RealPage (RP) 10-K/A 2018 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ___________________________________________

FORM 10-K/A

Amendment No. 1

 ___________________________________________

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34846

___________________________________________

RealPage, Inc.

(Exact name of registrant as specified in its charter)

___________________________________________

Delaware	75-2788861
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2201 Lakeside Blvd. Richardson, Texas	75082-4305
(Address of principal executive offices)	(Zip Code)

(972) 820-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	RP	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Based on the closing price of the registrant’s common stock on the last business day of the registrant’s most recently completed second fiscal quarter, which was June 30, 2018, the aggregate market value of its shares held by non-affiliates on that date was approximately $4,177,183,676. On February 15, 2019, 93,590,150 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement for its 2019 Annual Meeting of Stockholders to be filed within 120 days of the Registrant’s fiscal year ended December 31, 2018 are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

Explanatory Note

On February 27, 2019, RealPage, Inc. (“we”, “us” or the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Original Form 10-K”). Subsequent to the filing of the Original Form 10-K, the Public Company Accounting Oversight Board (“PCAOB”) conducted an inspection of Ernst & Young LLP’s (“EY”) audit of the Company’s consolidated financial statements for the year ended December 31, 2018. In connection with this inspection, EY performed additional testing related to certain controls pertaining to our information technology (“IT”) systems and subsequently requested a reevaluation by management of those controls. As a result of this reevaluation, management identified, and we concluded, that certain individual control deficiencies over our information technology general controls (“ITGCs”), when viewed in combination, aggregated to a material weakness as of December 31, 2018. Specifically, we did not maintain effective controls over user access to certain IT systems and related changes to IT programs and data. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. The material weakness did not result in any financial statement modifications and there have been no changes to our previously disclosed financial results.

We are filing this Amendment No. 1 to the Original Form 10-K (this “Amendment”) solely to (i) amend and restate the Controls and Procedures disclosure included in Item 9A of the Original Form 10-K to reflect the material weakness, (ii) amend Ernst & Young LLP’s related opinion on management’s assessment of our internal control over financial reporting, and (iii) amend Ernst & Young LLP’s opinion on the consolidated financial statements solely to include a reference to Ernst & Young LLP’s updated report on internal control over financial reporting included in Item 8 of the Original Form 10-K. We are also filing an updated Consent of Independent Registered Public Accounting Firm and, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), currently dated certifications by our Chief Executive Officer and Chief Financial Officer.

This Amendment does not modify, amend or update in any way the financial statements and other disclosures set forth in the Original Form 10-K and there have been no changes to the XBRL data filed in Exhibit 101 of the Original Form 10-K. In addition, except as specifically described above, this Amendment does not reflect events occurring after the filing of the Original Form 10-K, nor does it modify or update disclosures therein in any way other than as required to reflect the revisions described above. Among other things, forward-looking statements made in the Original Form 10-K have not been revised to reflect events that occurred or facts that became known to us after the filing of the Original Form 10-K, and any such forward looking statements should be read in their historical context. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K.

In addition to this Amendment, we intend to file amendments to our Quarterly Reports on Form 10-Q for the first quarter ended March 31, 2019 and the second quarter ended June 30, 2019 to amend our disclosures under Item 4 Controls and Procedures therein.

TABLE OF CONTENTS

PART II
Item 8.	Financial Statements and Supplementary Data	2
Item 9A.	Controls and Procedures	47
PART IV
Item 15.	Exhibits and Financial Statement Schedules	49
SIGNATURES AND EXHIBIT INDEX
Signatures		50
Exhibit Index		51

PART II

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm	3
Consolidated Balance Sheets	6
Consolidated Statements of Operations	7
Consolidated Statements of Comprehensive Income	8
Consolidated Statements of Stockholders’ Equity	9
Consolidated Statements of Cash Flows	11
Notes to Consolidated Financial Statements	13

2

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of RealPage, Inc.    

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of RealPage, Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule listed in the Index under Item 15(c) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2019, except for the effect of the material weakness described in the second and third paragraphs of that report, as to which the date is November 4, 2019, expressed an adverse opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2004.

Dallas, Texas

February 27, 2019

3

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of RealPage, Inc.

Opinion on Internal Control over Financial Reporting

We have audited RealPage, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives in the control criteria, RealPage, Inc. (the Company) has not maintained effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

As indicated in the accompanying “Management’s Report on Internal Control over Financial Reporting,” management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of NovelPay, LLC and ClickPay Services, Inc. (collectively known as ClickPay), LeaseLabs, Inc. (LeaseLabs), and Rentlytics, Inc. (Rentlytics), which are included in the 2018 consolidated financial statements of the Company. ClickPay constituted approximately 11% and 3% of total assets and total revenues, respectively, as of December 31, 2018. LeaseLabs constituted approximately 6% and 1% of total assets and total revenues, respectively, as of December 31, 2018. Rentlytics constituted approximately 3% and less than 1% of total assets and total revenues, respectively, as of December 31, 2018. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of ClickPay, LeaseLabs, and Rentlytics.

In our report dated February 27, 2019, we expressed an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. Management has subsequently identified deficiencies in controls related to information technology (IT) systems and has further concluded that the aggregation of such deficiencies represented a material weakness as of December 31, 2018. As a result, management has revised its assessment, as presented in the accompanying Management's Report on Internal Control over Financial Reporting to conclude that the Company’s internal control over financial reporting was not effective as of December 31, 2018. Accordingly, our present opinion on the effectiveness of December 31, 2018’s internal control over financial reporting as of December 31, 2018, as expressed herein, is different from that expressed in our previous report.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment. Management has identified a material weakness in controls over certain user access to IT systems and related changes to IT programs and data.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule listed in the Index under Item 15(c). This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2018 consolidated financial statements, and this report does not affect our report dated February 27, 2019, which expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

4

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Dallas, Texas

February 27, 2019, except for the effect of the material weakness described in the second and third paragraphs above, as to which the date is November 4, 2019

5

RealPage, Inc.

Consolidated Balance Sheets

(in thousands, except per share and share amounts)

	December 31,
	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	228,159		$	69,343
Restricted cash	154,599			96,002
Accounts receivable, less allowances of $8,850 and $3,951 at December 31, 2018 and 2017, respectively	123,596			124,505
Prepaid expenses	19,214			12,107
Other current assets	15,185			6,622
Total current assets	540,753			308,579
Property, equipment, and software, net	153,528			148,428
Goodwill	1,053,119			751,052
Intangible assets, net	287,378			252,337
Deferred tax assets, net	42,602			44,887
Other assets	20,393			11,010
Total assets	$	2,097,773		$	1,516,293
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	25,312		$	26,733
Accrued expenses and other current liabilities	95,482			79,379
Current portion of deferred revenue	120,704			116,622
Current portion of term loans	16,133			14,116
Customer deposits held in restricted accounts	154,601			96,057
Total current liabilities	412,232			332,907
Deferred revenue	4,902			5,538
Revolving facility	—			50,000
Term loans, net	287,582			303,261
Convertible notes, net	292,843			281,199
Other long-term liabilities	37,190			41,513
Total liabilities	1,034,749			1,014,418
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value: 10,000,000 shares authorized and zero shares issued and outstanding at December 31, 2018 and 2017, respectively	—			—
Common stock, $0.001 par value: 250,000,000 and 125,000,000 shares authorized, 95,991,162 and 87,153,085 shares issued and 93,650,127 and 83,180,401 shares outstanding at December 31, 2018 and 2017, respectively	96			87
Additional paid-in capital	1,187,683			637,851
Treasury stock, at cost: 2,341,035 and 3,972,684 shares at December 31, 2018 and 2017, respectively	(65,470		)	(61,260		)
Accumulated deficit	(58,793		)	(75,046		)
Accumulated other comprehensive (loss) income	(492		)	243
Total stockholders’ equity	1,063,024			501,875
Total liabilities and stockholders’ equity	$	2,097,773		$	1,516,293

See accompanying notes.

6

RealPage, Inc.

Consolidated Statements of Operations

(in thousands, except per share amounts)

	Year Ended December 31,
	2018			2017			2016
Revenue:
On demand	$	833,709		$	642,622		$	542,531
Professional and other	35,771			28,341			25,597
Total revenue	869,480			670,963			568,128
Cost of revenue	328,382			258,135			225,539
Amortization of product technologies	35,797			22,163			17,669
Gross profit	505,301			390,665			324,920
Operating expenses:
Product development	118,525			89,452			73,607
Sales and marketing	166,607			140,473			122,457
General and administrative	118,208			112,975			85,013
Amortization of intangible assets	35,911			17,755			12,599
Total operating expenses	439,251			360,655			293,676
Operating income	66,050			30,010			31,244
Interest expense and other, net	(31,750		)	(14,769		)	(3,758		)
Income before income taxes	34,300			15,241			27,486
Income tax (benefit) expense	(425		)	14,864			10,836
Net income	$	34,725		$	377		$	16,650
Net income per share attributable to common stockholders:
Basic	$	0.40		$	0.00		$	0.22
Diluted	$	0.38		$	0.00		$	0.21
Weighted average common shares outstanding:
Basic	87,290			79,433			76,854
Diluted	91,531			82,398			77,843

See accompanying notes.

7

RealPage, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

	Year Ended December 31,
	2018			2017			2016
Net income	$	34,725		$	377		$	16,650
Other comprehensive (loss) income:
Unrealized gain on derivative instruments, net of tax	61			318			400
Reclassification adjustment for (gains) losses included in earnings on derivative instruments, net of tax	(613		)	(77		)	136
Foreign currency translation adjustment	(183		)	55			(43		)
Other comprehensive (loss) income, net of tax	(735		)	296			493
Comprehensive income	$	33,990		$	673		$	17,143

See accompanying notes.

8

RealPage, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands)

	Common Stock					Additional Paid-in			Accum. Other Comprehensive			Accumulated			Treasury Stock					Total Stockholders’
	Shares		Amount			Capital			(Loss) Income			Deficit			Shares		Amount			Equity
Balance as of January 1, 2016	82,919		$	83		$	471,668		$	(546	)	$	(120,415	)	4,125		$	(24,338	)	$	326,452
Stock option exercises	1,569		2			28,487			—			—			—		—			28,489
Issuance of restricted stock	2,587		2			(1		)	—			—			—		—			1
Treasury stock purchased, at cost	—		—			—			—			—			1,863		(27,264		)	(27,264		)
Retirement of treasury stock	(1,013	)	(1		)	(5,748		)	—			(15,495		)	(1,013	)	21,244			—
Stock-based compensation	—		—			36,688			—			—			—		—			36,688
Net tax benefit from stock-based compensation	—		—			3,254			—			—			—		—			3,254
Other comprehensive income - derivative instruments	—		—			—			536			—			—		—			536
Foreign currency translation	—		—			—			(43		)	—			—		—			(43		)
Net income	—		—			—			—			16,650			—		—			16,650
Balance as of December 31, 2016	86,062		86			534,348			(53		)	(119,260		)	4,975		(30,358		)	384,763
Cumulative effect of adoption of ASU 2016-09	—		—			6			—			43,837			—		—			43,843
Stock option exercises	991		1			27,013			—			—			(354	)	—			27,014
Issuance of restricted stock	100		—			(2		)	—			—			(1,795	)	2			—
Treasury stock purchased, at cost	—		—			—			—			—			1,147		(30,904		)	(30,904		)
Stock-based compensation	—		—			46,146			—			—			—		—			46,146
Other comprehensive income - derivative instruments	—		—			—			241			—			—		—			241
Foreign currency translation	—		—			—			55			—			—		—			55
Equity component of convertible notes, net of issuance costs and deferred tax	—		—			61,390			—			—			—		—			61,390
Purchases of convertible note hedges	—		—			(62,549		)	—			—			—		—			(62,549		)
Issuance of warrants	—		—			31,499			—			—			—		—			31,499
Net income	—		—			—			—			377			—		—			377
Balance as of December 31, 2017	87,153		87			637,851			243			(75,046		)	3,973		(61,260		)	501,875

9

Cumulative effect of adoption of ASU 2014-09	—		—			—			—			2,221			—		—			2,221
Public offering of common stock, net of $16,949 of offering costs	8,050		8			441,893			—			—			—		—			441,901
Issuance of common stock in connection with our acquisitions	1,361		2			75,148			—			—			—		—			75,150
Stock option exercises	27		—			2,468			—			—			(632	)	10,695			13,163
Issuance of restricted stock	—		—			(14,598		)	—			—			(1,807	)	14,598			—
Treasury stock purchased, at cost	—		—			473			—			—			1,407		(57,585		)	(57,112		)
Retirement of treasury stock	(600	)	(1		)	(7,388		)	—			(20,693		)	(600	)	28,082			—
Stock-based compensation	—		—			51,836			—			—			—		—			51,836
Other comprehensive income - derivative instruments	—		—			—			(552		)	—			—		—			(552		)
Foreign currency translation	—		—			—			(183		)	—			—		—			(183		)
Net income	—		—			—			—			34,725			—		—			34,725
Balance as of December 31, 2018	95,991		$	96		$	1,187,683		$	(492	)	$	(58,793	)	2,341		$	(65,470	)	$	1,063,024

See accompanying notes.

10

RealPage, Inc.

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2018			2017			2016
Cash flows from operating activities:
Net income	$	34,725		$	377		$	16,650
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	100,186			67,146			54,834
Amortization of debt discount and issuance costs	12,464			7,296			443
Deferred taxes	(2,179		)	13,791			8,386
Stock-based expense	50,641			45,835			36,852
Excess tax benefit from stock-based compensation	—			—			(5,998		)
Loss on disposal and impairment of long-lived assets	6,733			524			1,247
Acquisition-related consideration	284			684			(877		)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable	(717		)	(18,821		)	(12,239		)
Prepaid expenses and other current assets	(11,894		)	945			21,040
Other assets	(4,543		)	(717		)	(187		)
Accounts payable	1,266			268			652
Accrued compensation, taxes, and benefits	3,288			3,438			5,220
Deferred revenue	3,478			17,114			4,452
Customer deposits	57,230			3,055			(6,834		)
Other current and long-term liabilities	(6,155		)	(672		)	5,808
Net cash provided by operating activities	244,807			140,263			129,449
Cash flows from investing activities:
Purchases of property, equipment, and software	(50,933		)	(49,752		)	(75,241		)
Proceeds from disposal of property, equipment, and software	—			—			4,500
Acquisition of businesses, net of cash and restricted cash acquired	(278,563		)	(649,910		)	(66,440		)
Purchase of other investments	(1,800		)	(200		)	(3,000		)
Net cash used in investing activities	(331,296		)	(699,862		)	(140,181		)
Cash flows from financing activities:
Proceeds from term loans	—			199,400			124,688
Payments on term loans	(14,116		)	(3,551		)	(2,345		)
Proceeds from revolving credit facility	140,000			50,000			—
Payments on revolving credit facility	(190,000		)	—			(40,000		)
Proceeds from borrowings on convertible notes	—			345,000			—
Purchase of convertible senior note hedges	—			(62,549		)	—
Proceeds from issuance of warrants	—			31,499			—
Payments of deferred financing costs	(1,136		)	(10,734		)	(392		)
Payments on capital lease obligations	(227		)	(335		)	(548		)
Payments of acquisition-related consideration	(28,388		)	(8,491		)	(5,684		)
Proceeds from public offering, net of underwriters’ discount and offering costs	441,901			—			—
Proceeds from exercise of stock options	13,163			27,014			28,490
Excess tax benefit from stock-based compensation	—			—			5,998
Purchase of treasury stock related to stock-based compensation	(29,030		)	(30,904		)	(6,020		)
Purchase of treasury stock under share repurchase program	(28,082		)	—			(21,244		)
Net cash provided by financing activities	304,085			536,349			82,943
Net increase (decrease) in cash and cash equivalents	217,596			(23,250		)	72,211
Effect of exchange rate on cash	(183		)	55			(43		)
Cash, cash equivalents and restricted cash:
Beginning of period	165,345			188,540			116,372
End of period	$	382,758		$	165,345		$	188,540

11

RealPage, Inc.

Consolidated Statements of Cash Flows, continued

(in thousands)

	Year Ended December 31,
	2018		2017		2016
Supplemental cash flow information:
Cash paid for interest	$	18,204	$	6,754	$	2,833
Cash paid for income taxes, net of refunds	$	3,121	$	1,855	$	693
Non-cash investing and financing activities:
Fair value of stock consideration in connection with our acquisitions	$	53,334	$	—	$	—
Redemption of noncontrolling interest in connection with acquisition of ClickPay	$	21,816	$	—	$	—
Accrued property, equipment, and software	$	1,447	$	5,777	$	3,993
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets and to that shown in the Consolidated Statements of Cash Flows:
	Year Ended December 31,
	2018		2017		2016
Cash and cash equivalents	$	228,159	$	69,343	$	104,886
Restricted cash	154,599		96,002		83,654
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	382,758	$	165,345	$	188,540

See accompanying notes.

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RealPage, Inc.

Notes to Consolidated Financial Statements

1. The Company

RealPage, Inc., a Delaware corporation (together with its subsidiaries, the “Company” or “we” or “us”), is a leading global provider of software and data analytics to the real estate industry. Our platform of data analytics and software solutions enables the rental real estate industry to manage property operations (such as marketing, pricing, screening, leasing, and accounting), identify opportunities through market intelligence, and obtain data-driven insight for better operational and financial decision-making. Our integrated, on demand platform provides a single point of access and a massive repository of real-time lease transaction data, including prospect, renter, and property data. By leveraging data as well as integrating and streamlining a wide range of complex processes and interactions among the rental real estate ecosystem (owners, managers, prospects, renters, service providers, and investors), our platform helps our clients improve financial and operational performance and prudently place and harvest capital.

During May 2018 and as disclosed in our Form 10-Q for the quarter ended March 31, 2018, we were the subject of a targeted email phishing campaign that led to a business email compromise, pursuant to which an unauthorized party gained access to an external third party system used by a subsidiary that we acquired in 2017. The incident resulted in the diversion of approximately $6.0 million, net of recovered funds, intended for disbursement to three clients. We immediately restored all funds to the client accounts. During the quarter ended June 30, 2018, we remediated the material weakness that gave rise to the incident and implemented additional preventive and detective control procedures.

We maintain insurance coverage to limit our losses related to criminal and network security events. During January 2019, we received approximately $1.0 million from our primary insurance carrier as a partial repayment toward our losses from the business email compromise. We are currently involved in discussions with our insurance carrier regarding coverage of the remaining losses, and intend to vigorously pursue repayment of these losses. Due to the ongoing discussions with our insurance carrier and the uncertainty regarding timing and full collectability of the loss, we recorded an allowance of $5.0 million for the remaining amount of the loss, which is included in the line “General and administrative” in the accompanying Consolidated Statements of Operations. For the year ended December 31, 2018, total charges from the phishing incident included in our Consolidated Statements of Operations was $5.4 million for losses and related expenses that are not probable of recovery.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements and footnotes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of RealPage, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Effective with the quarter ended September 30, 2018, we changed the presentation of our Consolidated Statements of Operations to add “Amortization of product technologies” and “Amortization of intangible assets” as separate line items within such statements. Amounts shown as amortization of product technologies were previously included within “Cost of revenue”, and amounts shown as amortization of intangible assets were previously included within the “Sales and marketing” operating expense category. We believe this revised presentation helps readers of our financial statements isolate non-cash amortization expenses that arise from our acquisitions and internally developed software.

Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation.

Correction of an Immaterial Error in Previously Issued Financial Statements

In the third quarter of 2018, we identified an error related to the misclassification of amortization expense related to intangible assets on certain acquired technologies, recognized as “Sales and marketing” expense. Such expense should have been recognized as a component of “Cost of revenue”. As a result, our cost of revenue was understated, and our sales and marketing expense was overstated by identical amounts, which also resulted in an overstatement of gross profit and total operating expenses by the same amount for the effected periods. There was no effect on reported revenues, net income, earnings per share, or cash flows. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the materiality of the error from a qualitative and quantitative perspective and concluded that the effect of the misclassification was not material to our previously issued consolidated financial statements.

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We have corrected the presentation of the amortization expense for all prior periods presented in this Form 10-K. The immaterial error correction resulted in an increase of cost of revenue and reduction in sales and marketing expense of $6.9 million and $0.9 million for the years ended December 31, 2017 and 2016, respectively. There was no change in our accounting for amortization expense related to client relationship, non-compete agreements and trade name intangible assets.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such significant estimates include, but are not limited to, the determination of the allowances against our accounts receivable; useful lives of intangible assets; impairment assessments on long-lived assets (including goodwill); contingent commissions related to the sale of insurance products; fair value of acquired net assets and contingent consideration in connection with business combinations; the nature and timing of satisfaction of performance obligations and related reserves; fair values of stock-based awards; loss contingencies; and the recognition, measurement and valuation of current and deferred income taxes. Actual results could differ from these estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the result of which forms the basis for making judgments about the carrying value of assets and liabilities.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Our cash accounts are maintained at various high credit, quality financial institutions and may exceed federally insured limits. We have not experienced any losses in such accounts.

Substantially all of our accounts receivable are derived from clients in the residential rental housing market. Concentrations of credit risk with respect to accounts receivable and revenue are limited due to a large, diverse customer base. We do not require collateral from clients. We maintain an allowance for doubtful accounts based upon the expected collectability of accounts receivable.

No single client accounted for 10% or more of our revenue or accounts receivable for the years ended December 31, 2018, 2017, or 2016.

Segment and Geographic Information

Our chief operating decision maker is our Chief Executive Officer, who reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, we have determined we operate as a single operating segment.

Principally, all of our revenue for the years ended December 31, 2018, 2017, and 2016 was earned in the United States. Net property, equipment, and software located in the United States amounted to $144.3 million and $140.0 million at December 31, 2018 and 2017, respectively. Net property, equipment, and software located in our international subsidiaries amounted to $9.2 million and $8.4 million at December 31, 2018 and 2017, respectively. Substantially all of the net property, equipment, and software held in our international subsidiaries was located in the Philippines, Spain, and India at both December 31, 2018 and 2017.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an initial maturity of three months or less at the date of purchase to be cash equivalents. The fair value of our cash and cash equivalents approximates carrying value.

Restricted cash consists of cash collected from tenants that will be remitted primarily to our clients.

Accounts Receivable

Accounts receivable primarily represent trade receivables from clients recorded at the invoiced amount, net of allowances, which are based on our historical experience, the aging of our trade receivables, and management judgment.

Trade receivable are written off against the allowance when management determines a balance is uncollectible. During the years ended December 31, 2018, 2017, and 2016, we incurred bad debt expense of $3.7 million, $3.2 million, and $2.4 million, respectively.

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Property, Equipment, and Software

Property, equipment, and software are recorded at cost less accumulated depreciation and amortization, which are computed using the straight-line method over the following estimated useful lives:

Data processing and communications equipment	3 - 5 years
Furniture, fixtures, and other equipment	3 - 5 years
Software	3 - 5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Software includes both purchased and internally developed software. Gains and losses from asset disposals are included in the line “General and administrative” in the Consolidated Statements of Operations.

Internally Developed Software

We capitalize certain development costs incurred in connection with software development for our solutions to be marketed to external users. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the technological feasibility stage, internal and external costs including costs of materials, services, and payroll and payroll-related costs for employees, are capitalized, if direct and incremental, until the software is available for general release to customers. Minor upgrades and enhancements are also expensed as incurred. Costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality are capitalized.

Costs incurred to develop software intended solely for our internal use, such as internal administration and finance and accounting systems, are capitalized during the application development stage. Interest on funds used to finance internally developed software up to the date the asset is ready for its intended use, is capitalized and included in the cost of the asset if the asset is actively under development. Capitalized interest was not significant for any period presented.

Amortization of internally developed software is included in “Amortization of product technologies” in the accompanying Consolidated Statements of Operations.

Impairment of Long-Lived Assets

Tangible long-lived assets held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include, but are not limited to, significant under-performance relative to current and historical or projected future operating results, significant changes in the manner of our use of the asset, or significant changes in our overall business and/or product strategies. If circumstances require that a long-lived asset group be tested for possible impairment, determination of recoverability is based on an estimate of the undiscounted cash flows expected to be generated by that long-lived asset or asset group. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, we would recognize an impairment charge equal to the excess of the carrying value over its fair value.

Business Combinations

We allocate the fair value of the purchase consideration of our acquisitions to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Purchase consideration includes assets transferred, liabilities assumed, and/or equity interests issued by us, all of which are measured at their fair value as of the date of acquisition. Our business combination transactions may be structured to include a combination of up-front, deferred and contingent payments to be made at specified dates subsequent to the date of acquisition. These payments may include a combination of cash and equity. Deferred and contingent payments are included in the purchase consideration based on their fair value as of the acquisition date. Deferred obligations are generally subject to adjustments specified in the underlying purchase agreement related to the seller’s indemnification obligations. Contingent consideration is an obligation to make future payments to the seller contingent upon the achievement of future operational or financial targets. The fair value of these payments is estimated using a probability weighted discount model based on the achievement of the specified targets.

The valuation of the net assets acquired as well as certain elements of purchase consideration require management to make significant estimates and assumptions, especially with respect to future expected cash flows, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates. During the measurement period, we may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill. Changes to the fair value of contingent payments is reflected in “General and administrative” costs in the accompanying Consolidated Statements of Operations.

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Acquisition costs are expensed as incurred and are included in “General and administrative” in the accompanying Consolidated Statements of Operations. We include the results of operations from acquired businesses in our consolidated financial statements from the effective date of the acquisition.

Goodwill and Indefinite-Lived Intangible Assets

We test goodwill and indefinite-lived intangible assets for impairment separately on an annual basis in the fourth quarter of each year, or more frequently if circumstances indicate that the assets may not be recoverable.

We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or by performing a quantitative assessment. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we would perform a quantitative fair value test. To calculate any potential impairment, we compare the fair value of a reporting unit with its carrying amount, including goodwill. Any excess of the carrying amount of the reporting unit’s goodwill over its fair value is recognized as an impairment loss, and the carrying value of goodwill is written down. For purposes of goodwill impairment testing, we have one reporting unit.

We quantitatively evaluate indefinite-lived intangible assets by estimating the fair value of those assets based on estimated future earnings derived from the assets using the income approach. Assets with indefinite lives that have been determined to be inseparable due to their interchangeable use are grouped into single units of accounting for purposes of testing for impairment. If the carrying amount of an identified intangible asset with an indefinite life exceeds its fair value, we would recognize an impairment loss equal to the excess of carrying value over fair value.

Intangible Assets

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization. Our intangible assets are largely acquired in business combinations and include developed technologies, client relationships, vendor relationships, non-competition agreements and trade names. Intangible assets are amortized over the shorter of the contractual life or the estimated useful life. Intangible assets are amortized on a straight-line basis, except for client relationships which are amortized proportionately to the expected discounted cash flows derived from the asset.

Estimated useful lives for intangible assets consist of the following:

Developed technologies	3 - 7 years
Client relationships	3 - 10 years
Vendor relationships	7 years
Trade names	1 - 7 years
Non-competition agreements	5 - 10 years

Amortization of acquired developed technologies is included in “Amortization of product technologies”, and amortization of acquired client relationships, vendor relationships, non-competition agreements and trade names is included in “Amortization of intangible assets” in the accompanying Consolidated Statements of Operations.

Other Current and Long-Term Liabilities

Accrued expenses and other current liabilities consisted of the following at December 31, 2018 and 2017:

	December 31,
	2018		2017
	(in thousands)
Accrued compensation, payroll taxes, and benefits	$	29,405	$	25,677
Sales tax obligations	3,673		4,930
Current portion of liabilities related to acquisitions	47,173		34,430
Lease-related liabilities	2,640		2,288
Other current liabilities	12,591		12,054
Total accrued expenses and other current liabilities	$	95,482	$	79,379

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Other long-term liabilities consisted of the following at December 31, 2018 and 2017:

	December 31,
	2018		2017
	(in thousands)
Accrued lease liability	$	25,207	$	27,760
Liabilities related to acquisitions	10,969		13,000
Other long-term liabilities	1,014		753
Total other long-term liabilities	$	37,190	$	41,513

Deferred Revenue

For several of our solutions, we invoice our clients in annual, monthly, or quarterly installments in advance of the commencement of the service period. Deferred revenue is recognized when billings are due or payments are received in advance of revenue recognition from our subscription and other services. Accordingly, the deferred revenue balance does not represent the total contract value of annual subscription agreements.

Revenue Recognition

Revenues are derived from on demand software solutions, professional services and other goods and services. We recognize revenue as we satisfy one or more service obligations under the terms of a contract, generally as control of goods and services are transferred to our clients. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. We include estimates of variable consideration in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur. We estimate and accrue a reserve for credits and other adjustments as a reduction to revenue based on several factors, including past history.

On Demand Revenue

Our on demand revenue consists of license and subscription fees, transaction fees related to certain of our software-enabled value-added services, and commissions derived from our selling certain risk mitigation services.

We generally recognize revenue from subscription fees on a straight-line basis over the access period beginning on the date that we make our service available to the client. Our subscription agreements generally are non-cancellable, have an initial term of one year or longer and are billed either monthly, quarterly or annually in advance. Non-refundable upfront fees billed at the initial order date that are not associated with an upfront service obligation are recognized as revenue on a straight-line basis over the period in which the client is expected to benefit, which we consider to be three years.

We recognize revenue from transaction fees in the month the related services are performed based on the amount we have the right to invoice.

We offer risk mitigation services to our clients by acting as an insurance agent and derive commission revenue from the sale of insurance products to our clients’ residents. The commissions are based upon a percentage of the premium that the insurance company charges to the policyholder and are subject to forfeiture in instances where a policyholder cancels prior to the end of the policy. Our contract with our underwriting partner provides for contingent commissions to be paid to us in accordance with the agreement. Our estimate of contingent commission revenue considers the variable factors identified in the terms of the applicable agreement. We recognize commissions related to these services as earned ratably over the policy term and insurance commission receivable in “Accounts receivable, less allowances”.

Professional and Other Revenue

Professional services and other revenues generally consist of the fees we receive for providing implementation and consulting services, submeter equipment and ongoing maintenance of our existing on premise licenses.

Professional services are billed either on a time and materials basis or on a fixed price basis, and revenue is recognized over time as we perform the obligation. Professional services are typically sold bundled in a contract with other on demand solutions but may be sold separately. Professional service contracts sold separately generally have terms of one year or less. For bundled arrangements, where we account for individual services as a separate performance obligation, the transaction price is allocated between separate services in the bundle based on their relative standalone selling prices.

Other revenues consist primarily of submeter equipment sales that include related installation services. Such sales are considered bundled, and revenue from these bundled sales is recognized in proportion to the number of installed units completed to date as compared to the total contracted number of unites to be provided and installed. For all other equipment sales, we generally recognize revenue when control of the hardware has transferred to our client.

Revenue recognized for on premise software sales generally consists of annual maintenance renewals on existing term or perpetual license, which is recognized ratably over the service period.

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Contract with Multiple Performance Obligations

The majority of the contracts we enter into with clients, including multiple contracts entered into at or near the same time with the same client, require us to provide one or more on demand software solutions, professional services and may include equipment. For these contracts, we account for individual performance obligations separately: i) if they are distinct or ii) if the promised obligation represents a series of distinct services that are substantially the same and have the same pattern of transfer to the client. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration, if any, to be included in the transaction price. For contracts with multiple performance obligations, we allocate the transaction price to the separate performance obligations on a relative standalone selling price basis. The standalone selling prices of our service are estimated using a market assessment approach based on our overall pricing objectives taking into consideration market conditions and other factors including the number of solutions sold, client demographics and the number and types of users within our contracts.

Sales, value add, and other taxes we collect from clients and remit to governmental authorities are excluded from revenues.

Cost of Revenue

Cost of revenue consists primarily of salaries and related personnel expenses of our operations and support personnel, including training and implementation services; expenses related to the operation of our data centers; fees paid to third-party providers; allocations of facilities overhead costs; and depreciation

Sales and Marketing Expenses and Deferred Commissions

Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions, travel, and stock-based compensation. Other costs included are marketing and promotional events, our annual user conference, and other online and product marketing costs. We amortize sales commissions that are directly attributable to a contract over an estimated customer benefit period of three years.

Advertising costs are expensed as incurred and totaled $26.4 million, $22.8 million, and $19.4 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Stock-Based Expense

We recognize compensation expense related to stock options and shares of restricted stock based on the estimated fair value of the awards on the date of grant. We generally grant time-based stock options and restricted stock awards, which vest over a specified period of time, and market-based awards, which become eligible to vest only after the achievement of a condition based upon the trading price of our common stock and vest over a specified period of time thereafter. The fair value of employee stock options is estimated on the date of grant using a binomial option pricing model, the Black-Scholes model. The fair value of our market-based restricted stock awards is estimated using a discrete model based on multiple stock price-paths developed through the use of Monte Carlo simulation.

For time-based stock options and restricted stock awards, expense is recognized on a straight-line basis over the requisite service period. Expense associated with market-based awards is recognized over the requisite service period using the graded-vesting attribution method. Share-based compensation is reduced for forfeitures once they occur.

Income Taxes

Income taxes are recorded based on the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize the effect of tax rate changes on current and accumulated deferred income taxes in the period in which the rate change was enacted.

Valuation allowances are provided when it is more likely than not that all or a portion of the deferred tax asset will not be realized. The factors used to assess the need for a valuation allowance include historical earnings, our latest forecast of taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets.

We may recognize a tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities.

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Fair Value Measurements

We measure our derivative financial instruments and acquisition-related contingent consideration obligations at fair value at each reporting period using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 - Inputs are derived from valuation techniques in which one or more of the significant inputs or value drivers are unobservable.

The categorization of an asset or liability is based on the inputs described above and does not necessarily correspond to our perceived risk of that asset or liability. Moreover, the methods used by us may produce a fair value calculation that is not indicative of the net realizable value or reflective of future fair values. Furthermore, although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments and non-financial assets and liabilities could result in a different fair value measurement at the reporting date.

Certain financial instruments, which may include cash, cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses are recorded at their carrying amounts, which approximates their fair values due to their short-term nature.

Recently Adopted Accounting Standards

Accounting Standards Update 2014-09

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, as amended by certain supplementary ASU’s released in 2016, replaces all current GAAP guidance on this topic and eliminates all industry-specific guidance. The new revenue recognition standard requires the recognition of revenue when promised goods or services are transferred to clients in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a client. Collectively, we refer to Topic 606 and Subtopic 340-40 as the “new revenue standard” or “ASC 606.”

We adopted the requirements of the new revenue standard on January 1, 2018 using the modified retrospective method and applied the guidance to contracts not substantially completed as of the date of initial application, or open contracts. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings at the beginning of 2018. Comparative information from prior year periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative effects of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard were as follows:

	Balance at December 31, 2017			Adjustments due to ASU 2014-09			Balance at January 1, 2018
	(in thousands)
Assets
Accounts receivable, less allowances	$	124,505		$	(7,925	)	$	116,580
Other current assets	$	6,622		$	2,771		$	9,393
Deferred tax assets, net	$	44,887		$	(780	)	$	44,107
Other assets	$	11,010		$	4,459		$	15,469
Liabilities
Current portion of deferred revenue	$	116,622		$	(3,696	)	$	112,926
Stockholders’ Equity
Accumulated deficit	$	(75,046	)	$	2,221		$	(72,825	)

Adoption of the new revenue standard resulted in changes to our accounting policies for revenue recognition, certain variable considerations, and commissions expense. The adoption of the new revenue standard did not have a significant effect

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on our revenue; however, it did have an impact on the timing of when we expense commission costs incurred to obtain a contract and the reserves we establish for variable consideration from credits or other pricing accommodations we provide our clients. We expect the effect of the new revenue standard to be immaterial to our revenue on an ongoing basis. The primary effect to our net income on an ongoing basis relates to the reserve for credit accommodations and deferral of incremental commission costs incurred to obtain new contracts. Under the new revenue standard, we accrue for credit accommodations in our reserve during the month of billing, and credits reduce this reserve when issued. Further, we now initially defer commission costs and amortize these costs to expense over a period of benefit that we have determined to be three years. Deferred commissions were capitalized for open contracts at the date of initial application and are capitalized for new contracts in 2018.

See Note 4 for additional required disclosures related to the impact of adopting the new revenue standard and our accounting for costs to obtain a contract.

Accounting Standards Update 2016-18

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows - Restricted Cash, which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. This ASU must be adopted retrospectively.

We adopted ASU 2016-18 effective January 1, 2018. As a result of our adoption, changes in customer deposits held in restricted accounts will result in an increase or reduction in our cash flows from operating activities. Under previous rules, such changes were largely offset by the corresponding change in restricted cash and had a minimal impact on our statement of cash flows. The prior period financial statements included in this filing have been adjusted to reflect the adoption of ASU 2016-18. The effects of those adjustments to the Consolidated Statements of Cash Flows have been summarized in the table below:

	Originally Reported			Effect of Change			As Adjusted
	(in thousands)
Statement of Cash Flows for the year ended December 31, 2017
Net cash provided by operating activities	$	137,327		$	2,936		$	140,263
Net cash used in investing activities	$	(709,274	)	$	9,412		$	(699,862	)
Cash, cash equivalents and restricted cash at end of period	$	69,343		$	96,002		$	165,345
Statement of Cash Flows for the year ended December 31, 2016
Net cash provided by operating activities	$	136,216		$	(6,767	)	$	129,449
Net cash used in investing activities	$	(145,141	)	$	4,960		$	(140,181	)
Cash, cash equivalents and restricted cash at end of period	$	104,886		$	83,654		$	188,540

Accounting Standards Update 2016-01

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities and ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10) in February 2018, which provides clarification on certain guidance issued under ASU 2016-01. Among other things, ASU 2016-01 eliminates the cost method of accounting and requires that investments in equity securities that were previously accounted for under the cost method must now be measured at fair value, with changes in fair value recognized in net income. Equity instruments that do not have readily determinable fair values may be measured at cost less impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. This ASU became effective on January 1, 2018. We hold an investment which was accounted for under the cost method of accounting prior to January 1, 2018, which does not have a readily determinable fair value and which has had no observable price change. Therefore, we continue to measure this investment at cost, less any impairment. The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The amendments in this update will be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact of this ASU on our consolidated financial statements.

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In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands an entity’s ability to apply hedge accounting for nonfinancial and financial risk components and allows for a simplified approach for fair value hedging of interest rate risk. Certain of the amendments in this ASU as they relate to cash flow hedges, eliminate the requirement to separately record hedge ineffectiveness currently in earnings. Instead, the entire change in the fair value of the hedging instrument is recorded in Other Comprehensive Income (“OCI”), and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in which the earnings effect of the hedged item is reported. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.

We will adopt this standard effective January 1, 2019 on a modified retrospective basis and will record a cumulative effect adjustment in the opening balance of retained earnings with an offsetting adjustment to other comprehensive income. Further, after adoption, the entire change in the fair value of our interest rate swaps will be recorded in other comprehensive income and reclassified into interest expense as interest payments are made on our variable rate debt. The changes in the ASU will not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in fiscal years beginning after December 15, 2018. The amendments in this ASU are to be applied through a cumulative-effect adjustment to retained earnings as of the first reporting period in which the ASU is effective. We have not yet selected a transition date and are currently evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance requires lessees to recognize assets and liabilities arising from all leases with a lease term of more than 12 months, including those classified as operating leases under previous accounting guidance. It also requires disclosure of key information about leasing arrangements to increase transparency and comparability among organizations.

ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements, which provides for an optional transition method to allow companies to initially account for the impact of the adoption with a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. This eliminates the requirement to restate amounts presented prior to January 1, 2019. We will adopt the standard effective January 1, 2019 under the optional transition method, or modified retrospective approach. We have elected the package of practical expedient available under the transition provisions including: (i) not reassessing whether expired or existing contracts contain leases, (ii) not reassessing lease classification, and (iii) not revaluing initial direct costs for existing leases. We also plan to elect the practical expedient which will allow aggregation of non-lease components with the related lease components when evaluating accounting treatment. We have made an accounting policy election to exempt leases with an initial term of twelve months or less from balance sheet recognition. Instead, short-term leases will be expensed over the lease term.

The adoption of this standard will materially impact our balance sheet by recognizing a right of use asset and lease liability between approximately $75.0 million and $100.0 million. The value of lease assets and lease liabilities recognized under ASU 2016-02 will change with the passage of time and from changes in specific facts and circumstances effecting the nature and timing of our contractual lease arrangements from period to period. As a result, the lease assets and lease liabilities that are recognized as of January 1, 2019 may not be indicative of amounts to be recognized in future periods. Adoption of this ASU will modify our ongoing analysis and disclosures of lease agreements. We have implemented a new lease software solution and continue to modify our business processes and internal controls as part of the adoption.

3. Acquisitions

Fiscal Year 2018

Rentlytics

In October 2018, we entered into an agreement and plan of merger whereby we acquired 100% of the capital stock of Rentlytics, Inc. (“Rentlytics”), a provider of business intelligence and data analytics software and services to the multi-family housing industry. Aggregate purchase consideration was $55.4 million, including deferred cash obligations of up to $8.0 million that will be released on the first and second anniversary dates of the closing date, subject to any indemnification claims. The acquisition was financed using cash on hand.

The acquired identified intangible assets consisted of client relationships, developed technology and trade names and were assigned estimated useful lives of ten, seven and ten years, respectively. Preliminary goodwill recognized of $42.4 million is

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primarily comprised of anticipated synergies from the expansion of our business intelligence and data analytics platform. Goodwill and acquired intangible assets are not deductible for tax purposes. Accounts receivable acquired have a gross value of $2.0 million, of which $0.4 million is estimated to be uncollectible. Acquisition costs associated with this transaction totaled $1.2 million, which also include certain change of control payments and related severance costs paid to former Rentlytics employees.

LeaseLabs

In September 2018, we acquired substantially all of the assets of LeaseLabs, Inc. (“LeaseLabs”), a full-stack marketing solutions provider to the multifamily housing industry. LeaseLabs provides online, social media and website marketing services to property management companies. Aggregate purchase consideration was $112.9 million, including deferred cash obligations of up to $11.8 million, subject to any indemnification claims, to be released on the first and second anniversary dates of the closing date, and contingent consideration of up to $9.9 million based on the collection of acquisition date accounts receivable balances during the six-month period after the acquisition date. The fair value of the contingent consideration was $7.0 million on the date of acquisition. We also issued 86,745 shares of our common stock at closing, which had a fair value of $5.3 million on the date of acquisition. We will issue shares of our common stock with a fair value of $5.0 million on the first anniversary date of the acquisition. A liability of $4.8 million has been recorded for the obligation to issue these shares. The acquisition was financed using cash on hand.

The acquired identified intangible assets consisted of client relationships, developed technology and trade names and were assigned estimated useful lives of ten, seven and ten years, respectively. Preliminary goodwill recognized of $84.7 million is primarily comprised of anticipated synergies from the expansion of our marketing platform with LeaseLabs’ marketing solutions and the combination of our marketing content, websites and lead management with LeaseLabs’ marketing solutions. Goodwill and acquired intangible assets are deductible for tax purposes. Accounts receivable acquired have a gross value of $3.5 million, of which $0.6 million is estimated to be uncollectible. Acquisition costs associated with this transaction totaled $0.4 million.

BluTrend

In July 2018, we acquired substantially all of the assets of Blu Trend, LLC (“BluTrend”), a provider of utility management services for the multifamily housing industry. The acquired assets will be integrated with our existing resident utility management platform. Aggregate purchase consideration was $8.5 million, including deferred cash obligations of up to $1.0 million, and deferred stock obligations of up to $1.0 million. The $2.0 million of deferred obligations are subject to indemnification claims as well as continued employment of certain BluTrend employees and will be released on the first and second anniversary dates of the closing date. The deferred obligations will be recognized as compensation expense over the two-year period after the acquisition date. The acquisition was financed using cash on hand.

The acquired identifiable intangible assets consisted of client relationships, developed technology and trade names and were assigned estimated useful lives of ten, five and two years, respectively. Preliminary goodwill recognized of $3.9 million is primarily comprised of anticipated synergies from integrating the BluTrend business into our utility management platform. Goodwill and the acquired identified intangible assets are deductible for tax purposes. Acquisition costs associated with this transaction totaled $0.1 million.

ClickPay

In April 2018, we acquired substantially all of the outstanding membership units of NovelPay, LLC (“NovelPay”), other than those owned by ClickPay Services, Inc. On the same day, we acquired all of the outstanding stock of ClickPay Services, Inc. (collectively with NovelPay, “ClickPay”). ClickPay provides an electronic payment platform servicing resident units across multiple segments of real estate, which offers integrated payment services to increase operational efficiencies for property owners and managers. The acquisition of ClickPay broadens our presence in the real estate industry, and solidifies the integration of our leasing platform with third-party property management systems.

We acquired ClickPay for purchase consideration of $221.1 million. The purchase consideration consisted of $139.0 million of cash, net of cash acquired of $7.5 million, the issuance of 870,168 shares of our common stock valued at $48.0 million, a deferred obligation of up to $10.2 million, and a liability of $24.7 million related to put and call option agreements, which had a fair value of $24.4 million on the date of acquisition. Approximately 187,480 shares of common stock issued at closing are subject to a holdback and subject to any indemnification claims made, will be released on the first anniversary date of the closing date. The deferred obligation requires us to issue shares of our common stock with a fair value of $9.8 million on the second anniversary date of the closing date. The acquisition of ClickPay was financed using funds available under our Credit Facility, as defined in Note 8, and cash on hand.

Pursuant to the acquisition agreement, certain holders initially retained units representing approximately 12% of the membership units of NovelPay, subject to put rights that could be exercised by the holders on or after September 1, 2018, and call rights that could be exercised by us on or after October 1, 2018. The exercise price of the put and call rights was the same

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as the per unit price of the membership units purchased at the closing. We evaluated the put and call options and determined the put and call options were embedded within the noncontrolling interests, and the economic substance represented a financing arrangement of the noncontrolling interests because of the substantially fixed exercise price and stated exercise dates. In June 2018, we and one of the remaining NovelPay noncontrolling interest holders agreed to waive the put and call exercise date, and we completed the purchase of such holder’s membership units for 395,206 shares of common stock valued at $21.8 million. In September 2018, the remaining NovelPay noncontrolling interest holders exercised their put rights, and we completed the purchase of the noncontrolling interest holders’ membership units for $2.9 million in cash. As of December 31, 2018, all outstanding membership units of NovelPay have been acquired. No earnings were attributed to the noncontrolling interests in the accompanying Consolidated Statements of Operations.

The acquired identified intangible assets consisted of developed technology, client relationships, and trade names. These intangible assets were assigned estimated useful lives of seven, ten and ten years, respectively. Preliminary goodwill recognized of $173.3 million is primarily comprised of anticipated synergies from leveraging ClickPay’s electronic payment platform, which is compatible with multiple third-party property management systems. Goodwill of $102.4 million arising from the acquisition of NovelPay is deductible for tax purposes; goodwill arising from the acquisition of ClickPay Services, Inc. is not. Accounts receivable acquired had a gross contractual value of $2.7 million at acquisition, of which $0.5 million was estimated to be uncollectible. Acquisition costs associated with this transaction totaled $1.6 million.

Purchase Consideration and Purchase Price Allocations

The estimated fair values of assets acquired and liabilities assumed are provisional and are based primarily on the information available as of each respective acquisition date. We believe this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but we are awaiting additional information necessary to finalize those values. Therefore, the provisional measurements of fair value are subject to change, and such changes could be significant. We expect to finalize the valuation of these assets and liabilities as soon as practicable, but no later than one year from each respective acquisition date. The components of the purchase consideration and the preliminary allocation of each purchase price, including the effects of measurement period adjustments recorded as of December 31, 2018, are as follows:

	ClickPay			BluTrend			LeaseLabs			Rentlytics
	(in thousands)
Fair value of purchase consideration:
Cash, net of cash acquired	$	138,983		$	8,500		$	84,498		$	47,895
Common stock issued at closing	48,034			—			5,300			—
Deferred obligations, net	9,677			—			16,094			7,517
Noncontrolling interest financing	24,369			—			—			—
Contingent consideration	—			—			7,000			—
Total fair value of purchase consideration	$	221,063		$	8,500		$	112,892		$	55,412
Fair value of net assets acquired:
Restricted cash	$	1,313		$	—		$	—		$	—
Accounts receivable	2,226			226			2,853			1,585
Property, equipment, and software	89			—			865			—
Deferred tax asset, net	—			—			—			988
Intangible assets:
Developed product technologies	29,100			730			8,300			3,300
Client relationships	20,700			3,510			17,800			8,500
Trade names	2,900			30			1,100			400
Goodwill	173,250			3,887			84,674			42,351
Other assets	362			122			321			401
Accounts payable and accrued liabilities	(2,698		)	(5		)	(696		)	(763		)
Client deposits held in restricted accounts	(1,313		)	—			—			—
Deferred revenue	—			—			(2,325		)	(1,350		)
Deferred tax liability, net	(4,866		)	—			—			—
Total fair value of net assets acquired	$	221,063		$	8,500		$	112,892		$	55,412

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Acquisitions Prior to 2018

We completed eight acquisitions during fiscal years 2017 and 2016. A summary of each acquisition can be found in the table below:

	Date of Acquisition	Aggregate Purchase Price		Closing Cash Payment, Net of Cash Acquired		Net Tangible Assets Acquired (Liabilities Assumed)			Identified Intangible Assets		Goodwill Recognized
		(in thousands)
NWP Services Corporation	March 2016	$	68,183	$	62,190	$	18,314		$	16,349	$	33,520
AssetEye, Inc.	May 2016	$	4,911	$	3,749	$	(928	)	$	2,685	$	3,154
eSupply Systems, LLC	June 2016	$	7,046	$	5,461	$	267		$	3,585	$	3,194
Axiometrics LLC	January 2017	$	73,757	$	66,050	$	(5,963	)	$	25,530	$	54,190
American Utility Management	June 2017	$	69,412	$	64,775	$	1,107		$	22,398	$	45,907
On-Site Manager, Inc.	September 2017	$	251,109	$	225,300	$	3,197		$	65,320	$	182,592
PEX Software Limited	October 2017	$	6,031	$	5,103	$	(369	)	$	3,100	$	3,300
Lease Rent Options	December 2017	$	299,923	$	298,040	$	5,263		$	91,666	$	202,994

Purchase consideration for Axiometrics included contingent consideration of up to $5.0 million payable if certain revenue targets were achieved during the twelve-month period ending December 31, 2018. Based on information that was available at December 31, 2018, management has determined the fair value of the contingent consideration to be zero. Refer to Note 13 for additional information regarding our contingent consideration liabilities.

Deferred Obligations and Contingent Consideration Activity

The following table presents changes in our deferred cash and stock obligations and contingent consideration for the fiscal years ended December 31, 2018 and 2017:

	Deferred Cash and Stock Obligations			Contingent Consideration			Total
	(in thousands)
Balance at January 1, 2017	$	14,150		$	541		$	14,691
Additions, net of fair value discount	42,104			812			42,916
Cash payments	(8,215		)	(700		)	(8,915		)
Accretion expense	1,049			—			1,049
Change in fair value	—			(239		)	(239		)
Indemnification claims and other adjustments	(2,072		)	—			(2,072		)
Balance at December 31, 2017	47,016			414			47,430
Additions, net of fair value discount	36,313			7,000			43,313
Cash payments	(29,600		)	(247		)	(29,847		)
Accretion expense	1,970			—			1,970
Change in fair value	—			(1,167		)	(1,167		)
Indemnification claims and other adjustments	(3,557		)	—			(3,557		)
Balance at December 31, 2018	$	52,142		$	6,000		$	58,142

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Pro Forma Results of Acquisitions

The following table presents unaudited pro forma results of operations for the years ended December 31, 2018 and 2017, as if the aforementioned 2018 and 2017 acquisitions had occurred as of January 1, 2017 and January 1, 2016, respectively. The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense, tax expense or benefit, issuance of our common shares, and additional amortization resulting from the valuation of amortizable intangible assets. We prepared the pro forma financial information for the combined entities for comparative purposes only, and it is not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the periods presented, or of future results.

	Year Ended December 31,
	2018 Pro Forma		2017 Pro Forma
	(unaudited)
	(in thousands, except per share amounts)
Total revenue	$	899,966	$	809,987
Net income (loss)	$	27,969	$	(14,210	)
Net income (loss) per share:
Basic	$	0.32	$	(0.18	)
Diluted	$	0.30	$	(0.18	)

4. Revenue Recognition

On January 1, 2018, we adopted the new revenue standard using the modified retrospective method for those contracts with remaining service obligations as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

We recorded a net increase to opening equity of $2.2 million as of January 1, 2018 as the cumulative effect of adopting the new revenue standard. The effect on revenues of adopting the new revenue standard for the fiscal year ended December 31, 2018 is presented in the “Impact on Consolidated Financial Statements” section below.

Disaggregation of Revenue

The following table presents our revenues disaggregated by major revenue source. Sales and usage-based taxes are excluded from revenues.

	Year Ended December 31,
	2018		2017		2016
	(in thousands)
On demand
Property management	$	186,975	$	167,002	$	152,890
Resident services	350,457		272,176		218,097
Leasing and marketing	166,361		123,804		116,505
Asset optimization	129,916		79,640		55,039
Total on demand revenue	833,709		642,622		542,531
Professional and other	35,771		28,341		25,597
Total revenue	$	869,480	$	670,963	$	568,128

On Demand Revenue

We generate the majority of our on demand revenue by licensing software-as-a-service (“SaaS”) solutions to our clients on a subscription basis. Our SaaS solutions are provided pursuant to contractual commitments that typically include a promise that we will stand ready, on a monthly basis, to deliver access to our technology platform over defined service delivery periods. These solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the client. Revenue from our SaaS solutions is generally recognized ratably over the term of the arrangement.

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Consideration for our on demand subscription services consist of fixed, variable and usage-based fees. We invoice a portion of our fees at the initial order date and then monthly or annually thereafter. Subscription fees are generally fixed based on the number of sites and the level of services selected by the client.

We sell certain usage-based services, primarily within our property management, resident services and leasing and marketing solutions, to clients based on a fixed rate per transaction. Revenues are calculated based on the number of transactions processed monthly and will vary from month to month based on actual usage of these transaction-based services over the contract term, which is typically one year in duration. The fees for usage-based services are not associated with every distinct service promised in the series of distinct services we provide our clients. As a result, we allocate variable usage-based fees only to the related transactions and recognize them in the month that usage occurs.

As part of our resident services offerings, we offer risk mitigation services to our clients by acting as an insurance agent and derive commission revenue from the sale of insurance products to our clients’ residents. The commissions are based upon a percentage of the premium that the insurance company underwriting partners charge to the policyholder and are subject to forfeiture in instances where a policyholder cancels prior to the end of the policy. The overall insurance services we provide represent a single performance obligation that qualifies as a separate series in accordance with the new revenue standard. Our contracts with our underwriting partners also provide for contingent commissions to be paid to us in accordance with the agreements. The contingent commissions are not associated with every distinct service promised in the series of distinct insurance services we provide. We generally accrue and recognize contingent commissions monthly based on estimates of the variable factors identified in the terms of the applicable agreements.

Professional Services and Other Revenues

Professional services and other revenues generally consist of the fees we receive for providing implementation and consulting services, submeter equipment and ongoing maintenance of our existing on premise licenses.

Professional services revenues primarily consist of fees for implementation services, consulting services and training. Professional services are billed either on a fixed rate per hour (time) and materials basis or on a fixed price basis. Professional services are typically sold bundled in a contract with other on demand solutions but may be sold separately. For bundled arrangements, we allocate the transaction price to separate services based on their relative standalone selling prices if a service is separately identifiable from other items in the bundled arrangement and if a client can benefit from it on its own or with other resources readily available to the client.

Other revenues consist of submeter equipment sales that include related installation services, sales of other equipment and on premise software sales. Submeter hardware and installation services are considered to be part of a single performance obligation due to the significance of the integration and interdependency of the installation services with the meter equipment. Our typical payment terms for submeter installations require a percentage of the overall transaction price to be paid upfront, with the remainder billed as progress payments. We recognize submeter revenue in proportion to the number of fully installed units completed to date as compared to the total contracted number of units to be provided and installed. For all other equipment sales, we generally recognize revenue when control of the hardware has transferred to our client, which occurs at a point in time, typically upon delivery to the client.

The majority of on premise revenue consists of maintenance renewals from clients who renew for an additional one-year term. Maintenance renewal revenue is recognized ratably over the service period based upon the standalone selling price of that service obligation.

Contract Balances

Contract assets generally consist of amounts recognized as revenue before they can be invoiced to clients or amounts invoiced to clients prior to the period in which the service is provided where the right to payment is subject to conditions other than just the passage of time. These contract assets are included in “Accounts receivable” in the accompanying Consolidated Financial Statements and related disclosures. Contract liabilities are comprised of billings or payments received from our clients in advance of performance under the contract. We refer to these contract liabilities as “Deferred revenue” in the accompanying Consolidated Financial Statements and related disclosures. We recognized $113.7 million of on demand revenue during the year ended December 31, 2018, which was included in the line “Deferred revenue” in the accompanying Consolidated Balance Sheets as of the beginning of the period.

Contract Acquisition Costs

We capitalize certain commissions as incremental costs of obtaining a contract with a client if we expect to recover those costs. The commissions are capitalized and amortized over a period of benefit determined to be three years. As of December 31, 2018, the current and noncurrent balances of capitalized commissions costs recorded in the lines “Other current assets” and “Other assets” in the accompanying Consolidated Balance Sheets were $6.7 million and $7.8 million, respectively. During the year ended December 31, 2018, we amortized commission costs totaling $5.4 million. No impairment loss was recognized in relation to these capitalized costs.

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Remaining Performance Obligations

Certain clients commit to purchase our solutions for terms ranging from two to seven years. We expect to recognize approximately $414.7 million of revenue in the future related to performance obligations for on demand contracts with an original duration greater than one year that were unsatisfied or partially unsatisfied as of December 31, 2018. Our estimate does not include amounts related to:

• professional and usage-based services that are billed and recognized based on services performed in a certain period;

• amounts attributable to unexercised contract renewals that represent a material right; or

• amounts attributable to unexercised client options to purchase services that do not represent a material right.

We expect to recognize revenue on approximately 68.8% of the remaining performance obligations over the next 24 months, with the remainder recognized thereafter. Revenue from remaining performance obligations for professional service contracts as of December 31, 2018 was immaterial.

Impact on Consolidated Financial Statements

The following tables summarize the effects of the adoption of ASU 2014-09 on selected line items within our Consolidated Statements of Operations and Balance Sheets:

	Year Ended December 31, 2018
	As reported			Balances without adoption of ASU 2014-09			Effect of Change on Net Income Higher/(Lower)
	(in thousands)
Revenue
On demand	$	833,709		$	835,465		$	(1,756	)
Professional and other	35,771			32,886			2,885
Total revenue	$	869,480		$	868,351		$	1,129
Operating expenses
Sales and marketing	$	166,607		$	174,578		$	7,971
Net income before income taxes	$	34,300		$	25,200		$	9,100
Income tax expense (benefit)	(425		)	(2,608		)	(2,183		)
Net income	$	34,725		$	27,808		$	6,917

	Balances at December 31, 2018 - as reported		Balances at December 31, 2018 without adoption of ASU 2014-09		Effect of Change Higher/(Lower)
	(in thousands)
Assets
Accounts receivable, less allowances	$	123,596	$	130,742	$	(7,146	)
Other current assets	$	15,185	$	8,198	$	6,987
Other assets	$	20,393	$	12,114	$	8,279
Liabilities
Current portion of deferred revenue	$	120,704	$	125,078	$	(4,374	)
Deferred revenue	$	4,902	$	4,902	$	—

The adoption of ASU 2014-09 had no net effect on the Consolidated Statements of Cash Flows for the year ended December 31, 2018.

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5. Accounts Receivable

Accounts receivable consisted of the following at December 31, 2018 and 2017:

	December 31,
	2018			2017
	(in thousands)
Trade receivables from clients	$	120,767		$	115,354
Insurance commissions receivable	11,679			13,102
Accounts receivable, gross	132,446			128,456
Less: Allowances	(8,850		)	(3,951		)
Accounts receivable, net	$	123,596		$	124,505

Trade receivables include amounts billed to our clients, primarily under our on demand subscription solutions. Trade receivables also includes amounts invoiced to clients prior to the period in which the service is provided and amounts for which we have met the requirements to recognize revenue in advance of invoicing the client. Insurance commissions receivable consists of commissions derived from the sale of insurance products to individuals and contingent commissions related to those policies. Contingent commissions are determined based on a calculation that considers earned agent commissions, a percent of premium retained by our underwriting partner, incurred losses, and profit retained by our underwriting partner during the time period. Contingent commissions receivables are recorded at their estimated net realizable value, based on estimates and considerations which include, but are not limited to, the historical and projected loss rates incurred by the underlying policies.

6. Property, Equipment, and Software

Property, equipment, and software consisted of the following at December 31, 2018 and 2017:

	December 31,
	2018			2017
	(in thousands)
Leasehold improvements	$	63,391		$	59,179
Data processing and communications equipment	68,015			83,922
Furniture, fixtures, and other equipment	33,840			28,752
Software	131,437			107,924
Property, equipment, and software, gross	296,683			279,777
Less: Accumulated depreciation and amortization	(143,155		)	(131,349		)
Property, equipment, and software, net	$	153,528		$	148,428

Depreciation and amortization expense for property, equipment, and purchased software was $28.5 million, $27.2 million, and $24.5 million for the years ended December 31, 2018, 2017, and 2016, respectively.

The unamortized amount of capitalized software development costs was $54.9 million and $45.5 million at December 31, 2018 and 2017, respectively. Amortization expense related to capitalized software development costs totaled $11.9 million, $8.0 million, and $5.8 million during the years ended December 31, 2018, 2017, and 2016, respectively.

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7. Goodwill and Identified Intangible Assets

Changes in the carrying amount of goodwill during the years ended December 31, 2018 and 2017, were as follows, in thousands:

Balance at January 1, 2017	$	259,938
Goodwill acquired	491,079
Measurement period and other adjustments	35
Balance at December 31, 2017	751,052
Goodwill acquired	304,162
Measurement period and other adjustments	(2,095		)
Balance at December 31, 2018	$	1,053,119

We completed our annual goodwill impairment test during the fourth quarter of the fiscal year ended December 31, 2018. Based on the results of the quantitative analysis, we concluded that there was no impairment of goodwill. In 2017 or 2016, we performed qualitative assessments which did not result in the impairment of goodwill.

Intangible assets consisted of the following at December 31, 2018 and 2017:

	December 31, 2018							December 31, 2017
	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
	(in thousands)
Finite-lived intangible assets:
Developed technologies	$	207,310	$	(100,445	)	$	106,865	$	164,640	$	(76,577	)	$	88,063
Client relationships	264,228		(107,155		)	157,073		213,728		(78,390		)	135,338
Vendor relationships	5,650		(5,650		)	—		5,650		(5,650		)	—
Trade names	22,956		(10,682		)	12,274		17,556		(4,325		)	13,231
Non-compete agreements	4,173		(1,395		)	2,778		4,173		(605		)	3,568
Total finite-lived intangible assets	504,317		(225,327		)	278,990		405,747		(165,547		)	240,200
Indefinite-lived intangible assets:
Trade names	8,388		—			8,388		12,137		—			12,137
Total intangible assets	$	512,705	$	(225,327	)	$	287,378	$	417,884	$	(165,547	)	$	252,337

Amortization expense for finite-lived intangible assets totaled $59.8 million, $31.9 million, and $24.5 million during the years ended December 31, 2018, 2017, and 2016, respectively.

The following table sets forth the estimated amortization of intangible assets for the years ending December 31, in thousands:

2019	$	61,916
2020	52,679
2021	45,446
2022	35,686
2023	28,553

In the fourth quarter of 2018, we recorded an impairment charge of $2.7 million related to the indefinite-lived trade name of our 2010 acquisition of Level One, based on the excess of the carrying value over its estimated fair value. Fair value was estimated using standard valuation methodologies (principally the income and market approach) incorporating market participant considerations and management’s assumptions on revenue growth rates, royalty rates and discount rates. The key factor contributing to the impairment was a change in our long-term marketing strategy for this product offering, which included a shift away from the use of a separate Level One branding and towards a RealPage Contact Center branding. The remaining balance of $1.0 million was reclassified to finite-lived intangible assets as of December 31, 2018 and will be amortized over its estimated remaining useful life of five years. The method utilized to estimate the fair value incorporated significant unobservable inputs, and we concluded that the measurement should be classified within Level 3 of the fair value hierarchy.

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In 2016, we sold certain assets associated with our senior living referral services and recorded an impairment of the associated trade name of $0.8 million in connection with the disposition.

These impairment charges are included in “Sales and marketing” in the accompanying Consolidated Statements of Operations.

8. Debt

On September 30, 2014, we entered into an agreement for a secured credit facility. The credit facility agreement was subsequently amended during 2016 and 2017, and was further amended in March 2018 (inclusive of these amendments, the “Credit Facility”). We incurred debt issuance costs in the amount of $1.1 million related to the execution of the March 2018 amendment. The Credit Facility matures on February 27, 2022, and includes the following:

Revolving Facility: The Credit Facility provides $350.0 million in aggregate commitments for revolving loans, with sublimits of $10.0 million for the issuance of letters of credit and $20.0 million for swingline loans (“Revolving Facility”).

Term Loan: In February 2016, we originated a term loan in the original principal amount of $125.0 million under the Credit Facility (“Term Loan”). We made quarterly principal payments of $0.8 million through March 31, 2018, that increased to $1.5 million beginning on June 30, 2018, and that will increase again to $3.1 million beginning on June 30, 2020.

Delayed Draw Term Loan: In December 2017, we drew funds of $200.0 million available under the delayed draw term loan (“Delayed Draw Term Loan”). We made quarterly principal payments of $1.3 million through March 31, 2018, that increased to $2.5 million beginning on June 30, 2018, and that will increase again to $5.0 million beginning on June 30, 2020.

Revolving loans under the Credit Facility may be voluntarily prepaid and re-borrowed. Principal payments on the Term Loan and Delayed Draw Term Loan (collectively, the “Term Loans”) are due in quarterly installments, as described above, and may not be re-borrowed. All outstanding principal and accrued but unpaid interest is due on the maturity date. The Term Loans are subject to mandatory repayment requirements in the event of certain asset sales or if certain insurance or condemnation events occur, subject to customary reinvestment provisions. We may prepay the Term Loans in whole or in part at any time, without premium or penalty.

Accordion Feature: The Credit Facility also allows us, subject to certain conditions, to request additional term loans or revolving commitments up to an aggregate principal amount of $150.0 million, plus an amount that would not cause our Senior Leverage Ratio, as defined below, to exceed 3.50 to 1.00 (the “Accordion Feature”).

At our option, amounts outstanding under the Credit Facility accrue interest at a per annum rate equal to either LIBOR, plus a margin ranging from 1.25% to 2.25%, or the Base Rate, plus a margin ranging from 0.25% to 1.25% (“Applicable Margin”). The base LIBOR is, at our discretion, equal to either one, two, three, or six month LIBOR. The Base Rate is defined as the greater of Wells Fargo’s prime rate, the Federal Funds Rate plus 0.50%, or one month LIBOR plus 1.00%. In each case, the Applicable Margin is determined based upon our Net Leverage Ratio, as defined below. Accrued interest on amounts outstanding under the Credit Facility is due and payable quarterly, in arrears, for loans bearing interest as the Base Rate and at the end of the applicable interest period in the case of loans bearing interest at the adjusted LIBOR.

Certain of our existing and future material domestic subsidiaries are required to guarantee our obligations under the Credit Facility, and the obligations under the Credit Facility are secured by substantially all of our assets and the assets of the subsidiary guarantors. The Credit Facility contains customary covenants, subject in each case to customary exceptions and qualifications, which limit our and certain of our subsidiaries’ ability to, among other things, incur additional indebtedness or guarantee indebtedness of others; grant liens on our assets; enter into mergers or consolidations; dispose of assets; prepay certain indebtedness; make changes to our governing documents and certain of our agreements; pay dividends and make other distributions on our capital stock and redeem and repurchase our capital stock; make investments, including acquisitions; and enter into transactions with affiliates. Our covenants also include requirements that we comply with the following financial covenants:

Consolidated Net Leverage Ratio: The Consolidated Net Leverage Ratio (“Net Leverage Ratio”), defined as a ratio of consolidated funded indebtedness, as defined in the Credit Facility, on the last day of each fiscal quarter to the sum of the four previous consecutive fiscal quarters’ consolidated EBITDA, as defined in the Credit Facility, of 5.00 to 1.00.

Consolidated Interest Coverage Ratio: The Consolidated Interest Coverage Ratio (“Interest Coverage Ratio”), defined as a ratio of the four previous fiscal quarters’ consolidated EBITDA to our interest expense for the same period, excluding non-cash interest attributable to the Convertible Notes, as defined below, of 3.00 to 1.00.

Consolidated Senior Secured Net Leverage Ratio: The Consolidated Senior Secured Net Leverage Ratio (“Senior Leverage Ratio”), defined as a ratio of consolidated senior secured indebtedness, as defined in the Credit Facility, on the last day of each fiscal quarter to the four previous consecutive fiscal quarters’ consolidated EBITDA, of 3.75 to 1.00.

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As of December 31, 2018, we were in compliance with the covenants under our Credit Facility.

The Credit Facility contains customary events of default, subject to customary cure periods for certain defaults. In the event of a default, the obligations under the Credit Facility could be accelerated, the applicable interest rate could be increased, the loan commitments could be terminated, our subsidiary guarantors could be required to pay the obligations in full and our lenders would be permitted to exercise remedies with respect to all of the collateral that is securing the Credit Facility. Any such default that is not cured or waived could have a material adverse effect on our liquidity and financial condition.

As of December 31, 2018, we had $350.0 million of available credit under our Revolving Facility and there were no outstanding borrowings. Principal outstanding for the Revolving Facility was $50.0 million at December 31, 2017. We incur commitment fees on the unused portion of the Revolving Facility. The carrying value of the Revolving Facility approximates its fair value.

Unamortized debt issuance costs for the Revolving Facility were $1.3 million and $0.6 million at December 31, 2018 and 2017, respectively, and are included in the line “Other assets” in the Consolidated Balance Sheets.

Principal outstanding, and unamortized debt issuance costs for the Term Loans, were as follows at December 31, 2018 and 2017:

	December 31, 2018						December 31, 2017
	Term Loan			Delayed Draw Term Loan			Term Loan			Delayed Draw Term Loan
	(in thousands)
Principal outstanding	$	114,990		$	190,000		$	120,356		$	198,750
Unamortized issuance costs	(171		)	(606		)	(233		)	(821		)
Unamortized discount	(137		)	(361		)	(185		)	(490		)
Carrying value	$	114,682		$	189,033		$	119,938		$	197,439

The fair value of the Term Loans on December 31, 2018 and 2017 was $298.9 million and $303.8 million, respectively. The fair value was estimated by discounting future cash flows using prevailing market interest rates on debt with similar creditworthiness, terms, and maturities. We concluded that this fair value measurement should be categorized within Level 2.

Future maturities of principal under the Term Loans are as follows for the years ending December 31, in thousands:

	Term Loans
2019	$	16,133
2020	28,232
2021	32,266
2022	228,359
	$	304,990

Convertible Notes

In May 2017, we issued convertible senior notes with aggregate principal of $345.0 million (including the underwriters’ exercise in full of their over-allotment option of $45.0 million) which mature on November 15, 2022 (“Convertible Notes”). The Convertible Notes were issued under an indenture dated May 23, 2017 (“Indenture”), by and between us and Wells Fargo Bank, N.A., as Trustee. We received net proceeds from the offering of approximately $304.2 million after adjusting for debt issuance costs, including the underwriting discount, the net cash used to purchase the Note Hedges and the proceeds from the issuance of the Warrants which are discussed below.

The Convertible Notes accrue interest at a rate of 1.50%, payable semi-annually on May 15 and November 15 of each year. On or after May 15, 2022, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at their option. The Convertible Notes are convertible at an initial rate of 23.84 shares per $1,000 of principal (equivalent to an initial conversion price of approximately $41.95 per share of our common stock). The conversion rate is subject to customary adjustments for certain events as described in the Indenture. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our current intent 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. Based on our closing stock price of $48.19 on December 31, 2018, the if-converted value exceeded the aggregate principal amount of the Convertible Notes by $51.3 million.

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Holders may convert their Convertible Notes, at their option, prior to May 15, 2022 only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on June 30, 2017 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sales price of our common stock and the conversion rate on each such trading day; or

• upon the occurrence of specified corporate events, as defined in the Indenture.

We may not redeem the Convertible Notes prior to their maturity date, and no sinking fund is provided for them. If we undergo a fundamental change, as described in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes. The fundamental change repurchase price is equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. If holders elect to convert their Convertible Notes in connection with a make-whole fundamental change, as described in the Indenture, we will, to the extent provided in the Indenture, increase the conversion rate applicable to the Convertible Notes.

The Convertible Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Convertible Notes and equal in right of payment to any of our existing and future unsecured indebtedness that is not subordinated. The Convertible Notes are effectively junior in right of payment to any of our secured indebtedness (to the extent of the value of assets securing such indebtedness) and structurally junior to all existing and future indebtedness and other liabilities, including trade payables, of our subsidiaries. The Indenture does not limit the amount of debt that we or our subsidiaries may incur. The Convertible Notes are not guaranteed by any of our subsidiaries.

The Indenture does not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The Indenture contains customary events of default with respect to the Convertible Notes and provides that upon certain events of default occurring and continuing, the Trustee may, and the Trustee at the request of holders of at least 25% in principal amount of the Convertible Notes shall, declare all principal and accrued and unpaid interest, if any, of the Convertible Notes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization, involving us or a significant subsidiary, all of the principal of and accrued and unpaid interest on the Convertible Notes will automatically become due and payable.

In accounting for the issuance of the Convertible Notes, we separated the Convertible Notes into liability and equity components. We allocated $282.5 million of the Convertible Notes to the liability component, and $62.5 million to the equity component. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense over the term of the Convertible Notes using the effective interest method. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.

We incurred issuance costs of $9.8 million related to the Convertible Notes. Issuance costs were allocated to the liability and equity components based on their relative values. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the Convertible Notes, and issuance costs attributable to the equity component are included along with the equity component in stockholders' equity.

The net carrying amount of the Convertible Notes at December 31, 2018 and 2017, was as follows:

	December 31,
	2018			2017
	(in thousands)
Liability component:
Principal amount	$	345,000		$	345,000
Unamortized discount	(46,235		)	(56,557		)
Unamortized debt issuance costs	(5,922		)	(7,244		)
	$	292,843		$	281,199
Equity component, net of issuance costs and deferred tax:	$	61,390		$	61,390

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The estimated fair value of the Convertible Notes at December 31, 2018 and 2017 was $441.4 million and $430.3 million, respectively. The estimated fair value is based on quoted market prices as of the last trading day of the year; however, the Convertible Notes have only a limited trading volume and as such this fair value estimate is not necessarily the value at which the Convertible Notes could be retired or transferred. We concluded this measurement should be classified within Level 2.

The following table sets forth total interest expense related to the Convertible Notes for the year ended December 31, 2018 and 2017:

	December 31,
	2018		2017
	(in thousands)
Contractual interest expense	$	5,175	$	3,119
Amortization of debt discount	10,322		5,991
Amortization of debt issuance costs	1,322		766
	$	16,819	$	9,876

The effective interest rate of the liability component for the year ended December 31, 2018 and 2017 was 5.87%.

Convertible Note Hedges and Warrants

On May 23, 2017, we entered into privately negotiated transactions to purchase hedge instruments (“Note Hedges”), covering approximately 8.2 million shares of our common stock at a cost of $62.5 million. The Note Hedges are subject to anti-dilution provisions substantially similar to those of the Convertible Notes, have a strike price of approximately $41.95 per share, are exercisable by us upon any conversion under the Convertible Notes, and expire on November 15, 2022.

The Note Hedges are generally expected to reduce the potential dilution to our common stock (or, in the event the conversion is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the Convertible Notes. The cost of the Note Hedges is expected to be tax deductible as an original issue discount over the life of the Convertible Notes, as the Convertible Notes and the Note Hedges represent an integrated debt instrument for tax purposes. The cost of the Note Hedges was recorded as a reduction of our additional paid-in capital in the accompanying Consolidated Financial Statements.

On May 23, 2017, we also sold warrants for the purchase of up to 8.2 million shares of our common stock for aggregate proceeds of $31.5 million (“Warrants”). The Warrants have a strike price of $57.58 per share and are subject to customary anti-dilution provisions. The Warrants will expire in ratable portions on a series of expiration dates commencing on February 15, 2023. The proceeds from the issuance of the Warrants were recorded as an increase to our additional paid-in capital in the accompanying Consolidated Financial Statements.

The Note Hedges are transactions that are separate from the terms of the Convertible Notes and the Warrants, and holders of the Convertible Notes and the Warrants have no rights with respect to the Note Hedges. The Warrants are similarly separate in both terms and rights from the Note Hedges and the Convertible Notes.

9. Stock-based Expense and Employee Benefits

Stock-based Expense

Our Amended and Restated 1998 Stock Incentive Plan (“Stock Incentive Plan”) provided for awards which could be granted in the form of incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights, and performance restricted stock. In August 2010, we discontinued issuance of new awards under the Stock Incentive Plan and concurrently adopted the 2010 Equity Incentive Plan (“Equity Incentive Plan”). The Equity Incentive Plan, as amended, provides for awards which may be granted in the form of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares under substantially the same terms as the Stock Incentive Plan.

We also grant awards to our directors under the Equity Incentive Plan. Prior to 2010, these awards were generally in the form of stock options. Beginning in 2010, the awards granted to our directors are generally in the form of restricted stock. The awards granted to directors generally vest ratably over a period of four quarters; however, should a director leave the board, we have the right to repurchase shares as if the awards vested on a pro rata basis.

Our board of directors periodically approves increases to the number of shares of common stock reserved for issuance under the Equity Incentive Plan. At both December 31, 2018 and 2017, there were 27,634,259 shares of our common stock reserved for awards under the Equity Incentive Plan. The Plan permits the exercise of stock options and grants of restricted stock to be fulfilled through the issuance of previously authorized but unissued common stock shares, or the reissuance of

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shares held in treasury. Beginning in March 2017, we began to primarily utilize treasury shares when stock options are exercised or restricted stock is granted. Prior to that point, we generally utilized unissued common stock shares to satisfy these items.

The following table represents a consolidated summary of our stock-based plan activity:

	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Total compensation expense recognized	$	50,641	$	45,835	$	36,852
Cash proceeds related to stock-based expense transactions	$	13,163	$	27,014	$	28,490
Aggregate grant-date fair value of shares and stock options that vested during the year	$	49,711	$	48,662	$	28,624

Total unrecognized compensation expense related to our stock-based expense plans was $73.8 million at December 31, 2018, and is expected to be recognized over a weighted average period of 1.9 years.

Stock Option Awards

Stock options granted prior to February 2014 generally vested over a period of sixteen quarters, with 75% vesting ratably over fifteen quarters and the remaining 25% vesting in the sixteenth quarter. Beginning in February 2014, stock options granted generally vested ratably over a period of twelve quarters. Expense is recognized over the requisite service period in a manner that reflects the vesting of the related awards. Awards under the plan generally expire ten years from the date of the grant. All outstanding options were granted at exercise prices equal to or exceeding our estimate of the fair market value of our common stock at the date of grant.

The following table summarizes stock option transactions under our Stock Incentive Plan and Equity Incentive Plan:

	Number of Shares		Range of Exercise Prices					Weighted Average Exercise Price
Balance as of January 1, 2016	5,801,873		$	0.91	–	$	29.50	$	19.43
Exercised	(1,568,699	)	1.68		–	27.18		18.16
Forfeited/cancelled	(625,431	)	4.28		–	29.50		21.77
Expired	(654	)	0.91		–	0.91		0.91
Balance at December 31, 2016	3,607,089		2.55		–	29.50		19.58
Exercised	(1,344,569	)	5.04		–	29.50		20.09
Forfeited/cancelled	(61,892	)	15.19		–	25.70		19.66
Expired	(163	)	2.55		–	2.82		2.73
Balance at December 31, 2017	2,200,465		4.28		–	29.50		19.26
Exercised	(658,564	)	4.92		–	29.50		20.00
Forfeited/cancelled	(11,329	)	15.19		–	25.70		18.85
Expired	(2,250	)	7.00		–	7.00		7.00
Balance at December 31, 2018	1,528,322		4.28		–	29.50		18.96

The below table provides information regarding outstanding stock options which were fully vested and expected to vest and exercisable options at December 31:

	2018				2017
	Options Fully Vested		Options Exercisable		Options Fully Vested and Expected to Vest		Options Exercisable
Number of options	1,528,322		1,528,322		2,200,465		1,999,278
Weighted-average remaining contractual term (in years)	4.1		4.1		5.5		5.3
Weighted-average exercise price	$	18.96	$	18.96	$	19.26	$	19.16
Aggregate intrinsic value, in thousands	$	44,674	$	44,674	$	55,106	$	50,257

The aggregate intrinsic value of options exercised during the years ended December 31, 2018, 2017, and 2016, was $23.0 million, $25.1 million, and $11.3 million, respectively. There were no stock options awarded during the years ended December 31, 2018, 2017, and 2016.

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Restricted Stock Awards

Restricted stock awards entitle the holder to receive shares of our common stock as the award vests. Grants of restricted stock are classified as time-based, market-based, or performance-based depending on the vesting criteria of the award.

Time-based restricted stock awards:

Time-based restricted stock awards granted prior to February 2014, generally vest ratably over sixteen quarters following the date of grant. Awards granted during 2014 and 2015, generally vest ratably over a period of twelve quarters beginning on the first day of the quarter immediately following the grant date. Beginning in 2016, awards granted generally vest ratably over a period of twelve quarters beginning on the first day of the second calendar quarter immediately following the grant date. The fair value of time-based restricted stock awards is based on the closing price of our common stock on the date of grant. Compensation expense for time-based restricted stock awards is recognized over the vesting period on a straight-line basis.

A summary of time-based restricted stock award activity is presented in the table below.

	Number of Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at January 1, 2016	1,068,706		$	20.05
Granted	1,793,257		20.79
Vested	(841,983	)	20.14
Forfeited/cancelled	(386,479	)	20.21
Non-vested shares at December 31, 2016	1,633,501		20.78
Granted	1,359,578		36.25
Vested	(953,749	)	23.73
Forfeited/cancelled	(283,342	)	28.01
Non-vested shares at December 31, 2017	1,755,988		30.05
Granted	1,289,866		53.26
Vested	(1,017,367	)	31.92
Forfeited/cancelled	(242,675	)	40.70
Non-vested shares at December 31, 2018	1,785,812		44.34

Market-based restricted stock awards:

Market-based restricted stock awards become eligible for vesting upon the achievement of specific market-based conditions based on the per share price of our common stock. Shares that become eligible to vest, if any, become Eligible Shares. Eligible Shares generally vest ratably over a period of four quarters, beginning on the first day of the quarter immediately after they become Eligible Shares. Vesting is conditional upon the recipient remaining a service provider to us, as defined in the plan document, through each applicable vesting date.

A summary of market-based restricted stock award activity is presented in the table below.

	Number of Shares		Weighted Average Grant-Date Fair Value
Balance as of January 1, 2016	1,015,095		$	11.85
Granted	794,025		13.58
Vested	(51,250	)	12.52
Forfeited/cancelled	(193,710	)	11.61
Balance at December 31, 2016	1,564,160		12.73
Granted	535,441		28.18
Vested	(1,407,133	)	13.69
Forfeited/cancelled	(2,303	)	13.34
Balance at December 31, 2017	690,165		22.76
Granted	517,364		35.66
Vested	(677,857	)	23.02
Balance at December 31, 2018	529,672		35.03

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We estimate the fair value of market-based restricted stock awards using a discrete model to analyze the fair value of the subject shares. The discrete model utilizes multiple stock price-paths, through the use of Monte Carlo simulation, which are then analyzed to determine the fair value of the subject shares. The weighted average of assumptions used to value awards granted during 2018, 2017, and 2016 were as follows:

	2018		2017		2016
Risk-free interest rate	2.5	%	1.8	%	1.1	%
Expected volatility	31.2	%	31.6	%	41.5	%

Risk-free interest rate. We estimated the risk-free rate from the three year U.S. Treasury strip note yield curve as of the valuation date.

Expected volatility. We estimate expected volatility based on our historic and implied volatility rate.

Expense related to the market-based restricted stock awards is recognized over the requisite service period using the graded-vesting attribution method. The requisite service period is a measure of the expected time to achieve the specified market condition plus the time-based vesting period. The expected time to achieve the market condition is estimated utilizing a Monte Carlo simulation, considering only those stock price-paths in which the market condition is achieved. The estimated requisite service period for market-based restricted stock shares issued in 2018 ranged from six to ten quarters. Market-based restricted stock awards granted in 2017 had requisite service periods ranging from five to seven quarters.

Employee Benefit Plans

In 1998, our board of directors approved a defined contribution plan that provides retirement benefits under the provisions of Section 401(k) of the Internal Revenue Code. Our 401(k) Plan (“Plan”) covers substantially all employees who meet a minimum service requirement. Contributions of $4.2 million, $2.9 million, and $2.4 million were made by us under the Plan for the years ended December 31, 2018, 2017, and 2016, respectively.

10. Commitments and Contingencies

Lease Commitments

We lease office facilities and equipment for various terms under long-term, non-cancellable operating lease agreements. The leases expire at various dates through 2028 and provide for renewal options. The agreements generally require us to pay for executory costs such as real estate taxes, insurance, and repairs.

In May 2015, we entered into a lease agreement for office space located in Richardson, Texas to serve as our new corporate headquarters and data center. The lease is for a term of twelve years, beginning in 2016, and includes optional extension periods. The lease agreement contains provisions for rent escalations over the term of the lease and leasehold improvement incentives. We completed the move of our corporate headquarters and data center to this new facility in the third quarter of 2016. Our lease for our previous corporate headquarters expired in December 2016.

Rent expense was $15.8 million, $13.8 million, and $14.7 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Minimum annual rental commitments under non-cancellable operating leases, net of sublease income amounts, were as follows at December 31, 2018:

	Minimum Lease Commitments
	(in thousands)
2019	$	16,996
2020	12,650
2021	11,485
2022	10,433
2023	10,229
Thereafter	38,416
	$	100,209

Guarantor Arrangements

We have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The term of the indemnification period is for the officer or

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director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a director and officer insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, we had no liabilities recorded for these agreements as of December 31, 2018 or 2017.

In the ordinary course of our business, we include standard indemnification provisions in our agreements with our clients. Pursuant to these provisions, we indemnify our clients for losses suffered or incurred in connection with third-party claims that our products infringed upon any U.S. patent, copyright, trademark, or other intellectual property right. Where applicable, we generally limit such infringement indemnities to those claims directed solely to our products and not in combination with other software or products. With respect to our products, we also generally reserve the right to resolve such claims by designing a non-infringing alternative, by obtaining a license on reasonable terms, or by terminating our relationship with the client and refunding the client’s fees.

The potential amount of future payments to defend lawsuits or settle indemnified claims under these indemnification provisions is unlimited in certain agreements; however, we believe the estimated fair value of these indemnification provisions is minimal, and, accordingly, we had no liabilities recorded for these agreements as of December 31, 2018 or 2017.

Litigation

From time to time, in the normal course of our business, we are a party to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and our view of these matters may change in the future as the litigation and events related thereto unfold. We expense legal fees as incurred. Insurance recoveries associated with legal costs incurred are recorded when they are deemed probable of recovery.

As previously disclosed, in March 2015, we were named in a purported class action lawsuit in the United States District Court for the Eastern District of Pennsylvania, styled Stokes v. RealPage, Inc., Case No. 2:15-cv-01520. The claims in this purported class action relate to alleged violations of the Fair Credit Reporting Act (“FCRA”) in connection with background screens of prospective tenants of our clients.

As previously disclosed, in November 2014, we were named in a purported class action lawsuit in the United States District Court for the Eastern District of Virginia, styled Jenkins v. RealPage, Inc., Case No. 3:14cv758. The claims in this purported class action relate to alleged violations of the FCRA in connection with background screens of prospective tenants of our clients.

Following various procedural motions, on June 19, 2017, the court in both the Stokes case and Jenkins case consolidated the cases, for purposes of settlement. On June 30, 2017, the parties signed a Settlement Agreement and Release covering both cases, and the plaintiffs in the consolidated cases filed an uncontested motion for preliminary approval of the class action settlement and the notice to the class. On August 3, 2017, the court issued a written order preliminarily approving the proposed class settlement. Following the final approval hearing on February 6, 2018, the court entered an order granting final approval of the settlement.

On February 23, 2015, we received from the Federal Trade Commission (“FTC”) a Civil Investigative Demand consisting of interrogatories and a request to produce documents relating to our compliance with the FCRA. We responded to the request and requests for additional information by the FTC. On November 2, 2017, the FTC staff informed us of its belief that there was a basis for claims that could include monetary and injunctive relief against us for failing to follow reasonable procedures to assure maximum possible accuracy of our tenant screening reports. We believe that our business practices did not, and do not, violate the FCRA or any other laws.

In October 2018, we reached a settlement with the FTC resolving all issues raised by the FTC related to this matter. Under the settlement, we paid $3.0 million to the FTC and agreed to continue to comply with the FCRA. The settlement does not require any changes to our current business practices.

At December 31, 2018 and 2017, we had accrued amounts for estimated settlement losses related to legal matters. We do not believe there is a reasonable possibility that a material loss exceeding amounts already recognized may have been incurred as of the date of the balance sheets presented herein.

We are involved in other legal proceedings and claims, including purported class action lawsuits, not described above that are not likely to be material either individually or in the aggregate based on information available at this time. Our view of these matters may change as the litigation and events related thereto unfold.

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11. Net Income per Share

Basic net income per share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by using the weighted average number of common shares outstanding, after giving effect to all potential dilutive common shares outstanding during the period. Included within net income per share is the dilutive effect of outstanding stock options and restricted stock using the treasury stock method. Weighted average shares from common share equivalents in the amount of 286,449, 193,274, and 220,473 were excluded from the dilutive shares outstanding because their effect was anti-dilutive for the years ended December 31, 2018, 2017, and 2016, respectively.

For purposes of considering the Convertible Notes in determining diluted net income per share, it is our current intent 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 (the “conversion premium”) in shares of our common stock. Therefore, only the impact of the conversion premium is included in total dilutive weighted average shares outstanding using the treasury stock method. The dilutive effect of the conversion premium is shown in the table below.

The Warrants sold in connection with the issuance of the Convertible Notes are considered to be dilutive when the average price of our common stock during the period exceeds the Warrants’ strike price of $57.58 per share. The effect of the additional shares that may be issued upon exercise of the Warrants is included in total dilutive weighted average shares outstanding using the treasury stock method and is shown in the table below. The Note Hedges purchased in connection with the issuance of the Convertible Notes are considered to be anti-dilutive and therefore do not impact our calculation of diluted net income per share. Refer to Note 8 for further discussion regarding the Convertible Notes.

We exclude common shares subject to a holdback pursuant to business combinations from the calculation of basic weighted average shares outstanding where the release of such shares is contingent upon an event not solely subject to the passage of time. As of December 31, 2018, there were approximately 196,000 contingently returnable shares related to our acquisitions of ClickPay and BluTrend, which were excluded from the computation of basic net income per share as these shares are subject to sellers’ indemnification obligations and are subject to a holdback. There were no contingently returnable shares as of December 31, 2017, and 2016. Dilutive common shares outstanding include the weighted average contingently issuable shares discussed above that are subject to a holdback, as well as the weighted average contingently issuable shares to be issued subject to a holdback on the first anniversary dates of the ClickPay and BluTrend acquisitions. These shares are subject to release to the sellers on the first and second anniversary dates of the acquisitions but are contingent on the sellers’ indemnification obligations. Refer to Note 3 for further discussion regarding the ClickPay and BluTrend acquisitions.

The following table presents the calculation of basic and diluted net income per share attributable to common stockholders:

	Year Ended December 31,
	2018		2017		2016
	(in thousands, except per share amounts)
Numerator:
Net income	$	34,725	$	377	$	16,650
Denominator:
Basic:
Weighted average shares used in computing basic net income per share:	87,290		79,433		76,854
Diluted:
Add weighted average effect of dilutive securities:
Stock options and restricted stock	2,032		2,884		989
Convertible Notes and Warrants	1,948		81		—
Contingently issuable shares in connection with our acquisitions	261		—		—
Weighted average shares used in computing diluted net income per share:	91,531		82,398		77,843
Net income per share:
Basic	$	0.40	$	0.00	$	0.22
Diluted	$	0.38	$	0.00	$	0.21

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12. Income Taxes

The domestic and foreign components of income before income taxes were as follows:

	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Domestic	$	32,190	$	12,424	$	23,817
Foreign	2,110		2,817		3,669
Total	$	34,300	$	15,241	$	27,486

Our income tax expense consisted of the following components:

	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Current:
Federal	$	666		$	36		$	401
State	295			578			756
Foreign	738			313			449
Total current income tax expense	1,699			927			1,606
Deferred:
Federal	(1,543		)	14,620			9,055
State	(255		)	(900		)	235
Foreign	(326		)	217			(60		)
Total deferred income tax (benefit) expense	(2,124		)	13,937			9,230
Total income tax expense	$	(425	)	$	14,864		$	10,836

The reconciliation of our income tax expense computed at the U.S. federal statutory tax rate to the actual income tax expense is as follows:

	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Expense derived by applying the Federal income tax rate to income before income taxes	$	7,203		$	5,335		$	9,620
State income tax, net of federal benefit	(204		)	135			735
Foreign income tax	26			(631		)	(922		)
Change in valuation allowance	734			—			—
Nondeductible expenses	2,187			1,606			545
Fair value adjustment on stock acquisition	33			(17		)	150
Stock-based expense	(11,788		)	(19,080		)	285
Reduction in available Federal NOL	—			—			255
Federal income tax rate reduction	—			25,070			—
Deemed repatriation of foreign earnings	—			2,211			—
Base erosion and anti-abuse tax	1,117			—			—
Other	267			235			168
Total income tax expense	$	(425	)	$	14,864		$	10,836

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Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of our assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

	December 31,
	2018			2017
	(in thousands)
Deferred tax assets:
Reserves, deferred revenue and accrued liabilities	$	17,120		$	16,443
Stock-based expense	8,408			8,912
Net operating loss carryforwards and tax credits	56,210			42,119
Deferred tax assets before valuation allowance	81,738			67,474
Valuation allowance	(1,251		)	(517		)
Total deferred tax assets, net of valuation allowance	80,487			66,957
Deferred tax liabilities:
Property, equipment, and software	(16,810		)	(15,378		)
Intangible assets	(13,580		)	(3,940		)
Other	(7,495		)	(2,752		)
Total deferred tax liabilities	(37,885		)	(22,070		)
Net deferred tax assets	$	42,602		$	44,887

In connection with our adoption of ASU 2014-09, as amended, in January 2018, we recognized additional net deferred tax liabilities of $0.8 million.

The acquisition of the stock of ClickPay Services, Inc. in April 2018 resulted in an additional net deferred tax liability of approximately $4.9 million comprising additional deferred tax assets from federal NOLs of $0.9 million and deferred tax liabilities from intangible assets of $5.8 million.

The acquisition of the stock of Rentlytics, Inc. in October 2018 resulted in an additional net deferred tax asset of approximately $1.0 million comprising additional deferred tax assets from federal NOLs of $3.7 million and deferred tax liabilities from intangible assets of $2.7 million.

The acquisition of the stock of PEX Software Ltd and its subsidiary PEX Australia Ltd in October 2017 resulted in an additional net deferred tax liability of approximately $0.1 million.

The acquisition of the stock of an On-Site subsidiary, in connection with the acquisition of certain discrete assets of On-Site Manager, Inc. in September 2017, resulted in additional deferred tax liabilities of $1.2 million, primarily related to intangible assets.

On December 22, 2017, the Tax Reform Act was signed into law making significant changes to the Internal Revenue Code. Changes included, but were not limited to, a federal corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. As a result of the Tax Reform Act, we recorded $25.1 million of additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted, to reduce the carrying value of our net deferred tax assets to reflect the lower U.S. federal corporate tax rate. We also recognized tax expense of $2.2 million as a result of the deemed repatriation of foreign earnings.

Also on December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of US GAAP in situations where a registrant did not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with SAB 118, we determined in 2017 that the $25.1 million of deferred tax expense recorded in connection with the remeasurement of our net deferred tax assets and the $2.2 million of tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings were provisional amounts and were reasonable estimates at December 31, 2017. In 2018, we completed our assessment of the effects of the adoption of the Tax Reform Act. There were no material changes to our original estimates.

Because of the deemed repatriation discussed above, all of our estimated foreign earnings have been subjected to U.S. federal income tax. Foreign earnings generated after December 31, 2017, that are distributed to RealPage, Inc. as a dividend will receive a 100% dividends received deduction for federal income tax purposes, subject to certain limitations under Subpart

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F income and new global intangible low-taxed income (“GILTI”) regulations. We provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. We received no dividends from our foreign subsidiaries during 2018.

We periodically evaluate the realizability of our deferred tax assets. If we determine that it is more likely than not that all or a portion of such assets are not realizable, we provide a valuation allowance against the assets. The determination of the level of valuation allowance, if any, required at any time is based on a forecast of future taxable income that includes many judgments and assumptions. Accordingly, it is at least reasonably possible that future changes in one or more assumptions may lead to a change in judgment regarding the level of valuation allowance required in future periods. In 2017, we recognized a $0.3 million valuation allowance against our state NOLs in connection with the adoption of ASU 2016-09, as discussed above, and recorded an additional valuation allowance of $0.2 million against the NOLs of one of our foreign subsidiaries. In 2018, we recorded an additional valuation allowance of $0.8 million against certain deferred tax assets associated with a portion of our stock compensation expense. We believe the realization of such assets in the future may be constrained by Internal Revenue Code Section 162(m) limitations on the deductibility of executive compensation when the underlying restricted shares vest.

As of December 31, 2018, our tax-effected federal, state, and international NOL carryforwards of $49.9 million, $5.0 million, and $0.1 million, respectively, and our combined federal, state and international tax credits of $1.2 million comprise a major component of our deferred tax assets. If not used, the underlying gross federal NOLs totaling $237.6 million will begin to expire in 2024 and the underlying state NOLs totaling $81.2 million will begin to expire in 2019, with approximately $2.1 million expiring in the next five years. Approximately $0.1 million of our credits expire in 2026, and the balance has no expiration date. Approximately $0.7 million of our tax credits will be fully realizable by 2021.

Net operating losses that we have generated are not currently subject to the Section 382 limitation; however, $52.7 million of net operating losses generated by our subsidiaries prior to our acquisition of them are subject to the Section 382 limitation. The limitation on these pre-acquisition net operating loss carryforwards will fully expire in 2037. A cumulative change in ownership among material shareholders, as defined in Section 382 of the Internal Revenue Code, during a three year period also may limit utilization of the federal net operating loss carryforwards.

As a result of our adoption of ASU 2016-09, we began to account for all excess tax benefits and deficits arising from current period stock transactions as part of our income tax provision effective January 1, 2017. During the years ended December 31, 2018 and 2017, our tax provision was reduced by approximately $11.8 million and $19.1 million, respectively, as a result of excess stock compensation deductions from the vesting of restricted stock and the exercise of stock options during the year. Prior to the adoption of ASU 2016-09, we used the “with-and-without” method, as described in ASC 740, for purposes of determining when excess tax benefits had been realized. In 2016, we recognized excess stock compensation benefits from NOLs of $3.1 million, and these benefits were recognized as additions to paid-in capital and, thus, did not benefit our tax provision for those years.

Our subsidiary in Hyderabad, India benefited from a tax holiday granted under the Software Technology Parks of India program that began upon commencement of business operations in 2008 and continued through March 31, 2011. During this holiday period, we were required to pay a minimum alternative tax which was available to reduce our post-holiday tax liability. Effective July 8, 2013, this subsidiary began to benefit from a tax holiday under the Special Economic Zone program. This benefit was initially granted for a five years period and applies to a portion of our operations in this location. The benefit was reduced from a 100% tax holiday to a 50% tax holiday in April 2018. As a result of this tax holiday, the Company realized tax savings of $0.1 million, $0.4 million, and $0.2 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Our subsidiary in Manila, Philippines has benefited from Philippines income tax holiday incentives pursuant to registration with the Philippine Economic Zone Authority (“PEZA”). At various times, we have had up to four PEZA projects that qualified for tax holiday status. As of September 30, 2018, the tax holidays on all but one project have expired. Tax savings realized under the Philippine tax holiday incentives were $0.3 million, $0.2 million, and $0.4 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Uncertain Tax Positions

At December 31, 2018 and 2017, we had no unrecognized tax benefits. Our policy is to include interest and penalties related to unrecognized income tax benefits in income tax expense, and as of December 31, 2018 and 2017, there were no accrued interest and penalties.

We file consolidated and separate tax returns in the U.S. federal jurisdiction and six foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years before 2015 and are no longer subject to state and local income tax examinations by tax authorities for years before 2014; however, net operating losses from all years continue to be subject to examinations and adjustments for at least three years following the year in which the attributes are used.

Our subsidiary, RealPage India Private Limited (“RealPage India”), is currently undergoing an income tax examination for the fiscal years beginning April 1, 2011, April 1, 2012, and April 1, 2013. The India income tax authorities have assessed

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RealPage India additional tax and interest of $0.9 million as a result of these examinations. We believe the assessments are incorrect and have appealed the decisions to the India Commissioner of Income Tax.

13. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis:

Interest rate swap agreements: The fair value of our interest rate derivatives are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. We have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our interest rate swaps. As a result, we determined that our interest rate swap valuation in its entirety is classified in Level 2 of the fair value hierarchy.

Contingent consideration obligations: The fair value of the contingent consideration obligations include inputs not observable in the market and thus represent a Level 3 measurement. Contingent consideration obligations consist of potential obligations related to our acquisition activity. The amount to be paid under these obligations is contingent upon the achievement of stipulated operational or financial targets by the business subsequent to acquisition. The fair value for certain of our contingent consideration obligations is estimated using a probability weighted discount model which considers the achievement of the conditions upon which the respective contingent obligation is dependent. The probability of achieving the specified conditions is generally assessed by applying a Monte Carlo weighted-average model. Inputs into the valuation model include a discount rate specific to the acquired entity, a measure of the estimated volatility, and the risk free rate of return, which for the period ended December 31, 2017 was 16.3%, 24.0% and 1.6%, respectively. We also estimate the fair value of our contingent obligations based on management’s assessment of the probability of achievement of operational or financial targets. The fair value estimates consider the projected future operating or financial results for the factor upon which the respective contingent obligation is dependent. The fair value estimates are generally sensitive to changes in these projections. We develop the projected future operating results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in our overall business and/or product strategies.

The following tables disclose the assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017, by the fair value hierarchy levels as described above:

	Fair Value at December 31, 2018
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Interest rate swap agreements	$	923	$	—	$	923	$	—
Liabilities:
Interest rate swap agreements	413		—		413		—
Contingent consideration related to the acquisition of:
LeaseLabs	6,000		—		—		6,000
Total liabilities measured at fair value	$	6,413	$	—	$	413	$	6,000

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	Fair Value at December 31, 2017
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Interest rate swap agreements	$	1,329	$	—	$	1,329	$	—
Liabilities:
Contingent consideration related to the acquisition of:
AssetEye	247		—		—		247
Axiometrics	167		—		—		167
Total liabilities measured at fair value	$	414	$	—	$	—	$	414

There were no transfers between Level 1 and Level 2, or between Level 2 and Level 3 measurements during the years ended December 31, 2018 and 2017.

Changes in the fair value of Level 3 measurements for the reporting periods were as follows during the years ended December 31, 2018 and 2017, in thousands:

Balance at January 1, 2017	$	541
Initial contingent consideration	812
Net gain on change in fair value	(939		)
Balance at December 31, 2017	414
Initial contingent consideration	7,000
Settlements through cash payments	(247		)
Net gain on change in fair value	(1,167		)
Balance at December 31, 2018	$	6,000

Gains and losses resulting from changes in the fair value of the above liabilities are included in “General and administrative” expense in the accompanying Consolidated Statements of Operations.

Assets and liabilities measured at fair value on a non-recurring basis:

Refer to Note 7 for further information about assets measured at fair value on a non-recurring basis at December 31, 2018. There were no assets measured at fair value on non-recurring basis at December 31, 2017. There were no liabilities measured at fair value on a non-recurring basis at December 31, 2018 and 2017.

14. Stockholders’ Equity

Shelf Registration and Public Offering

On May 21, 2018, we filed a shelf registration statement on Form S-3 (File No. 333-225074) with the Securities and Exchange Commission (the “SEC”), which became effective upon filing. The shelf registration allows us to sell, from time to time, an unspecified number of shares of common stock; shares of preferred stock; debt securities; warrants to purchase shares of common stock, preferred stock, or other securities; purchase contracts; and units representing two or more of the foregoing securities.

On May 29, 2018, we consummated an underwritten public offering of 8.05 million shares of our common stock, which included 1.05 million shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares. The offering was priced at $57.00 per share for total gross proceeds of $458.9 million. The aggregate net proceeds to us were $441.9 million, after deducting underwriting discounts and offering expenses in the aggregate amount of $16.9 million.

Increase in Authorized Shares

On June 5, 2018, our stockholders approved an amendment to our Certificate of Incorporation to increase the authorized number of shares of our Common Stock from 125,000,000 to 250,000,000 shares. Our board of directors had previously approved the amendment in 2018.

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Stock Repurchase Program

In May 2014, our board of directors approved a share repurchase program authorizing the repurchase of up to $50.0 million of our outstanding common stock for a period of up to one year after the approval date. Shares repurchased under the plan are retired. Our board of directors approved a one year extension of this program in 2015, 2016, and 2017. This program expired in May 2018.

In October 2018, our board of directors approved a new share repurchase program authorizing the repurchase of up to $100.0 million of our outstanding common stock. The share repurchase program is effective through October 25, 2019. Shares repurchased under the plan are retired. The excess of the purchase price over the common stock’s par value is allocated between additional paid in capital and retained earnings. The amount allocated to additional paid in capital is calculated as the current value of additional paid in capital per share of outstanding common stock and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings.

Repurchase activity during the years ended December 31, 2018, 2017 and 2016 was as follows:

	Year Ended December 31,
	2018		2017		2016
Number of shares repurchased	599,664		—		1,012,823
Weighted-average cost per share	$	46.83	$	—	$	20.98
Total cost of shares repurchased, in thousands	$	28,082	$	—	$	21,244

15. Derivative Financial Instruments

On March 31, 2016, we entered into two interest rate swap agreements (collectively the “2016 Swap Agreements”), which are designed to mitigate our exposure to interest rate risk associated with a portion of our variable rate debt. The 2016 Swap Agreements cover an aggregate notional amount of $75.0 million from March 2016 to September 2019 by replacing the obligation’s variable rate with a blended fixed rate of 0.89%.

On December 24, 2018, we entered into two interest rate swap agreements (collectively the “2018 Swap Agreements”), which also are designed to mitigate our exposure to interest rate risk associated with a portion of our variable rate debt. The 2018 Swap Agreements cover an aggregate notional amount of $100.0 million from December 2018 to February 2022 by replacing the obligation’s variable rate with a blended fixed rate of 2.57%. We designated both the 2016 and 2018 Swap Agreements (collectively the “Swap Agreements”) as cash flow hedges of interest rate risk.

The effective portion of changes in the fair value of the Swap Agreements is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in the fair value of the Swap Agreements is recognized directly in earnings. Amounts reported in accumulated other comprehensive income related to the Swap Agreements will be reclassified to interest expense as interest payments are made on our variable rate debt. We estimate that during the next twelve months, an additional $0.9 million will be reclassified to earnings as a decrease to interest expense.

As of December 31, 2018, the Swap Agreements were still outstanding. The table below presents the notional and fair values of the Swap Agreements as well as their classification on the Consolidated Balance Sheets as of December 31, 2018 and 2017:

	Balance Sheet Location	Notional		Fair Value
		(in thousands)
Derivatives designated as cash flow hedging instruments:
Swap agreements as of December 31, 2018	Other assets	$	75,000	$	923
Swap agreements as of December 31, 2018	Other long-term liabilities	$	100,000	$	413
Swap agreements as of December 31, 2017	Other assets	$	75,000	$	1,329

As of December 31, 2018, we have not posted any collateral related to the Swap Agreements. If we had breached any of the Swap Agreement’s default provisions at December 31, 2018, we could have been required to settle our obligations under the Swap Agreements at their termination value of $0.5 million.

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The table below presents the amount of gains and/or losses related to the effective and ineffective portions of the Swap Agreements and their location on the Consolidated Statements of Operations for the fiscal years ended December 31, 2018, 2017 and 2016:

	Effective Portion						Ineffective Portion
Derivatives Designated as Cash Flow Hedges	Gain (Loss) Recognized in OCI		Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income			Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income
	(in thousands)
Year ended December 31, 2018:
Swap agreements, net of tax	$	61	Interest expense and other	$	613		Interest expense and other	$	(73	)
Year ended December 31, 2017:
Swap agreements, net of tax	$	318	Interest expense and other	$	77		Interest expense and other	$	(54	)
Year ended December 31, 2016:
Swap agreements, net of tax	$	400	Interest expense and other	$	(136	)	Interest expense and other	$	152

Gains and losses on the effective portion of our cash flow hedges are net of income tax expense (benefit) of $0.2 million, $(0.1) million, and $(0.4) million during the years ended December 31, 2018, 2017, and 2016, respectively.

16. Customer Deposits Held in Restricted Accounts

In connection with our payment processing services, we collect tenant funds and subsequently remit these tenant funds to our clients after varying holding periods. These funds are settled through our Originating Depository Financial Institution (“ODFI”) custodial accounts at major banks. The ODFI custodial account balance was $132.2 million and $74.8 million, and the related client deposit liability was $132.2 million and $74.9 million at December 31, 2018 and 2017, respectively. The ODFI custodial account balances are included in our Consolidated Balance Sheets as restricted cash. The corresponding liability for these custodial balances is reflected as client deposits. In connection with the timing of our payment processing services, we are exposed to credit risk in the event of nonperformance by other parties, such as returned checks. We utilize credit analysis and other controls to manage the credit risk exposure. We have not experienced any material credit losses to date. Any expected losses are included in our allowance for doubtful accounts. The ODFI custodial accounts are in the name of RealPage wholly-owned subsidiaries. The obligations under the ODFI custodial account agreements are guaranteed by us.

We offer invoice processing services to our clients as part of our overall utility management solution. This service includes the collection of invoice payments from our clients and the remittance of payments to the utility company. We had $15.1 million and $14.6 million in restricted cash and $15.1 million and $14.6 million in client deposits related to these services at December 31, 2018 and 2017, respectively.

In connection with our renter insurance products, we collect premiums from policy holders and subsequently remit the premium, net of our commission, to the underwriter. We maintain separate accounts for these transactions. We had $7.3 million and $6.6 million in restricted cash related to these renter insurance products at December 31, 2018 and 2017, respectively. Related to these renter insurance products, we had $7.3 million and $6.6 million in client deposits at December 31, 2018 and 2017, respectively.

17. Investments

Compstak

In August 2016, we acquired a minority interest in Compstak, Inc. (“Compstak”), which is an unrelated company that specializes in the aggregation of commercial lease data. The shares we acquired represent an ownership interest of less than 20%. We evaluated our relationship with Compstak and determined we do not have significant influence over its operations nor is it economically dependent upon us. The carrying value of this investment at both December 31, 2018 and 2017, was $3.0 million and is included in “Other assets” in the accompanying Consolidated Balance Sheets.

WayBlazer

In January 2018, we paid $2.0 million in cash in return for a convertible promissory note (“Note”) from WayBlazer, Inc. (“WayBlazer”), which was an unrelated company that specialized in an artificial intelligence platform for the travel industry. The Note bears interest at 8% per annum and matures in December 2020. On July 31, 2018, WayBlazer voluntarily filed Chapter 7 bankruptcy and ceased all operations. We have begun foreclosure proceedings and will attempt to recover the value of our investment through our first priority security interest in WayBlazer’s intellectual property. During the third quarter of

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2018, we were unable to determine the fair value of a recovery, if any, and therefore determined our investment in WayBlazer to be fully impaired, resulting in a non-operating loss of $2.0 million recognized in “Interest expense and other, net” in the accompanying Consolidated Statements of Operations.

18. Selected Quarterly Financial Data (unaudited)

The following is unaudited quarterly financial information for the years ended December 31, 2018 and 2017 (in thousands, except per share amounts).

	Three Months Ended
	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017			September 30, 2017		June 30, 2017		March 31, 2017
Revenue:
On demand	$	218,051	$	215,413	$	206,945	$	193,300	$	180,104		$	161,578	$	154,727	$	146,213
Professional and other	8,923		9,540		9,307		8,001		7,576			7,480		6,579		6,706
Total revenue	226,974		224,953		216,252		201,301		187,680			169,058		161,306		152,919
Gross profit	129,482		130,467		125,183		120,169		111,132			97,767		92,700		89,066
Net income (loss)	6,272		9,073		8,479		10,901		(20,865		)	6,834		6,213		8,195
Net income (loss) per share attributable to common stockholders:
Basic	$	0.07	$	0.10	$	0.10	$	0.13	$	(0.26	)	$	0.09	$	0.08	$	0.10
Diluted	0.07		0.09		0.09		0.13		(0.26		)	0.08		0.08		0.10

The above quarterly financial information should be read in conjunction with the Consolidated Financial Statements and notes thereto included herein.

46

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, with the participation of our management, and under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2018. At the time our Annual Report on Form 10-K for the year ended December 31, 2018 was filed on February 27, 2019, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2018. Subsequent to that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2018 because of certain individual control deficiencies related to our information technology general controls (“ITGCs”) that, when viewed in combination, aggregated to the material weakness described below. Management’s assessment of the effectiveness of our disclosure controls and procedures is expressed at the level of reasonable assurance because management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

Management’s Report on Internal Control over Financial Reporting and Attestation Report of the Independent Registered Public Accounting Firm

Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or the degree or compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2018. In conducting this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 framework). Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of certain businesses which we acquired during 2018 (i.e. ClickPay, LeaseLabs and Rentlytics), which businesses are included in our 2018 Consolidated Financial Statements.

• ClickPay constituted approximately 11%of our consolidated total assets as of December 31, 2018, and 3% of our consolidated total revenues for the year then ended.

• LeaseLabs constituted approximately 6% of our consolidated total assets as of December 31, 2018, and 1% of our consolidated total revenues for the year then ended.

• Rentlytics constituted approximately 3% of our consolidated total assets as of December 31, 2018, and less than 1% of our consolidated total revenues for the year then ended.

In Management’s Report on Internal Control over Financial Reporting included in our original Annual Report on Form 10-K for the year ended December 31, 2018 that was filed on February 27, 2019, based on our evaluation using criteria set by COSO, management concluded that our internal control over financial reporting was effective as of December 31, 2018. Subsequently, management conducted a reassessment of our internal control over financial reporting and concluded that the material weakness described below existed as of December 31, 2018 and therefore, using the COSO criteria, we did not maintain effective internal control over financial reporting as of December 31, 2018.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As part of our reassessment, management has identified certain individual control deficiencies related to our ITGCs that, when viewed in combination, aggregated to a material weakness. Specifically, we did not maintain effective controls over user access to certain IT systems and related changes to IT programs and data, and, as a result, the effective functioning of certain process-level automated and IT-dependent controls may have been affected. The material weakness did not result in any financial statement modifications, and there have been no changes to our previously disclosed financial results.

The effectiveness of internal control over financial reporting as of December 31, 2018 has been audited by Ernst & Young LLP, our independent registered public accounting firm, which is stated in their revised report included in Part II Item 8 of this Annual Report on Form 10-K/A.

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Remediation Plan

Upon identifying the individual control deficiencies, management has been taking actions to remediate the deficiencies that in combination resulted in the material weakness and to improve the design and effectiveness of our ITGCs. The remedial activities include the following:

• Expanding the management and governance over IT system controls.

• Implementing enhanced process controls around internal user access management including provisioning, removal, and periodic review.

• Further restricting privileged access and improving segregation of duties within IT environments based on roles and responsibilities.

• Strengthening the security environment around certain applications, IT programs or databases.

• Strengthening internal user authentication mechanisms following established policy requirements.

We have completed certain of such remediation activities as of the date of this Amendment and believe that we have strengthened our ITGCs to address the identified material weakness. However, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of these remediation measures, and we will make any changes to the design of this plan and take such other actions that we deem appropriate given the circumstances. We expect to complete the remediation process by the end of the fourth quarter of 2019.

Changes in Internal Controls

Other than the material weakness described in this Item 9A., there were no changes in our internal control over financial reporting during the three months ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statements

(1) The financial statements filed as part of this Annual Report on Form 10-K/A are listed on the index to financial statements.

(2) Any financial statement schedules required to be filed as part of this Annual Report on Form 10-K/A are set forth in section (c) below.

(b) Exhibits

See Exhibit Index at the end of this Annual Report on Form 10-K/A, which is incorporated by reference.

(c) Financial Statement Schedules

The following schedule is filed as part of this Annual Report on Form 10-K/A:

All other schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

REALPAGE, INC.

December 31, 2018

(in thousands)

Accounts receivable allowances

	Balance at Beginning of Year		Adoption of ASC 606		Additions Charged to Income (2)		Deductions (3)			Balance at End of Year
Year ended December 31:
2016	$	2,318	$	—	$	4,786	$	(4,636	)	$	2,468
2017	2,468		—		4,458		(2,975		)	3,951
2018 (1)	3,951		4,702		17,180		(16,983		)	8,850

Accounts receivable allowances represent a reserve for credits and an estimate for uncollectible accounts.

⁽¹⁾  In 2018, we adopted ASU 2014-09, under the modified retrospective method. Under the new standard, we accrue for credit accommodations in our reserve during the month of billing, and credits reduce this reserve when issued. Comparative information from prior year periods has not been restated and continues to be reported under the accounting standards in effect for those periods.

⁽²⁾  Allowance for doubtful accounts are charged to expense. Credit accommodations are charged to revenue.

⁽³⁾  Applied credits and uncollectible accounts written off, net of recoveries.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richardson, State of Texas, on this 4th day of November, 2019.

REALPAGE, INC.
By:	/s/ Stephen T. Winn
	Stephen T. Winn
	Chairman of the Board of Directors, Chief Executive Officer,
	President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Stephen T. Winn Stephen T. Winn	Chairman of the Board of Directors, Chief Executive Officer, President and Director (Principal Executive Officer)	11/4/2019
/s/ Thomas C. Ernst, Jr. Thomas C. Ernst, Jr.	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)	11/4/2019
/s/ Kandis L. Tate Thompson Kandis L. Tate Thompson	Senior Vice President, Chief Accounting Officer (Principal Accounting Officer)	11/4/2019

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EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Included Herewith
2.1	Acquisition Agreement dated April 19, 2018 by and among Registrant and each of the holders of outstanding membership units of NovelPay LLC, a Delaware limited liability company, other than those owned by ClickPay Services, Inc., a Delaware corporation, and NP Representative, LLC, a Delaware limited liability company, solely in its capacity as the Sellers’ Representative**	10-Q	5/10/2018	2.1
2.2	Agreement and Plan of Merger by and among Registrant, RP Newco XXIII Inc., a Delaware corporation and wholly-owned subsidiary of Registrant, RP Newco XXIV Inc., a Delaware corporation and wholly-owned subsidiary of Registrant, ClickPayServices, Inc., a Delaware corporation and NP Representative, LLC, a Delaware limited liability company, solely in its capacity as the Sellers’ Representative**	10-Q	5/10/2018	2.2
2.3	Agreement and Plan of Merger dated October 11, 2018 between Registrant and RP Newco XXVI Inc., a Delaware corporation and wholly-owned subsidiary of Registrant, Rentlytics, Inc., a Delaware corporation, each of the equityholders of Rentlytics who executed the Agreement and Plan of Merger and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as the Equityholders’ Representative**	10-K	2/27/2019	2.3
3.1	Amended and Restated Certificate of Incorporation of the Registrant, as amended	10-Q	8/6/2018	3.1
3.2	Amended and Restated Bylaws of the Registrant	S-1/A	7/26/2010	3.4
4.1	Form of Common Stock certificate of the Registrant	S-1/A	7/26/2010	4.1
4.2	Shareholders’ Agreement among the Registrant and certain stockholders, dated December 1, 1998, as amended July 16, 1999 and November 3, 2000	S-1	4/29/2010	4.2
4.3	Second Amended and Restated Registration Rights Agreement among the Registrant and certain stockholders, dated February 22, 2008	S-1	4/29/2010	4.3
4.4	Indenture between the Registrant and Wells Fargo Bank, National Association, dated May 23, 2017	10-Q	8/4/2017	4.4
4.5	Form of Global Note to represent the 1.50% Convertible Senior Notes due 2022, of the Registrant	10-Q	8/4/2017	4.5
4.6	Form of Warrant Confirmation in connection with 1.50% Convertible Senior Notes due 2022, of the Registrant	10-Q	8/4/2017	4.6
4.7	Form of Call Option Confirmation in connection with 1.50% Convertible Senior Notes due 2022, of the Registrant	10-Q	8/4/2017	4.7
10.1	Form of Indemnification Agreement entered into between the Registrant and each of its directors and officers	S-1	4/29/2010	10.1
10.2	Amended and Restated 1998 Stock Incentive Plan (June 2010)+	S-1	6/7/2010	10.2G
10.3	Forms of Stock Option Agreements and Restricted Share Agreements approved for use under the 1998 Stock Incentive Plan+	S-1	4/29/2010	10.2A, 10.2B, 10.2C, 10.2D
10.4	Forms of Stock Option Agreements and Restricted Share Agreements approved for use under the 1998 Stock Incentive Plan+	S-1	6/7/2010	10.2E, 10.2F, 10.2H
10.5	Form of Director's Nonqualified Stock Option Agreement+	S-1	4/29/2010	10.3

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Included Herewith
10.6	Form of Notice of Grant of Restricted Shares (Outside Directors)+	S-1	6/7/2010	10.49
10.7	2010 Equity Incentive Plan, as Amended and Restated June 4, 2014+	DEF-14A	4/17/2014	Appendix A
10.8	First Amendment to the Amended and Restated 2010 Equity Incentive Plan+	8-K	1/21/2015	10.1
10.9	Second Amendment to the Amended and Restated 2010 Equity Incentive Plan+	8-K	4/7/2015	10.1
10.10	Third Amendment to the Amended and Restated 2010 Equity Incentive Plan+	10-Q	5/6/2016	10.1
10.11	Fourth Amendment to the RealPage, Inc. 2010 Equity Incentive Plan, as amended and restated, dated February 16, 2017+	10-Q	5/8/2017	10.5
10.12	Forms of Stock Option Award Agreements and Restricted Stock Award Agreements approved for use under the 2010 Equity Incentive Plan+	S-8	8/17/2010	4.6,  4.7, 4.8,  4.9
10.13	Stand-Alone Stock Option Agreement between the Registrant and Peter Gyenes, dated February 25, 2010+	S-1	4/29/2010	10.7
10.14	Form of Stock Option Award Agreement between the Registrant and Stephen T. Winn approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	8-K	3/5/2015	10.1
10.15	Form of Stock Option Award Agreement between the Registrant and certain executive officers approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	8-K	3/5/2015	10.2
10.16	Form of Restricted Stock Award Agreement for time-based awards between the Registrant and Stephen T. Winn approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	8-K	3/5/2015	10.3
10.17	Form of Restricted Stock Award Agreement for time-based awards between the Registrant and certain executive officers approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	8-K	3/5/2015	10.4
10.18	Form of Restricted Stock Award Agreement for time-based awards between the Registrant and certain executive officers approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	10-Q	5/6/2016	10.4
10.19	Form of Restricted Stock Award Agreement for market-based awards between the Registrant and certain executive officers approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	10-Q	5/6/2016	10.5
10.20	Form of Restricted Stock Award Agreement for market-based awards between the Registrant and Stephen T. Winn approved for use under the 2010 Equity Incentive Plan, as amended and restated June 4, 2014, as amended+	10-Q	5/6/2016	10.6
10.21	Form of 2017 Management Incentive Plan+	10-Q	5/8/2017	10.4
10.22	RealPage, Inc. Management Incentive Plan+	DEF-14A	4/17/2014	Appendix B
10.23	Amended and Restated Employment Agreement between the Registrant and Stephen T. Winn dated as of October 26, 2016+	8-K	10/31/2016	10.1
10.24	Amended and Restated Employment Agreement between the Registrant and W. Bryan Hill dated as of March 1, 2015+	8-K	3/5/2015	10.12
10.25	Consulting Agreement between the Registrant and W. Bryan Hill, dated January 7, 2019+***	10-K	2/27/2019	10.25

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Included Herewith
10.26	Amended and Restated Employment Agreement between the Registrant and William Chaney dated as of March 1, 2015+	8-K	3/5/2015	10.1
10.27	Employment Agreement between the Registrant and David Monk, dated May 1, 2015+	10-Q	8/7/2015	10.18
10.28	Employment Agreement between the Registrant and Ashley Glover, dated August 3, 2016+	10-Q	11/8/2016	10.2
10.29	Exhibit I to the Employment Agreement between the Registrant and Ashley Glover referenced herein as Exhibit 10.28+	10-Q	5/6/2016	10.4
10.30	Exhibit II to the Employment Agreement between the Registrant and Ashley Glover referenced herein as Exhibit 10.28+	10-Q	5/6/2016	10.5
10.31	Employment Agreement between Registrant and Andrew Blount, dated December 11, 2015+	10-Q	5/8/2017	10.6
10.32	Amendment to Employment Agreement between Registrant and Andrew Blount, dated January 4, 2016+	10-Q	5/8/2017	10.7
10.33	Employment Agreement between Registrant and Thomas C. Ernst, Jr., dated January 7, 2019+***	10-K	2/27/2019	10.33
10.34	Exhibit I to the Employment Agreement between the Registrant and Thomas C. Ernst, Jr. referenced herein as Exhibit 10.33+	10-Q	5/6/2016	10.4
10.35	Exhibit II to the Employment Agreement between the Registrant and Thomas C. Ernst Jr. referenced herein as Exhibit 10.33+	10-Q	5/6/2016	10.5
10.36	Employment Agreement between Registrant and Kandis Thompson, dated January 7, 2019+***	10-K	2/27/2019	10.36
10.37	Lease Agreement dated June 2, 2015 by and between the Registrant and Lakeside Campus Partners, LP	8-K	6/4/2015	10.1
10.38	First Amendment to the Lease Agreement dated July 27, 2015 by and between the Registrant and Lakeside Campus Partners, LP	10-Q	8/7/2015	10.20
10.39	Second Amendment to the Lease Agreement dated July 8, 2016 by and between the Registrant and Lakeside Campus Partners, LP	10-Q	11/8/2016	10.1
10.40	Credit Agreement by and among the Registrant, the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent, dated September 30, 2014	10-Q	11/10/2014	10.1
10.41	First Amendment to Credit Agreement and Incremental Amendment among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated February 26, 2016	10-Q	5/6/2016	10.2
10.42	Second Amendment to Credit Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated February 15, 2017	10-Q	5/8/2017	10.1
10.43	Third Amendment to Credit Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated February 27, 2017	10-Q	5/8/2017	10.2

53

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Included Herewith
10.44	Fourth Amendment to Credit Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated April 3, 2017	10-Q	5/8/2017	10.3
10.45	Fifth Amendment to Credit Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated May 11, 2017	10-Q	8/4/2017	10.2
10.46	Sixth Amendment to Credit Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated August 14, 2017	10-Q	11/7/2017	10.1
10.47	Seventh Amendment to Credit Agreement, Incremental Amendment and Amendment to Collateral Agreement among the Registrant, certain subsidiaries of the Registrant party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated March 12, 2018	10-Q	5/10/2018	10.1
10.48	Collateral Agreement by and among the Registrant, certain of its subsidiaries from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent, dated as of September 30, 2014	10-Q	11/10/2014	10.2
10.49	Guaranty Agreement made by certain domestic subsidiaries of Registrant in favor of Wells Fargo Bank, National Association, as administrative agent, dated as of September 30, 2014	10-Q	11/10/2014	10.3
21.1	Subsidiaries of the Registrant***	10-K	2/27/2019	21.1
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm				X
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*				X
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*				X
101.INS	Instance				X
101.SCH	Taxonomy Extension Schema				X
101.CAL	Taxonomy Extension Calculation				X
101.LAB	Taxonomy Extension Labels				X
101.PRE	Taxonomy Extension Presentation				X
101.DEF	Taxonomy Extension Definition				X

+ Indicates management contract or compensatory plan or arrangement.

* Furnished herewith.

** Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished to the Securities and Exchange Commission upon request.

*** Furnished with the Annual Report on Form 10-K filed on February 27, 2019.

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