) makes a good living providing on-demand software for the rental
housing industry, helped by a strong U.S. rental market and its
own appetite for acquisitions.
The company sells a range of products for single-family and
multifamily rental properties. Software as a service, or SaaS,
solutions from RealPage are designed to help property
managers and owners manage their marketing, pricing, screening,
leasing, accounting, purchasing, utilities and other kinds of
These offerings have been in heavy demand in recent years as
the nation's housing bubble forced many financially strapped
Americans to sell their homes and return to the rental market. At
the same time, many would-be homebuyers who couldn't qualify for
mortgage loans were left with little choice but to rent.
Housing Shift Helps Sales
These trends, along with the large number of echo boomers age
20 to 34 entering the rental market every year, have pushed up
occupancy rates at rental properties across the U.S. and
increased the need for the kinds of software products that
That still holds true this year, even as the U.S. housing
market has bounced back.
"The rental housing market continues to sustain a strong
performance," RealPage CEO Stephen Winn said on a Nov. 7
conference call with analysts to discuss the firm's Q3
He cited data from MPF Research, an independent division of
RealPage, showing that the apartment occupancy rate for the 100
largest markets in the U.S. was 95.4% at the end of the third
quarter --which was about even with the previous year.
"Annual revenue growth for the rental housing market, which
includes the shifts in both occupancy and effective rents, was
3.2% in the third quarter, up from 3.1% in the second quarter,"
Meanwhile, he added, the 100 largest markets were in the
process of building 309,000 new units at the end of the third
quarter. These units are expected to be completed within the next
18 to 24 months.
A rise in the number of renters and rental units only tells
part of the growth story for RealPage, however. The company has
also been an aggressive acquirer through the years, with more
than 20 buyouts since its initial public offering in August
"Acquisitions have been a big part of the story for RealPage,"
said Brendan Barnicle, an analyst at Pacific Crest
RealPage has remained active on the acquisition front lately.
On Oct. 25, it announced the acquisition of Windsor Compliance, a
provider of compliance monitoring services for the affordable
Windsor provides compliance monitoring for more than 30,000
affordable housing units across the U.S. Its services are
designed to help rental property owners verify the income of
residents, in order to stay in compliance with HUD and tax credit
rules and regulations. It also offers some remediation services
to assist owners that are not in compliance.
Another deal, announced on Oct. 29, was RealPage's acquisition
of ActiveBuilding, which offers a platform designed to help
property owners and managers attract and retain residents through
better online tools.
One of those tools is a portal that gives residents a place to
see their bills, make payments, make service requests, reserve
amenities and renew leases. Another portal lets residents connect
with each other via texts, phone calls, emails,Facebook (
) and other social media platforms.
ActiveBuilding also helps property managers keep up with
packages and deliveries -- something they're doing a lot more of
these days as more residents order products over the
"ActiveBuilding allows staff to quickly log packages into the
system, automatically sends an e-mail or text notification to the
resident, and enables receipt authorization," Winn said. "(It
makes) the entire process more efficient and secure."
In a related transaction announced the same day, RealPage
acquired MyBuilding, a New York-based platform. MyBuilding offers
some of the same functionality as ActiveBuilding, but is geared
more toward condominium properties and homeowners
RealPage provides its SaaS products and services to more than
8,700 customers, nearly all of whom are property managers. Its
tools are used to manage the operations of around 8.6 million
rental housing units.
"It was one of the first companies with vertical expertise in
rental property within the SaaS category," analyst Barnicle
According to industry estimates, RealPage controls about 40%
of the on-demand software market for rental properties. Its
nearest competitor is probably Yardi, a privately held provider
of software solutions for the real estate industry.
RealPage also faces competition in certain product categories
from companies that make enterprise and financial software,
) andIntuit (INTU).
Financially, RealPage routinely cranks out double-digit sales
and earnings growth. During its 12 full quarters as a publicly
traded company, it has grown sales at least 20% and EPS at least
Third-quarter earnings rose 33% from a year earlier to 16
cents a share, topping consensus views by a penny. Revenue gained
18% to $98.1 million, shy of estimates for $99.7 million.
In a note following the Q3 results, Barrington Research
analyst Jeff Houston said RealPage should continue to deliver
robust growth as it rolls out new products and takes advantage of
a favorable business environment.
"With above-average profitability and 20%-plus organic
on-demand growth, we believe it should trade at a premium to the
overall SaaS group," Houston said.
RealPage's stock price touched a 13-month high of 26.34 on
Oct. 22. Shares currently trade near 25.
Analysts expect the company to post full-year earnings growth
of 26% in 2013 and 27% in 2014.