RealPage Inc
Q1 2020 Earnings Call Transcript

Published: 9 May 2020

[Company Representatives:]

Steve Winn - Chairman, Chief Executive Officer Tom Ernst - Executive Vice President, Chief Financial Officer, Treasurer Rhett Butler - Vice President of Investor Relations

[Operator:]

Greetings, and welcome to the RealPage First Quarter 2020 Conference Call. . As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Rhett Butler, Vice President of Investor Relations. Please go ahead, sir.

[Rhett Butler:]

Thank you, operator. Good afternoon and welcome to the RealPage financial results conference call for the first quarter ended March 31, 2020. With me on the call today are Steve Winn, our Chairman and Chief Executive Officer; and Tom Ernst, our Chief Financial Officer and Treasurer.

[Steve Winn:]

Thanks, Rhett. Welcome, everyone and thank you for joining us this evening. What started off to be a great quarter, fell short in March by about $3 million in revenue, relative to the trajectory of the first two months. Notwithstanding the impact of COVID-19, total revenue grew 18% to $277.1 million and adjusted-EBITDA grew 10% to $71.5 million compared to last year, within our range of guidance. Operating cash flow, excluding changes in restricted cash relating to accounting changes, grew 22% to $67 million. While the COVID-19 impact on Q1 was relatively small, we are reducing our revenue outlook for 2020 by 3% to 5%. Reduced revenue guidance is driven by lower expected bookings in the first half of the year, and slower leasing velocity impacting screening, contact center and transactional spend related to turning units. We expect these negative impacts will be offset to some extent by increased bookings and activations for products and services that facilitate virtual leasing, living and payments. We are reducing our full-year adjusted-EBITDA guidance by 5% to 7%, which is a larger percentage drop in revenue. While we intend to adjust variable costs due to lower revenue and the realization of some productivity improvements, we do not expect to reduce product development or sales and marketing spend given our view that clients will have an increased need for products and services that help them accelerate their transition to more virtual operations. Our adjusted guidance assumes, that client operations return to normal state by the third quarter of this year. We are already seeing signs of a recovery in the data, and I’ll share that with you in a minute. Tom will provide more detail and context in his prepared remarks as well.

[Tom Ernst:]

Thanks, Steve. And, good afternoon everyone. I also could not be prouder of the RealPage team’s response over the last two months. The team swiftly adapted to the changing work environment, while also adapting to support our customers changing needs, enabling them to make their communities safe for their residents and employees while mitigating the financial challenges of unemployment and social distancing on their properties. We provide an essential service to our customers, which they rely upon us to deliver. We did deliver and we remain fiercely committed to doing so. On behalf of RealPage and its customers, to team RealPage, I would like to give a very big public, thank you. We believe RealPage is very well positioned to deliver on this commitment. We are well capitalized, have strong cash flow and a proven recurring business model that allows us to continue to invest in, and drive the innovation that our customers need and the growth that provides shareholder value. As Steve mentioned, normal seasonal leasing activity that starts ramping in March and runs through the fall was significantly depressed in March compared to prior years, even when compared to the seasonally low winter months of 2019 and the beginning of 2020. While our subscription business model is largely unaffected by these trends, we do have some sensitivity to activity driven seasonality. This can be observed in the normal seasonal pattern our revenue has historically followed with the second and third quarters being our strongest for quarter-on-quarter growth, and the first and fourth quarter is typically showing less sequential growth. Moving on to the quarter. The first quarter financial performance was solid despite the macroeconomic backdrop. Total revenue grew 18% year-over-year, which included 10% growth on an organic basis. We were on track with our internal budget and the high end of the revenue guidance range at the end of February. The slowdown in revenue driven by leasing activity, along with the slowdown in new project activations, were primarily responsible for revenue performance near the low end of our guidance range for the full quarter. Our earnings and cash flow performance was strong. Adjusted-EBITDA of $71.5 million grew nearly 10%, and we generated $67 million of operating cash. While we do not anticipate reporting this type of data on a continuing basis, we thought that additional disclosure on Buildium would be helpful in the first full quarter as part of RealPage. Buildium contributed over $16 million of revenue during the quarter, growing over 35% year-over-year, with significant adjusted-EBITDA margin expansion on a stand-alone basis. Total RealPage ACV growth was 19% compared to the prior year, consisting of 16% new unit growth and 3% revenue per unit growth. We ended the quarter with 18.9 million units, consisting of nearly 10 million multifamily units from owners and managers with over 5,000 units and over 9 million SMB units. Total bookings production experienced a strong start to the year. However, March did see a significant slowdown. We are seeing strong, but early signs of improvement as the second quarter is proceeding. Total sales team members at the end of the quarter were 576, representing 22% growth compared to the prior year quarter. We expect to invest modestly here under the current climate and continue to focus on productivity. From a profitability perspective in Q1, adjusted-EBITDA margins contracted by nearly 200 basis points to 26% compared to the prior year period. Lower adjusted-EBITDA margins were driven by gross margin investments and growth initiatives, including acquisitions, and by continued sales force investments and general and administrative investments and infrastructure. Looking at the drivers in more detail. Product development cost as a percentage of revenue decreased nearly 100 basis points year-over-year and continues to be driven primarily by our efficiency initiatives implemented in early 2019 that enable us to allocate more resources towards innovation projects while optimizing maintenance projects. Sales and marketing costs as a percentage of revenue increased 60 basis points year-over-year and was driven primarily by increases in our sales force, which grew by over 100 total reps. Our primary area of investment were in the SMB business and in lead generation capacity as we begin to pivot during the COVID-19 crisis. General administrative costs as a percentage of revenue increased 150 basis points year-over-year and was driven primarily by incremental acquisition costs and infrastructure investments to drive efficiency and scale over the long term. As a result, we expect strong G&A leverage as we exit 2020 and as we move into 2021. During the quarter, we generated nearly $67 million of operating cash, excluding the impact from changes in restricted cash related to accounting treatment changes. Our leverage ratio is now 3.3 times, this is comfortably within the 2 times to 4 times range we believe is optimal operationally. As we turn to our outlook for the second quarter and the year, we take confidence in the essential nature of the support we provide for our customers’ business and our performance thus far in the challenging environment. This combines with the intrinsic visibility of our SaaS model to enable continual execution of our growth plan, albeit with a wider uncertainty cone around how the macro scenarios unfold. Before turning to guidance, I’d like to frame the scenarios we contemplated. In establishing the high end of the range, we assumed that we would see over the remainder of the second quarter and the year, a continued ramp-up in return to work levels, leasing activity levels and our customers’ willingness to engage new projects. In addition, the high end assumes that we will see a bit of a catch-up in leasing macro season in the second half of the year. At the low end of the range, we assumed little recovery in either leasing activity or client engagement of new initiatives for the duration of 2020 from the activity levels that we saw in March and April. While this may seem like a harsh planning assumption given the nature of the unique macro potentialities, we thought its prudent to include that scenario at the low end of our guidance. Accordingly, our outlook for 2020 is; for the second quarter, we expect non-GAAP revenue of $276 million to $280 million, which represents growth of 13% to 15%, including 5% to 6% organic growth. Adjusted-EBITDA is expected to be $66 million to $70 million, which represents margins of 24% to 25%. Our second quarter adjusted-EBITDA is expected to be impacted by over $3 million of spend that we incurred to ensure not only that we are ready to respond during the COVID-19, but also that we went above and beyond for our customers, including establishing the temporary labor centers and investing in the product and marketing initiatives that Steve mentioned in his comments. The need for spend in these areas has plateaued in the second quarter, and we expect margins to expand as the year progresses. Non-GAAP diluted earnings per share is expected to be $0.38 to $0.42. For the full year, we expect non-GAAP revenue to grow between 13% and 17%, including 5% to 9% growth on an organic basis. This represents revenue of $1.115 billion to $1.155 billion. Adjusted-EBITDA is expected to be $290 million to $300 million or 26% of revenue, representing a reduction of 150 basis points of margin versus our previous guidance. While we intend to adjust variable costs due to lower revenue and the realization of some productivity improvements, we do not expect to reduce product development or sales and marketing spend, given our view that clients will have an increased need for products and services that help them accelerate their transition to more virtual operations. Non-GAAP diluted earnings per share is expected to be $1.74 to $1.84. In summary, we believe we are on solid financial footing and have a strategy to weather the storm during the current macroeconomic backdrop. We are an essential service to our customers, and we remain fiercely committed to supporting our customers, and we are proud of our performance to-date through this unprecedented challenge. Lastly, due primarily to the COVID-19 crisis, we are moving our Analyst Day to a virtual event in the first half of August. By holding the Analyst Day a couple of weeks after RealWorld, we will be able to benefit by packaging together some of the content from the customer event for investors. This concludes our prepared comments. Operator, let’s open for questions please.

[Operator:]

Certainly. Our first question today is coming from John Campbell from Stephens. Your line is now live.

[John Campbell:]

Hey guys good afternoon.

[Steve Winn:]

Hi, John.

[John Campbell:]

So, I just want to touch on the less leasing activity kind of expectation you guys called out. I had to hop on late, so I apologize if I missed this. But can you talk to how long do you think, when turnover stays muted? And then Steve, if you could maybe touch on kind of any commentary that you guys are maybe hearing around rent forbearance and whether property managers are just being creative with lease terms and trying to lock existing renters into longer-term contracts?

[Steve Winn:]

Well, we were pleasantly surprised that the rent collections dropped only 3% in April. Given the literal shutdown and the amount of unemployment we had anticipated, that would be higher. Leasing activity collapsed right around the time that Tom Hanks announced he had COVID-19, but it fairly quickly came back. It was only down for three or four weeks, and we began to see a trend back up, and we have a slide in our IR deck that shows that probably the most encouraging event was everybody that had planned to move, rescinded their notice to vacate and stayed put. And so we saw a jump in renewal rates, which helped mitigate the reduction in new leases. So, you went in expecting the worst, and I think what we’ve seen is quite encouraging. This is not over, of course. So, can’t predict where it’s going to go. But right now, we are returning to normal.

[Tom Ernst:]

Yes, John, I’d encourage you to take a look at the investor deck. We put some slides from our dashboards in the deck that we typically don’t put in, that we thought might be helpful around overall leasing activity across same-store analysis in our customer base, along with website traffic data from our customer base as well. So, you can see kind of the data as we’re seeing it, and it really is a striking V, that who knows what May brings, but it’s been an encouraging ramp off the bottom.

[John Campbell:]

Okay. That’s helpful. And, Tom I don’t know how much additional detail you can give on this, but I thought I would give it a shot. On the transactional revenue, I mean obviously 10%, 11% of revenues now. Could you talk to what that mix looks like? I don’t know if you can go down to the product type or maybe just down to the segment level, like where that’s kind of falling on a segment basis?

[Tom Ernst:]

We have, within our subscription business, we have components of multiple of our products that actually get metered based on underlying transactional activity at the property. The Screening software is one example of that where it’s majority subscription, but ours as a component that’s based on the activity levels, similar with our payments business. So across multiples of our businesses, there are some metering on a transactional basis. This is entirely the driver you’re seeing behind, and you can see in the data that we showed on the overall leasing activity, where at the end of March, we were actually seeing the percent changes in new leases across the 6,600 communities. The same-store analysis shows it was down over 40%. So that’s the sensitivity that drove us to report towards the low end of our guidance range rather than the high end in the quarter to give you a sense.

[John Campbell:]

Okay, yeah. That’s helpful. Thanks guys.

[Operator:]

Thank you. Our next question is coming from Pat Walravens from JMP Group. Your line is now live.

[Pat Walravens:]

Great. Thanks very much. Can I talk a little bit about the payments business. So Resident Services was $119 million. And so my questions are, how much of that is payments? And what are the puts and takes in payments for you guys now? I mean if people don’t pay their rent, I assume you lose the transaction fee, but then on the other hand I guess some people don’t want to write checks as much as they used to, and hand the check to someone. So maybe you’re seeing more activity there. Just love to hear your thoughts around that.

[Steve Winn:]

Well, payments are way up overall, because everybody went online. You couldn’t take a paper check to the leasing office, so you had to go online. So, the mix of payments has changed, but the actual transactional volume is not materially different. It’s up, because our business is growing.

[Pat Walravens:]

And Steve, of that $119 million of Resident Services, how much is payment?

[Tom Ernst:]

So Pat, we don’t break it up, but payments is the largest in the Resident Services line. Our largest are payments, are Utility Management and Renters Insurance businesses, with payments being the largest.

[Pat Walravens:]

And then, when you talk about payments, it seems like you referenced New York a lot. What’s different about the ClickPay solution for New York versus for the rest of the country? Is that something that’s evolving?

[Steve Winn:]

ClickPay was strong in New York, and RealPage was not. And, we mentioned it because we’ve had so much success with ClickPay and New York happens to be their largest market. You have to pay rent in New York like anywhere else through.

[Tom Ernst:]

Now we’re seeing the same trend in the ClickPay, New York business as we are in the overall payment businesses that Steve alluded to where you’re seeing more online. So, it’s performing well.

[Pat Walravens:]

Okay, great. And then last one for me on this subject. So, 3% you know rent collection drop in April, what are you guys expecting for May and June, or what are you modeling?

[Steve Winn:]

It’s early, clearly. Our expectation is it will probably be slightly lower. I’m not expecting a big shift downward.

[Pat Walravens:]

Great. Thanks very much.

[Tom Ernst:]

Thanks Pat.

[Operator:]

Thank you. Our next question today is coming from Ryan Tomasello from KBW. Your line is now live.

[Ryan Tomasello:]

Good evening everyone. Hope everyone is doing well, and nice to speak to all of you. Just wanted to drill down a bit more into the major assumptions of the revised 2020 guide. Tom, can you quantify how much of the 300 to 500 basis point revenue growth reduction, specifically relates to these more temporary transactional headwinds from things like screening, leasing and turnover volumes? And then similarly, you know how much of that relates to delays in new project activation and lower bookings levels from clients?

[Tom Ernst:]

Sure, absolutely, Ryan. So, as we planned through the scenarios, those are definitely the two biggest factors, and they are roughly equal in magnitude at the midpoint of our planning assumption. That is the headwind from new projects, both bookings and activation levels versus the leasing activity driven.

[Ryan Tomasello:]

Okay. Got it, that’s helpful. And then just regarding the M&A landscape, are you seeing an increase in volumes of unsolicited inbounds there? And if so, what approach are you taking to underwriting in this new environment? Do you have appetite to consummate M&A at these leverage levels, and specifically, what areas of the market might interest you and kind of present the most value, assuming we start to see more distress amongst the smaller, you know players in that landscape there?

[Steve Winn:]

There clearly is a heightened M&A interest in almost all areas. There’s over 100 companies that are competing one place or another with RealPage, and a lot of the creative innovation is happening with many of these companies. I think prices will come down, just because the environment is not as strong as it used to be, and RealPage is still intends to be active in evaluating as many of these opportunities as we can and pick those that are most complementary and have the most leverage on our business model.

[Tom Ernst:]

Again, we are seeing a range, too as we look at some ancillary spaces. There are clearly some that are under more stress where prices have already started to come down, such as in the short-term rentals market or the pockets like that. And as we think about leverage, so we’re at 2.3% leverage, as I mentioned in my prepared remarks Ryan, that’s comfortably in the 2% to 4% range that we think is optimal for us. Now we do recognize, given an uncertain environment that we’re probably a little less hesitant to go to the high levels that our credit facility allows us to, which would be a 5 times leverage or even an accordion up to 5.5 times. But, we do want to be smart in an environment, as always and if there are attractive areas that can help contribute to our innovation, we will take a close look. But we will definitely be prudent with thinking about high levels of leverage in an uncertain environment.

[Ryan Tomasello:]

Great. Thanks.

[Operator:]

Thank you. Our next question is coming from Stephen Sheldon from William Blair. Your line is now live.

[Stephen Sheldon:]

Hi guys. Thanks. And really appreciate the data on daily visitors and leasing activity. Wanted to ask about bookings activity so far in 2020 by product category, and is there anywhere that’s been notably above-average or below average by product? And I’m just wanting to gauge maybe more recently, what types of products clients are focused on in this environment, and maybe where they’re not willing to make decisions yet or pushing out activations?

[Steve Winn:]

We see a lot of interest in virtual leasing, living and payments. I think this industry was trending slowly towards a move to go virtual, but it was going to take five or 10 years to get there. What’s happened in the last two months is going to accelerate that in a massive way. And, I think all operators will demand fully virtual platforms that allow them to originate demand, capture demand, close demand, do online tours, screen and even deliver the code to the smart lock that opens the apartment for them. So, this is development that we’ve been working on for some time and feel like we want to even accelerate some development that’s been going on in that area. Another mega trend, in our view has to do with residents that are now going to work more at home. So those apartment owners and operators that can deliver the most convenient work and living experience at the apartment will be the winners in the future. And, so many of the portal tools that we offer are going to become more and more important, and as I said in my remarks, we saw a 75% increase in usage of our Resident Portal. So, I don’t think that’s going to change. I think the residents are hooked on it, and they’re going to stay with it.

[Tom Ernst:]

Stephen, I’ll add to that, too. That the team here made a rapid shift to put together packages and campaigns to drive some of that shift that Steve is talking about, and we’re successful in moving about 15% of the pipeline to these virtual living, leasing and payments businesses. So, that was quite successful and resulted in significant deals as well. But, as we looked at the results, and I commented in my results how we did see significant impact or depressing impact to bookings, particularly in late March. We have seen early signs of recovery in that, and as the teams looked at where we’re driving bookings, it’s actually pretty broad-based. So, we’re seeing a big number of midsized deals as we look at the pipeline, they are across the range of what we do, including some areas you might expect would be even more deeply impacted such as student coming in late in April. So, overall it’s an encouraging kind of broad-based recovery, albeit it’s definitely lower levels than we had planned pre-COVID.

[Stephen Sheldon:]

Got it. And that’s helpful. I guess, the weaker bookings, in late March was that concentrated in any specific product category?

[Steve Winn:]

No. Everybody literally hunkered down to survive. There was a freeze up with one exception, and that is anything they could do to get payments from paper to electronic, they bought instantly.

[Stephen Sheldon:]

Got it. And one more, if I could. Just wanted to ask about the risk to implementations in this environment from in-person restrictions? I know you’re working and have made progress that simplify processes and allow for more self-provisioning. Could it be a meaningful headwind to what revenue streams could be implemented and come live this year?

[Steve Winn:]

I don’t think so. We had an exceptionally good quarter on the implementations, and we were concerned when we went to work-at-home that the productivity would decline. But, in fact, we’ve managed that tightly, and we’re very, very pleased with the performance of our team. We didn’t have any service-level problems at all, and it was all - 98% of it was being done work-at-home. We were also load balancing work around the world, so if we had a location in, say the Philippines was down for a couple of days, we could ship that work to India or the U.S. and our customers never saw it. So, I don’t see this environment being gated by, or having any implications to our ability to accelerate implementations and continue to work some of our people at home. I don’t think we’re going to bring everybody back for a long time.

[Stephen Sheldon:]

Make sense. Thank you.

[Tom Ernst:]

Looking at the numbers, Stephen. Looking at the numbers, the implementations did track roughly what happened with our bookings, and so we had a pickup of momentum, particularly as we looked as April progressed. So, we ended up with effectively not producing new backlog, they roughly tracked.

[Stephen Sheldon:]

Got it. Thank you.

[Operator:]

Thank you. Our next question is coming from Peter Heckmann from D.A. Davidson. Your line is now live.

[Alexis Huseby:]

Hi guys. This is Alexis on for Pete today. Thanks for taking our question. I just wanted to ask a few questions about customer behavior. So, it sounds like you have 9 million SMB units, and I’m wondering if you’ve seen a major difference in behavior on the part of your relatively smaller, versus larger clients and kind of in-line with that, if whether or not any customers have requested pricing concessions or waivers for monthly payments?

[Steve Winn:]

We’ve actually had very strong collections. Our DSO is better today than it’s been.

[Tom Ernst:]

In the last three years, yes. Actually we’ve had our best DSO in three years this quarter.

[Steve Winn:]

I mean we’re on top of that. We are an essential service. So, you know is one part of the customer base in more pain than another? It turns out that Class C apartments, which are the lower end of the multifamily space, actually suffered less decline than A and B. So, it’s not clear that SMB is going to be more impacted. We’re just not seeing that.

[Alexis Huseby:]

That’s really helpful. I definitely appreciate all the incremental data. So, would the company be considered, in most cases a critical vendor that would continue to be paid in the event of, say a Chapter 11 bankruptcy filing on the part of a property management firm?

[Steve Winn:]

You can’t really operate an apartment today without all of the online systems that RealPage offers. So, I can’t fathom a situation where an operator would just turn off the system and go to spreadsheets and paper checks for everybody. I think we are an essential service, and I think RealPage would be of the last to cut.

[Alexis Huseby:]

Yes. Sure, fair enough. And then just one last one, it was great hearing about the 20% boost to payment volumes. I’m wondering about the relationship between the downtick in new leases offset by the renewal leases, of course. How is that affecting tenant screening volumes?

[Steve Winn:]

Screening was down, particularly in the mid-March through mid-April, it was down a lot. If you looked at the slide that showed new leases, screening will track that. So, it was down, but it’s recovered. It’s come back to pre-COVID levels at this point.

[Tom Ernst:]

Although, we’re watching that closely, so that is the most recent data. But, as I outlined in our planning assumptions, we kind of, we don’t assume in the scenarios that we have year-on-year growth in screen, say for the high end of the range.

[Alexis Huseby:]

Okay. That’s good to know. Thank you.

[Operator:]

Thank you. Our next question is coming from Joe Vruwink from Baird. Your line is now live.

[Joe Vruwink:]

Great. Hi everyone. I’m wondering if you can talk, I think it’s a $27 million reduction in EBITDA midpoint to midpoint. How much of that is being prioritized to maybe the strategic leaning in on some of these categories that might actually be kind of category winners longer term? And then how do you think about the ROI on that investment that start to take place this year?

[Steve Winn:]

This is full year guidance.

[Tom Ernst:]

Yes, full year guidance. Right.

[Steve Winn:]

Yes. The revenue reduction is, of course what’s driving most of that $27 million. What we did not do was cut our product development, sales and marketing budgets. So, had we declined those at the 3% to 5% then EBITDA would have tracked. But, we really feel like we need to keep those dollars in play. There’s too much opportunity. Crisis is always followed by rebirth, and this is going to be a new world as our industry shifts from paper to virtual, and we want to be at the forefront of that shift and really drive that shift as much as possible. So, don’t show a weakness at this moment.

[Tom Ernst:]

And also, Joe, I mean that’s top priority, we are also remaining invested in the SMB strategy that we outlined for you when we acquired Buildium, and we spoke last quarter. So, we’re continuing to hire there, significant investment. They’re growing strongly; they grew 35% in their first full quarter, so that’s up from the 32% they were growing when we acquired them. So, look for us to continue to remain invested in that. We’ve talked about a number of other initiatives that are - we didn’t detail on this quarter, but we previously talked about that we continue to invest in from a product development standpoint and go-to-market standpoint.

[Joe Vruwink:]

Great. I guess that, Steve, the rebirth is what I’m interested in. When you talk about a five to 10 year trend structurally changing within a matter of a couple of months, just thinking about online leasing practices would be one. But, when you think about that unfolding, I’m not saying it helps 2020, but as you look into 2021, 2022 maybe relative to an organic growth rates that was already expected to be kind of low teens, do you think that gets pushed higher by some amount? Do you have any idea of what that amount might be?

[Steve Winn:]

We’re still committed to our 2022 goal of $1.5 billion in revenue and $500 million of adjusted EBITDA on a run rate basis. If we get more clarity on how these investments are going to perform, we may change that guidance, but we’re not backing off of that long-term objective as a result. I mean COVID is not changing that, but I don’t think we’re in a position at this point to raise it.

[Joe Vruwink:]

Okay fair enough. Thank you everyone.

[Steve Winn:]

Thanks Joe.

[Operator:]

Thank you. Our next question is coming from Jason Celino from KeyBanc Capital Markets. Your line is now live.

[Jason Celino:]

Hey guys. Thanks for fitting me in. A lot of uncertainty in the rental markets has been around this fear of tenants unable to pay. April payments, you can say, was better than feared and we still need to see May and June, but let’s say it also comes in a little bit better this year. Do you think the customer propensity and their budgets come back? Or do you think owners will still be conservative?

[Steve Winn:]

I think owners are going to buy technology that improves their bottom line, and going virtual will drive efficiencies for this industry. Notwithstanding 3% to 5% movement on collections from their residents, they’re going to spend the money because the returns are so fast and so real, and they know it works now. There were a few operators that had figured out going virtual was going to happen, and we’re actually orchestrating that shift, but this last two months has proven it works, and I think the technology that will drive virtual living and working at an apartment is going to be huge. And there are a lot of derivative products and services that will fall out of that. And, so I’m bullish, I mean I do think there’s going to be a rebirth and a change in the way our industry operates, and I think technology is going to become more important. The industry spends about 1% of its revenue on technology today. RealPage has about 17% of a $6 billion technology spend, excluding Telecom. And I am absolutely convinced because we can show the economics that the industry will grow that, and we’re hoping they grow over the next five years to at least 1.5% of spend on technology, which should be $10 billion, and RealPage is more helpful than the competitors and helping them get there, we would hope our market share would grow above 17% of the overall pie.

[Jason Celino:]

Okay, great. That’s actually pretty helpful. I guess one more, if I could fit it in. The slowdown in leasing velocity that you anticipate, do you think that it will be different for maybe a single-family property versus a multifamily property, or would it be the same?

[Steve Winn:]

We haven’t seen a difference. I mean everybody hunkered down. Again, it’s early in this rebound, so there may be a differential, but at this point we don’t see it.

[Jason Celino:]

Okay, great. That’s all from me. Thanks.

[Tom Ernst:]

Thanks Jason.

[Operator:]

Thank you. Our next question is coming from Sterling Auty from JPMorgan. Your line is now live.

[Jackson Ader:]

Great. This is Jackson Ader on for Sterling tonight. A couple of questions from our side, the first is, could we maybe just talk about the balance between net new logo additions being delayed in terms of their bookings deals, versus maybe existing customers that RealPage is looking to cross-sell and they have delayed maybe their decision making?

[Tom Ernst:]

I think we saw an impact in both. I mean the environment, the kinds of calls we are getting from customers was whether it was new or add-on deals or even things that were already in backlog, the calls were the same. I’m excited about this RealPage, but I’m dealing with an emergency right now. Call me back in a couple of weeks, please. So it was across both.

[Jackson Ader:]

Okay. So nothing necessarily to call out, you know one way more impacted than the other?

[Tom Ernst:]

I don’t think so. You know its still early, but it is, as we we’ve looked at what we are booking post-COVID, as I mentioned we’re seeing a pretty nice mix of not only new and add-on, but it’s across the product set as well. Obviously, it has shifted, as Steve has highlighted to the virtual living, leasing and payments. That’s been the big shift to call out. Otherwise, it’s fairly broad-based.

[Jackson Ader:]

Okay. And then Steve, a follow-up for you. How do you view maybe end customer consolidation? Would you view that as a net positive, net negative or neutral to RealPage? And how have you handled that in the past?

[Steve Winn:]

There’s been some consolidation in this industry, but not a lot. I remember when we came in to this industry, Equity Residential, I think had 200,000 units, and there’s only couple owner operators that have more than 200,000, 20 years later. So, it’s remained a fragmented industry, and there’s nothing that would suggest that there’s going to be massive increases in the size of one or two of owner operators. I think Greystar at this point is the largest, and they’re 400,000 or 500,000 units out of 65 million.

[Jackson Ader:]

Okay. Thank you.

[Tom Ernst:]

Thanks, Jackson.

[Operator:]

Thank you. Our next question is a follow-up from John Campbell from Stephens. Your line is now live.

[John Campbell:]

Hey guys, thanks. One quick follow-up here, I wanted to touch on the payments business again, Resident Direct, I know is a very, very small piece of that business, but it seems like it would make sense maybe for some folks to load a little bit of rent maybe near-term on the credit card. Are you seeing a mix shift at all there?

[Steve Winn:]

We’ve seen some shift to more credit card, and we’ve had some owners that have agreed to pay for the fee on it to help their residents. But, it’s still - credit cards are pretty small percentage of the total number of transactions that we process. But, it has gone up a little bit in the last two months.

[Tom Ernst:]

Yes. I wouldn’t characterize it as small, John. I think it’s been quite successful. It is a very small part of the overall count, but it’s been a successful product for us.

[Steve Winn:]

Yes, Resident Direct is important. It’s not small relative to Client direct. Because Client Direct where the client pays for it, and Resident Direct where the resident pays for it. Resident Direct is clearly the trend that the industry is moving to.

[Operator:]

Thank you. We’ve reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today’s teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.