAAP operations. In 2019, the company used a non-GAAP tax rate of approximately 26% to approximate the company’s long-term effective corporate tax rate. During 2019, the company availed itself of research and development tax credits for both federal and state and other state tax credits that will impact its long-term effective tax rate in future periods. For 2020 guidance purposes, the company uses a non-GAAP tax rate of 24% to more align with the expected impact of the credits and other anticipated impacts of US tax reform as rules are clarified by the US Treasury and foreign jurisdictional changes that impact the company’s tax portfolio globally. This non-GAAP tax rate will be reviewed annually to determine whether it remains appropriate in consideration of the company’s operating environment, changes in tax legislation, jurisdictional mix of earnings, and other factors deemed appropriate and necessary.
  • Acquisition-related deferred revenue – This item is included to reflect deferred revenue written down for GAAP purposes under purchase accounting in order to appropriately measure the underlying performance of the company’s business operations in the period of activity and associated expense.
  • Asset impairment and (gain) loss on disposal of assets – This item comprises gains and losses on the disposal and impairment of long-lived assets, and impairment of intangible assets, which are not reflective of the company’s ongoing operations. We believe exclusion of this item facilitates a more accurate comparison of the company’s results of operations between periods.
  • Depreciation of long-lived assets – Long-lived assets are depreciated over their estimated useful lives in a manner reflecting the pattern in which the economic benefit is consumed. Management is limited in its ability to change or influence these charges after the asset has been acquired and placed in service. We do not believe that depreciation expense accurately reflects the performance of our ongoing operations for the period in which the charges are incurred, and is therefore not considered by management in making operating decisions.
  • Amortization of product technologies and intangible assets – Intangible assets are amortized over their estimated useful lives and generally cannot be changed or influenced by the company after initial capitalization. Accordingly, this item is not considered by the company in making operating decisions. The company does not believe such charges accurately reflect the performance of its ongoing operations for the period in which such charges are incurred.
  • Change in fair value of equity investment This item represents changes in fair value of our equity investment based on observable price changes in orderly transactions for an identical or similar investment of the same issuer. We believe exclusion of this item facilitates a more accurate comparison of our results of operations between periods as this item is not reflective of our ongoing operations.
  • Acquisition-related expense – This item consists of direct costs incurred in our business acquisition transactions and expenses related to integration activities, and the impact of changes in the fair value of acquisition-related contingent consideration obligations. Examples of these direct costs include transaction fees, due diligence costs, acquisition retention bonuses and severance, and third-party consultants to assist with integration. We believe exclusion of this item facilitates a more accurate comparison of the results of the company’s ongoing operations across periods and eliminates volatility related to changes in the fair value of acquisition-related contingent consideration obligations.
  • Organizational realignment This item consists of direct costs associated with the alignment of our business strategies. In connection with these actions, we recognize costs related to termination benefits, exit costs associated with closure of facilities, certain asset impairments, cancellation of certain contracts, and other professional and consulting fees associated with these initiatives. We believe exclusion of this item facilitates a more accurate comparison of our ongoing results of operations between periods.
  • Regulatory and legal matters – This item is comprised of certain regulatory and similar costs and certain legal settlement costs, such as costs related to the company’s Hart-Scott-Rodino Antitrust Improvements Act review process incurred in connection with our acquisitions or the settlement of certain legal matters. These costs are excluded as they are irregular in timing and scope, and may not be indicative of our past and future performance. We believe exclusion of this item facilitates a more accurate comparison of the company’s results of operations between periods.
  • Amortization of convertible notes’ discount – This item consists of non-cash interest expense related to the amortization of the discount recognized on the convertible notes issued in May 2017 and May 2020. Management excludes this item, as it is not indicative of the company’s ongoing operating performance.
  • Stock-based expense – This item is excluded because these are non-cash expenditures that the company does not consider part of ongoing operating results when assessing the performance of our business, and also because the total amount of the expenditure is partially outside of its control because it is based on factors such as stock price, volatility, and interest rates, which may be unrelated to the company’s performance during the period in which the expenses are incurred.
 
Condensed Consolidated Balance Sheets
(in thousands, except per share and share amounts)
(unaudited)
 
June 30,December 31,

2020

2019

 
Assets
Current assets:
Cash and cash equivalents

$ 638,556

$ 197,154

Restricted cash

262,397

243,323

Accounts receivable, less allowances of $11,814 and $10,271 at June 30, 2020 and December 31, 2019, respectively

129,675

143,127

Prepaid expenses

28,613

24,539

Other current assets

28,354

27,387

Total current assets

1,087,595

635,530

Property, equipment, and software, net

169,222

163,282

Right-of-use assets

114,372

121,941

Goodwill

1,663,639

1,611,749

Intangible assets, net

348,620

372,996

Deferred tax assets, net

28,525

33,812

Other assets

28,473

30,507

Total assets

$ 3,440,446

$ 2,969,817

 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable

$ 40,700

$ 40,092

Accrued expenses and other current liabilities

98,624

89,038

Current portion of deferred revenue

132,796

134,148

Current portion of term loans

26,250

18,750

Convertible notes, net

311,638

-

Customer deposits held in restricted accounts

263,133

243,316

Total current liabilities

873,141

525,344

Deferred revenue

4,062

4,793

Revolving facility

-

230,000

Term loans, net

560,571

575,313

Convertible notes, net

283,122

305,188

Lease liabilities, net of current portion

125,697

133,313

Other long-term liabilities

34,038

22,940

Total liabilities

1,880,631

1,796,891

Stockholders’ equity:
Common stock, $0.001 par value: 250,000,000 shares authorized, 102,206,190 and 96,100,296 shares issued and 101,990,040 and 94,744,157 shares outstanding at June 30, 2020 and December 31, 2019, respectively

102

96

Additional paid-in capital

1,561,672

1,222,356

Treasury stock, at cost: 216,150 and 1,356,139 shares at June 30, 2020 and December 31, 2019, respectively

(4,527

)

(39,483

)

Retained earnings (deficit)

8,695

(7,695

)

Accumulated other comprehensive loss

(6,127

)

(2,348

)

Total stockholders’ equity

1,559,815

1,172,926

Total liabilities and stockholders’ equity

$ 3,440,446

$ 2,969,817

 
 
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
Three Months EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Revenue:
On demand

$ 278,559

$ 235,185

$ 547,030

$ 461,704

Professional and other

7,048

8,676

15,250

16,463

Total revenue

285,607

243,861

562,280

478,167

Cost of revenue(1)

110,713

95,708

219,623

185,902

Amortization of product technologies

14,531

9,900

28,303

19,414

Gross profit

160,363

138,253

314,354

272,851

Operating expenses:
Product development(1)

31,433

28,151

62,981

58,048

Sales and marketing(1)

49,424

49,120

104,081

93,943

General and administrative(1)

42,399

28,310

82,927

56,453

Amortization of intangible assets

11,247

10,402

22,666

20,238

Total operating expenses

134,503

115,983

272,655

228,682

Operating income

25,860

22,270

41,699

44,169

Interest expense and other, net

(12,692)

(8,029)

(25,427)

(14,009)

Income before income taxes

13,168

14,241

16,272

30,160

Income tax expense (benefit)

1,867

(822)

(634)

3,825

Net income

$ 11,301

$ 15,063

$ 16,906

$ 26,335

 
Net income per share attributable to common stockholders:
Basic

$ 0.12

$ 0.16

$ 0.18

$ 0.29

Diluted

$ 0.11

$ 0.16

$ 0.17

$ 0.27

Weighted average common shares outstanding:
Basic

95,752

91,914

94,203

91,703

Diluted

100,254

96,493

98,143

96,036

 
 
(1) Includes stock-based expense as follows:
Three Months EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Cost of revenue

$ 2,257

$ 1,447

$ 4,267

$ 2,778

Product development

1,629

2,016

3,566

4,496

Sales and marketing

2,296

6,383

8,184

11,733

General and administrative

6,149

6,019

12,515

11,771

$ 12,331

$ 15,865

$ 28,532

$ 30,778

 
 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Cash flows from operating activities:
Net income

$ 11,301

$ 15,063

$ 16,906

$ 26,335

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

34,344

29,016

67,906

56,840

Amortization of debt discount and issuance costs

4,936

3,279

8,410

6,513

Amortization of right-of-use assets

3,380

2,920

6,983

5,925

Deferred taxes

1,759

1,686

(1,233

)

4,236

Stock-based expense

12,331

15,865

28,532

30,778

Loss on disposal and impairment of other long-lived assets

-

(17

)

12

269

Change in fair value of equity investment

-

-

-

(2,600

)

Acquisition-related consideration

(596

)

294

(107

)

699

Change in customer deposits

21,375

3,706

16,368

(46,546

)

Other changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations

7,217

(2,427

)

13,852

(9,072

)

Net cash provided by operating activities

96,047

69,385

157,629

73,377

 
Cash flows from investing activities:
Purchases of property, equipment, and software

(16,492

)

(12,593

)

(29,746

)

(23,466

)

Acquisition of businesses, net of cash and restricted cash acquired

(38

)

(17,528

)

(59,500

)

(17,528

)

Purchase of other investment

-

(1,750

)

-

(1,750

)

Net cash used in investing activities

(16,530

)

(31,871

)

(89,246

)

(42,744

)

 
Cash flows from financing activities:
Payments on and proceeds from debt, net

104,051

(4,034

)

100,301

(8,067

)

Purchase of capped call instruments

(39,365

)

-

(39,365

)

-

Payments on finance lease obligations

(822

)

(1,358

)

(1,633

)

(2,127

)

Payments of acquisition-related consideration

(2,347

)

(8,835

)

(2,392

)

(20,247

)

Proceeds from public offering, net of underwriters’ discount and offering costs

334,402

-

334,402

-

Proceeds from exercise of stock options

2,816

1,192

7,722

3,069

Purchase of treasury stock related to stock-based compensation

(2,750

)

(6,092

)

(6,243

)

(11,108

)

Other financing activities, net

(348

)

-

(374

)

-

Net cash provided by (used in) financing activities

395,637

(19,127

)

392,418

(38,480

)

Net increase (decrease) in cash, cash equivalents and restricted cash

475,154

18,387

460,801

(7,847

)

Effect of exchange rate on cash

180

118

(325

)

19

 
Cash, cash equivalents and restricted cash:
Beginning of period

425,619

356,425

440,477

382,758

End of period

$ 900,953

$ 374,930

$ 900,953

$ 374,930

 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
COMPARABLE GAAP MEASURES
(unaudited, in thousands, except per share amounts)
 
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 EndedSix Months Ended
June 30, June 30,

2020

2019

2020

2019

Revenue (GAAP)

$

285,607

$

243,861

$

562,280

$

478,167

Acquisition-related deferred revenue

425

157

825

381

Non-GAAP Total Revenue

$

286,032

$

244,018

$

563,105

$

478,548

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Gross profit (GAAP)

$

160,363

$

138,253

$

314,354

$

272,851

Acquisition-related deferred revenue

425

157

825

381

Depreciation

3,830

4,017

7,610

7,688

Amortization of product technologies

14,531

9,900

28,303

19,414

Organizational realignment

255

-

453

-

Stock-based expense

2,257

1,447

4,267

2,778

Adjusted Gross Profit

$

181,661

$

153,774

$

355,812

$

303,112

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Net income (GAAP)

$

11,301

$

15,063

$

16,906

$

26,335

Acquisition-related deferred revenue

425

157

825

381

Depreciation, asset impairment, and loss on disposal of assets

8,566

8,697

16,949

17,457

Amortization of product technologies and intangible assets

25,778

20,302

50,969

39,652

Change in fair value of equity investment

-

-

-

(2,600

)

Acquisition-related expense

3,137

376

6,861

405

Organizational realignment

1,220

-

2,431

-

Regulatory and legal matters

2,150

352

2,509

352

Stock-based expense

12,331

15,865

28,532

30,778

Interest expense, net

13,129

8,241

26,034

16,822

Income tax expense (benefit)

1,867

(822

)

(634

)

3,825

Adjusted EBITDA

$

79,904

$

68,231

$

151,382

$

133,407

Non-GAAP Product Development Expense
Set forth below is a presentation of the company’s "Non-GAAP Product Development Expense." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Product development expense (GAAP)

$

31,433

$

28,151

$

62,981

$

58,048

Less:Organizational realignment

465

-

698

-

Stock-based expense

1,629

2,016

3,566

4,496

Non-GAAP Product Development Expense

$

29,339

$

26,135

$

58,717

$

53,552

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Sales and marketing expense (GAAP)

$

49,424

$

49,120

$

104,081

$

93,943

Less:Organizational realignment

278

-

889

-

Stock-based expense

2,296

6,383

8,184

11,733

Non-GAAP Sales and Marketing Expense

$

46,850

$

42,737

$

95,008

$

82,210

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

General and administrative expense (GAAP)

$

42,399

$

28,310

$

82,927

$

56,453

Less:Organizational realignment

222

-

391

-

Asset impairment and (gain) loss on disposal of assets

-

(17

)

12

269

Acquisition-related expense

3,137

376

6,861

405

Regulatory and legal matters

2,150

352

2,509

352

Stock-based expense

6,149

6,019

12,515

11,771

Non-GAAP General and Administrative Expense

$

30,741

$

21,580

$

60,639

$

43,656

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Operating expense (GAAP)

$

134,503

$

115,983

$

272,655

$

228,682

Less:Organizational realignment

965

-

1,978

-

Asset impairment and (gain) loss on disposal of assets

-

(17

)

12

269

Amortization of intangible assets

11,247

10,402

22,666

20,238

Acquisition-related expense

3,137

376

6,861

405

Regulatory and legal matters

2,150

352

2,509

352

Stock-based expense

10,074

14,418

24,265

28,000

Non-GAAP Operating Expense

$

106,930

$

90,452

$

214,364

$

179,418

 
 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Operating income (GAAP)

$

25,860

$

22,270

$

41,699

$

44,169

Acquisition-related deferred revenue

425

157

825

381

Asset impairment and (gain) loss on disposal of assets

-

(17

)

12

269

Amortization of product technologies and intangible assets

25,778

20,302

50,969

39,652

Acquisition-related expense

3,137

376

6,861

405

Organizational realignment

1,220

-

2,431

-

Regulatory and legal matters

2,150

352

2,509

352

Stock-based expense

12,331

15,865

28,532

30,778

Non-GAAP Operating Income

$

70,901

$

59,305

$

133,838

$

116,006

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Net income (GAAP)

$

11,301

$

15,063

$

16,906

$

26,335

Income tax expense (benefit)

1,867

(822

)

(634

)

3,825

Income before income taxes

13,168

14,241

16,272

30,160

 
Acquisition-related deferred revenue

425

157

825

381

Asset impairment and (gain) loss on disposal of assets

-

(17

)

12

269

Amortization of product technologies and intangible assets

25,778

20,302

50,969

39,652

Change in fair value of equity investment

-

-

-

(2,600

)

Acquisition-related expense

3,137

376

6,861

405

Organizational realignment

1,220

-

2,431

-

Regulatory and legal matters

2,150

352

2,509

352

Amortization of convertible notes' discount

4,183

2,717

7,021

5,393

Stock-based expense

12,331

15,865

28,532

30,778

Non-GAAP income before income taxes

62,392

53,993

115,432

104,790

Assumed rate for income tax expense (1)

24.0

%

26.0

%

24.0

%

26.0

%

Assumed provision for non-GAAP income tax expense

14,974

14,038

27,704

27,245

Non-GAAP Net Income

$

47,418

$

39,955

$

87,728

$

77,545

 
Net income per diluted share

$

0.11

$

0.16

$

0.17

$

0.27

Non-GAAP Net Income per Diluted Share

$

0.49

$

0.43

$

0.92

$

0.83

 
Weighted average outstanding shares - basic

95,752

91,914

94,203

91,703

Non-GAAP Adjusted Diluted Weighted Average Shares Outstanding:
Weighted average outstanding shares - diluted

100,254

96,493

98,143

96,036

Dilution offset from convertible note hedge transactions

(2,755

)

(2,528

)

(2,462

)

(2,368

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

97,499

93,965

95,681

93,668

 
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 EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

On demand revenue (GAAP)

$

278,559

$

235,185

$

547,030

$

461,704

Acquisition-related deferred revenue

425

157

825

381

Non-GAAP On Demand Revenue

$

278,984

$

235,342

$

547,855

$

462,085

 
 
Ending On Demand Units, Average On Demand Units, ACV, and RPU
Set forth below is a presentation of the company’s "Ending On Demand Units," "Average On Demand Units," "ACV," and "RPU." Please reference the "Explanation of Non-GAAP Financial Measures" section.
Three Months EndedSix Months Ended
June 30,June 30,

2020

2019

2020

2019

Ending on demand units

18,880

16,505

18,880

16,505

Average on demand units

18,844

16,453

18,743

16,382

 
ACV

$

1,118,074

$

942,436

RPU

$

59.22

$

57.10

 
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 September 30, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the Three
Months Ending
Guidance Range for the Twelve
Months Ending
September 30, 2020December 31, 2020
Low (3)High (3)Low (3)High (3)
Revenue (GAAP)

$

287,710

$

293,710

$

1,133,710

$

1,153,710

Acquisition-related deferred revenue

290

290

1,290

1,290

Non-GAAP Total Revenue

$

288,000

$

294,000

$

1,135,000

$

1,155,000

 
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 September 30, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the Three
Months Ending
Guidance Range for the Twelve
Months Ending
September 30, 2020December 31, 2020
Low (3)High (3)Low (3)High (3)
Non-GAAP Net Income:
Net income (GAAP)

$

5,602

$

9,982

$

30,230

$

38,908

Income tax expense

1,188

2,558

2,990

5,762

Income before income taxes

6,790

12,540

33,220

44,670

 
Acquisition-related deferred revenue

290

290

1,290

1,290

Asset impairment and loss on disposal of assets

-

-

20

20

Amortization of product technologies and intangible assets

25,300

24,900

101,480

100,680

Acquisition-related expense

1,540

1,440

9,920

9,620

Organizational realignment

750

500

3,480

3,130

Regulatory and legal matters

-

-

2,510

2,510

Amortization of convertible notes' discount

5,960

5,960

19,040

19,040

Stock-based expense

16,260

15,860

58,770

57,970

Non-GAAP income before income taxes

56,890

61,490

229,730

238,930

Expected effective tax rate (1)

24.0

%

24.0

%

24.0

%

24.0

%

Assumed provision for income tax expense

13,654

14,758

55,135

57,343

Non-GAAP Net Income

$

43,236

$

46,732

$

174,595

$

181,587

 
Net income per diluted share

$

0.05

$

0.10

$

0.30

$

0.38

Non-GAAP Net Income per Diluted Share

$

0.43

$

0.46

$

1.77

$

1.84

 
Non-GAAP Adjusted Diluted Weighted Average Shares Outstanding:
Weighted average outstanding shares - diluted

104,703

104,703

101,448

101,448

Dilution offset from convertible note hedge transactions

(3,151

)

(3,151

)

(2,843

)

(2,843

)

Non-GAAP Diluted Weighted Average Shares Outstanding (2)

101,552

101,552

98,605

98,605

 
 

Adjusted EBITDA Guidance

Set forth below is a presentation of the company’s "Adjusted EBITDA" guidance for the three months ending September 30, 2020, and the twelve months ending December 31, 2020. Please reference the "Explanation of Non-GAAP Financial Measures" section.
Guidance Range for the
Three Months Ending
Guidance Range for the
Twelve Months Ending
September 30, 2020December 31, 2020
Low (3)High (3)Low (3)High (3)
Adjusted EBITDA:
Net income (GAAP)

$

5,602

$

9,982

$

30,230

$

38,908

Acquisition-related deferred revenue

290

290

1,290

1,290

Depreciation, asset impairment, and loss on disposal of assets

8,970

8,770

35,130

34,730

Amortization of product technologies and intangible assets

25,300

24,900

101,480

100,680

Acquisition-related expense

1,540

1,440

9,920

9,620

Organizational realignment

750

500

3,480

3,130

Regulatory and legal matters

-

-

2,510

2,510

Stock-based expense

16,260

15,860

58,770

57,970

Interest expense, net

14,100

13,700

54,200

53,400

Income tax expense

1,188

2,558

2,990

5,762

Adjusted EBITDA

$

74,000

$

78,000

$

300,000

$

308,000

 
 

(1)

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 and capped call transactions entered into in May 2017 and May 2020, respectively, 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.

Contacts:

RealPage, Inc.
Investor Relations
Rhett Butler, 972-820-3773
rhett.butler@realpage.com

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