The company makes the majority of its revenue from fees for the use of its softwareRead more...
RealPage makes the majority of its money by selling license and subscription fees for its software
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While there's a lot of focus on the front end companies in the ever growing real estate tech space, with companies like Zillow, Trulia and Apartment List, which help people find residences to rent or buy, there's less attention put on the back end, to the data that helps drive these deals.
RealPage is a company that provides software solutions for owners and managers of single-family and multi-family rental properties. Its platform includes property management solutions for automating leasing, renting, management and accounting, as well as revenue management, utility management and renters insurance. It also provides resident services, which includes online billing and payments, maintenance requests and package notification.
So how does it make money? RealPage breaks its revenue down into three categories, the first, and by far largest, segment being what is calls its "on demand" revenue.
According its S-1 filing with the SEC, revenue from its on demand software solutions is "comprised of license and subscription fees" relating to its on demand software solutions, which are typically licensed for one year terms. It also includes commission income from sales of renter’s insurance policies, and transaction fees for "certain on demand software solutions, such as payment processing, spend management and billing services."
RealPage prices its on demand software on the number of units or beds the customer manages with our solutions. For its insurance based solutions, Real Page's agreement "provides for a fixed commission on earned premiums related to the policies sold by us." For its transaction-based solutions, its sets a price based on a fixed rate per transaction.
In 2017, RealPage made $642.6 million from this revenue stream. That was an 18.5 percent increase from 2016, and represented 96 percent of the company's total 2017 revenue.
The second largest source of revenue is what the company calls "professional and other," which consists of consulting and implementation services, training and other ancillary services.
"We complement our solutions with professional and other services for our customers willing to invest in enhancing the value or decreasing the implementation time of our solutions," the company wrote in its filing. "Our professional and other services are typically priced as time and material engagements."
In 2017, RealPage made $25.7 million from this revenue stream a 13 percent increase from 2016, and 3.8 percent of the company's total 2017 revenue.
Finally, he company has what it calls "on premise revenue," and those are solutions that are maintained locally on its customers own hardware, and they pay license fees from license agreements.
The company has not marketed its on premise solutions since at least 2010, and they are only offered to existing customers who already use the services. Therefore, it's not surprising that this a small revenue stream, and one that's shrinking. The revenue from its on premise services decreased 6.7 percent to just $2.6 million in 2016. That was only 0.4 percent of the company's total annual revenue.
Founded in 1998, RealPage currently serves nearly 12,500 clients worldwide. It handles over 600 billion annual transactions, has over three million prospects, over 30 million residents and over 8,000 vendors.
The company went public in 2010 and is currently trading at $59.15 a share, up over 33 percent since the beginning of this year.
(Image source: realpage.com)
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