RealPage Reports Fourth Quarter and Full Year 2018 Financial Results

RICHARDSON, Texas–(BUSINESS WIRE)–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, 2018.

Fourth Quarter 2018 Financial Highlights

  • GAAP total revenue of $227.0 million, an increase of 21%
    year-over-year;
  • Net income of $6.3 million, or $0.07 in net income per diluted share,
    a year-over-year increase of 130% and 127%, respectively;
  • Adjusted EBITDA of $60.8 million, an increase of 30% year-over-year;
    and
  • Non-GAAP net income of $36.6 million, or $0.39 in non-GAAP net income
    per diluted share, a year-over-year increase of 68% and 50%,
    respectively.

Full Year 2018 Financial Highlights

  • GAAP total revenue of $869.5 million, an increase of 30%
    year-over-year;
  • Net income of $34.7 million, or $0.38 in net income per diluted share,
    exhibiting significant year-over-year growth;
  • Adjusted EBITDA of $231.2 million, an increase of 41% year-over-year;
    and
  • Non-GAAP net income of $135.5 million, or $1.51 in non-GAAP net income
    per diluted share, a year-over-year increase of 78% and 62%,
    respectively.

Comments on the News

“Our 2018 financial performance was impressive,” said Steve Winn,
Chairman and CEO of RealPage. “The strong financial performance reflects
continued execution of our strategy to emphasize strategic platform
sales over the sales of individual products. Our new Unity Platform
makes this much easier and we are experiencing significant success with
suite sales achieving another record high new sales bookings level for
the fourth quarter and the full year.”

“2018 financial performance exhibited another year of strong growth as
total revenue grew 30%, while adjusted EBITDA and cash flow from
operations each grew significantly,” said Tom Ernst, CFO and Treasurer
of RealPage. “I’m excited by our future and the caliber of the team here
at RealPage. Three areas of focus for 2019 will be to further embed data
driven science into all of our products and internal processes, refine
our growing capabilities in curating the innovation lifecycle and
simplify internal processes across the company to reduce the time from
the sale of a suite to the full deployment of that suite.”

2019 Financial Outlook

RealPage management expects to achieve the following results during the
first quarter ending March 31, 2019:

  • GAAP total revenue is expected to be in the range of $232.8 million to
    $234.8 million;
  • GAAP net income per diluted share is expected to be in the range of
    $0.09 to $0.11;
  • Non-GAAP total revenue is expected to be in the range of $233.0
    million to $235.0 million;
  • Adjusted EBITDA is expected to be in the range of $64.0 million to
    $66.0 million;
  • Non-GAAP net income per diluted share is expected to be in the range
    of $0.39 to $0.41;
  • Non-GAAP diluted weighted average shares outstanding are expected to
    be approximately 93.9 million.

RealPage management expects to achieve the following results during the
calendar year ending December 31, 2019:

  • GAAP total revenue is expected to be in the range of $980.0 million to
    $1.0 billion;
  • GAAP net income per diluted share is expected to be in the range of
    $0.45 to $0.55;
  • Non-GAAP total revenue is expected to be in the range of $980.0
    million to $1.0 billion;
  • Adjusted EBITDA is expected to be in the range of $275.0 million to
    $285.0 million;
  • Non-GAAP net income per diluted share is expected to be in the range
    of $1.70 to $1.79;
  • 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 5:00 p.m. EDT today to
discuss its financial results. Participants are encouraged to listen to
the presentation via a live web broadcast and view presentation slides
at https://78449.themediaframe.com/dataconf/productusers/rlpg/mediaframe/28931/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, passcode 13687894, until March 25, 2019.

About RealPage

RealPage is a leading global provider of software and data analytics to
the real estate industry. Clients use our platform to improve operating
performance and increase capital returns. Founded in 1998 and
headquartered in Richardson, Texas, RealPage currently serves over
12,200 clients worldwide from offices in North America, Europe and Asia.
For more information about the company, 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 and calendar year ending December 31, 2019, continued
execution and success of its strategy to emphasize suite sales over the
sales of individual products, and the benefits of its Unity Platform,
its areas of focus in 2019 related to embedding data driven science into
its products and internal processes, growing capabilities in curating
the innovation lifecycle, and simplifying internal processes to reduce
the time from the sale of a suite to full deployment. 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
completed acquisitions of ClickPay, LeaseLabs and Rentlytics; (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 1, 2018 and its Quarterly Report on Form 10-Q previously filed
with the SEC on November 6, 2018. 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 non-cash or non-recurring 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 and other deferred revenue adjustments. The company
believes 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 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 on demand revenue
arising from our strategic acquisitions.

The company defines “Adjusted Gross Profit” as gross profit, plus (1)
acquisition-related and other deferred revenue adjustments, (2)
depreciation, (3) amortization of product technologies, and (4)
stock-based expense. The company believes that investors and financial
analysts find these non-GAAP financial measures 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 (loss), plus (1)
acquisition-related and other deferred revenue adjustments, (2)
depreciation, asset impairment, and the 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 (income)
expense, (6) costs related to the Hart-Scott-Rodino review process, (7)
interest expense, net, (8) income tax expense (benefit), and (9)
stock-based expense. The company believes that investors and financial
analysts find these non-GAAP financial measures 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 stock-based expense. The company believes
that investors and financial analysts find these non-GAAP financial
measures 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) asset impairment, and (2) stock-based
expense. The company believes that investors and financial analysts find
these non-GAAP financial measures 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) loss on disposal of
assets, (2) loss due to cyber incident, net of recoveries, (3)
acquisition-related (income) expense, (4) costs related to the
Hart-Scott-Rodino review process, and (5) stock-based expense. The
company believes that investors and financial analysts find these
non-GAAP financial measures 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) asset impairment and loss on disposal of assets, (2)
amortization of intangible assets, (3) loss due to cyber incident, net
of recoveries, (4) acquisition-related (income) expense, (5) costs
related to the Hart-Scott-Rodino review process, and (6) stock-based
expense. The company believes that investors and financial analysts find
these non-GAAP financial measures 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 and other deferred revenue adjustments, (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 (income) expense,
(6) costs related to the Hart-Scott-Rodino review process, and (7)
stock-based expense. The company believes that investors and financial
analysts find these non-GAAP financial measures 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 (loss), plus (1)
income tax (benefit) expense, (2) acquisition-related and other deferred
revenue adjustments, (3) asset impairment and loss on disposal of
assets, (4) amortization of product technologies and intangible assets,
(5) loss due to cyber incident, net of recoveries, (6)
acquisition-related (income) expense, (7) costs related to the
Hart-Scott-Rodino review process, (8) amortization of convertible note
discount, and (9) stock-based expense, less (10) 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 Weighted Average Diluted Shares Outstanding. The company
believes that investors and financial analysts find these non-GAAP
financial measures 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 Weighted Average Diluted Shares
Outstanding” as weighted average diluted 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 and other deferred revenue adjustments.
The company believes 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 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 – In 2017, the company used a 40.0%
    tax rate in order to approximate the company’s long-term effective
    corporate 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. In 2018 and for 2019 guidance purposes, the
    company uses a Non-GAAP tax rate of approximately 26%, as a result of
    the recently enacted Tax Cuts and Jobs Act legislation, to approximate
    the company’s long-term effective corporate tax rate. We believe
    excluding these items assists investors and analysts in understanding
    the tax provision and the effective tax rate related to ongoing
    operations.
  • Acquisition-related and other deferred revenue – These
    items are included to reflect 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 the company’s business operations in the
    period of activity and associated expense.
  • Asset impairment and loss on disposal of assets – These
    items comprise gains (losses) on the disposal and impairment of
    long-lived assets and impairment of indefinite-lived intangible
    assets, which are not reflective of the company’s ongoing operations.
    We believe exclusion of these items 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 are therefore not considered by management
    in making operating decisions.
  • Amortization of product technologies and intangible assets –
    These items are amortized over their estimated useful lives and
    generally cannot be changed or influenced by the company after initial
    capitalization. Accordingly, these items are 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.
  • Loss due to cyber incident, net of recoveriesThis
    item relates to losses, net of recoveries, arising from the May 2018
    incident in which the company was the subject of a targeted email
    phishing campaign. The company believes this loss is not reflective of
    its ongoing operations and that exclusion of this item facilitates a
    more accurate comparison of the company’s results of operations
    between periods.
  • Acquisition-related (income) expense – These items
    consist of direct costs incurred in our business acquisition
    transactions and the impact of changes in the fair value of
    acquisition-related contingent consideration obligations. We believe
    exclusion of these items 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.
  • Costs related to the Hart-Scott-Rodino review process –
    This item relates to the company’s Hart-Scott-Rodino Antitrust
    Improvements Act review process regarding the completed acquisitions
    of On-Site and LRO in 2017 and LeaseLabs in 2018. The company believes
    that these significant legal costs are not reflective of its ongoing
    operations or its normal acquisition activity.

Contacts

RealPage, Inc.
Investor Relations
Rhett Butler,
972-820-3773
[email protected]

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