RealPage Inc
Q4 2017 Earnings Call Transcript

Published: 28 Feb 2018

[Operator:]

Good afternoon and welcome to the RealPage Fourth Quarter 2017 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rhett Butler, Vice President of Investor Relations. Please go ahead.

[Rhett Butler:]

Thanks Brandon. Good afternoon and welcome to the RealPage financial results conference call for the fourth quarter and year ended December 31, 2017. With me on the call today is Steve Winn, our Chairman and Chief Executive Officer; and Bryan Hill, our Chief Financial Officer and Treasurer. In our remarks today, we will include statements that are considered forward-looking within the meaning of Federal Securities laws. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today, February 27, 2018, and are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties is contained in our quarterly report on Form 10-Q previously filed with the SEC on November 7, 2017, and our earnings release and materials distributed today. RealPage undertakes no obligation to update any forward-looking statements except as required by law. Finally, please note that on today's call, we may use or discuss non-GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure are included in today's earnings press release. In addition, please reference the explanation of non-GAAP financial measures section of today's earnings press release for more information. With that, I'll hand the call over to Steve.

[Steve Winn:]

Thanks, Rhett. Good afternoon everyone and thank you for joining our fourth quarter conference call. 2017 was a tremendous year for RealPage as we significantly enhanced our product offerings and executed well against our financial goals. I am proud of the value we have created for our shareholders, our teammates and our clients. The investment we made in development and through acquisitions in 2017 have positioned us to continue growing in 2018 well above the trajectory needed to reach $1 billion in revenue and $300 million of adjusted EBITDA by 2020. Today I will review our accomplishments over the past year including fourth quarter performance, briefly highlight the industry's macroeconomic trends and talk a little bit about 2018 initiatives. In 2017, our senior leadership team began formulating a strategy to grow beyond our 2020 goal. To achieve sustained revenue growth and margin expansion beyond 2020 we’re focusing on two themes, innovation and simplification. We call these teams - these names are North Star. Simply stated we must innovate in every area of the business to accelerate organic revenue growth and we must become a much easier company to do business with to drive significant margin expansion. These names will be intertwined with everything we do going forward, so you'll hear much more about our North Star as we move into 2018 and beyond. Given the exceptional growth we have achieved in the past couple of years, it should be fairly clear by now that we expect to achieve our 2020 financial goals hopefully sooner than originally planned. So now we're focused on how to continuing growing the business beyond 2020 through innovation and simplification. Accordingly, we have initiated several key organizational changes to highlight these names. For example, our incentive compensation systems are being tuned to reward team members based on innovation that drives accelerated organic growth and simplification that improves profitability by making us an easier company to do business with. Another example is that many of our team members have sat through in-depth training to understand the strategy, how to structure goals and initiatives for their respective teams and the value creation for all constituents if we execute successfully. So I’m confident that our company culture will be 100% focused on our North Start. As we track ahead of the pace initially required to achieve our 2020 goals, many of you already asked, what's next for RealPage. Rest assured, we're dreaming bigger and focused on scaling beyond our current 2020 objective. By this time next year, we intend to update our longer-term objectives and target operating model to reflect the return expected from our 2017 and 2018 organic investments. Our vision is to empower the real estate industry with a unique powerful and data rich platform that improves operational returns through increased revenue, reduced expenses and less risk. Our vision is expanding beyond the operational holding period of an asset to the transactional side of real estate where we believe we are well-positioned to use our data to help optimize the yield on the purchase and sale of an asset. Clients are really responding to our vision and coupled with investments made in 2017, we are experiencing a more satisfied installed base that is adopting more of our solutions and new clients that are eager to adopt the full platform. To that end, new clients sweet deals during the quarter had an average RPU of over $80 in our corporate sales segment and over $115 in our SMB segment. Supporting this trend, we recently announced WinnResidential is converting to the RealPage platform. This week deal contemplates the implementation of a large portion of our platform and I am particularly pleased that our consumer front end will be part of the deal. The strength of each component of our platform help to drive the decision to win. However, with myriad disparate software products leading to a very complex environment, it was the flexibility of our open architecture and the dedication of our client support teams that sealed the deal. We were able to work with Winn as a strategic partner enabling flexible configuration and deployment options to ensure a disruption free transition for the residence clients and team members. I’m extremely proud of the innovation and bespoke client experiences we are now delivering that were born from a focused investment strategy. During the quarter we also closed a large sweet deal with the manager of nearly 8000 affordable units in the Northeast and they were experiencing inefficiencies and complexities with the disparate set of software point products in their environment. As a result, some executives were literally consolidating spreadsheets to understand portfolio performance. RealPage was able to displace many of these vendors with our platform that included property management, screening, learning, accounting, business intelligence and utility management solutions. The integration of our platform combined with enhanced compliance capabilities and portfolio wide reporting were critical differentiators for RealPage. Our renovation in the affordable segment coupled with this clash sharp focus on efficiency, profitability and growth are the strategic partnerships that we love. What stands out here to me not only with this new and existing clients are adopting a much more meaningful way then they have historically but how we are utilizing data and innovation to solve our clients problems with a simpler more tailored way. Take Morgan communities which is utilizing our revenue management solutions. Morgan manages over 40,000 units and recently described how RealPage is a key partner in their journey. Morgan historically use budgets that would hold them to 97% or 98% occupancy in some secondary and tertiary markets where they were the leaders. Initially it was very hard for executives to accept that they could operate at 94% or 96% and achieve a higher NOI by increasing rents. Morgan began utilizing RealPage to operate at 95% while seeing revenue increases 3% to 4% making more profit and an occupancy level that would have made management uncomfortable before. Because the RealPage platform is rooted in data and science, executives could understand and follow the numbers. They describe the experience as eye-opening. These are the stories that get me excited and tell me that our North Star focus on simplification and innovation utilizing our data is the right path. Moving on let's review some of the actions we took during 2017 that help to drive our performance and will set the stage for 2018. From an organic investment perspective we continue to invest on our sales force with focus on productivity. This investment combined with refining our sales deployment strategy resulted in strong bookings and productivity growth. Specifically full year 2017 bookings grew over 20%. This is extremely encouraging sign as bookings growth was the strongest in Q3 and Q4 with momentum building as the year progressed. Despite the dilution from new sales reps, we achieved solid overall productivity growth giving us confidence in the growth plans that Bryan will outline shortly. We expect to leverage this momentum and further refine our go-to-market strategy in 2018 to increase the number of dedicated solution reps that focus on specific product solutions. We believe these specialty sales teams provide in-depth knowledge of our product solutions and help deepen penetration of our platform. We also made significant organic investments in our products and infrastructure. These investments include data analytics, investments, leasing and marketing investments and platform wide Unity investments. As you will recall, Unity is an important initiative in making RealPage easy-to-do business with. It allows us to share data across all applications, provide a single sign-on and user authentication, deliver persistent user experience across all of our solutions, build a vast library of shared services that all applications use, and build the technical framework that will enable us to add new clients and future acquisitions seamlessly. Certain components of Unity have already been implemented resulting in improved integration processes and the achievement of financial synergies which Bryan will speak about in a moment. Unity is also helping bring new innovation to the market faster. A couple of examples, Unity has allowed our On-Site team to rapidly conform the user experience to a consistent RealPage look and feel. Unified user management capabilities inherent in the platform have centralized the provisioning and management of users across On-Site products ensuring consistency and simplicity. Unity is also expected to provide enhanced client migration tools making the process of moving to our platform even easier. Unity is helping support our focus on innovation as well. Soon we expect to release new document management functionality that unifies the user experience and enables clients to utilize the Unity infrastructure for leasing operations and their own corporate needs. For example, leases, compliance, documents, work orders, invoices and reports from virtually anywhere can be searched for thrives and shared portfolio wide. These are just some of the benefits we are achieving with Unity and we expect to continue our innovation on this front throughout 2018. We also invested in our vacation rental platform and recently launched Kigo MarketPlace. Kigo MarketPlace is a global platform that optimizes the management of short-term rental inventory enabling property managers to capture a larger percentage of booking fee revenue from gas. The new offering introduces a much simpler pricing model, enables short-term rental managers to eliminate many of the fees paid to third parties while reducing risk at the same time. The integrated platform which can replace numerous point products currently cobbled together by manager’s features multicurrency payment in enhanced fraud and chargeback mitigation and intuitive guest communications capability. Short-term rental property managers now have the tools to build their local brand separate from lead generation channels increasing the number of profitable repeat gas that book direct. We benefit in our clients increased revenue because Kigo MarketPlace pricing is based on a percentage of booking revenue generated by the property manager. Our inorganic investments in 2017 were centered on five acquisitions. First, the acquisition of AXIOMetrics helped to improve our data analytics offering and begin to attack the transactional opportunity within multifamily rental housing assets. We have nearly completed the integration of our databases from AXIOMetrics RealPage and RealPage data analytics and our vision of offering a comprehensive RealPage data set as a single source of truth for multifamily, submarket and individual asset performance and analysis is almost realized. Second, the acquisition of a AUM expanded scale of our resident billing operations and included important energy consumption and cost data. Our resident utility management platform is now one of the largest solutions in the industry with over 2.6 million units on the platform. Third, the acquisition of On-Site was critical as it solidified our front end solution to manage the entire leasing process from lead assimilation to applicant screening to final generation of lease documents. The acquisition also significantly improved our lease management integration into major property management systems such as Yardi and MRI and AMSI. Finally in December we closed the acquisition of LRO and [PACKS]. Combined LRO, YieldStar and AXIOMetrics formed the most comprehensive suite of solutions for data analytics and asset optimization for rental housing assets. In addition, PACKS is our initial investment as we begin to expand internationally. Bryan will speak to the integration economics that we are achieving which are ahead of plan and reaffirm our M&A strategy. Moving on to macroeconomic trends. According to our data, occupancy for the fourth quarter was 95% which is unchanged from the fourth quarter last year. Annual rent growth registered 2.6% driven by rent cuts late in the year reflecting normal seasonality as slower leasing activity in the cooler weather months can spur housing owners and operators to offer more pricing deals. According to our Chief Economist, Greg Willett while apartment rent growth pace has slowed from the performance seen a couple of years ago, it's the longevity of the current cycle that is so impressive. Rents have climbed substantially for eight consecutive years. Willett's outlook for 2018 contemplates minimal shifts in momentum over the coming year, and expects apartment demand should stay very solid but new supply will continue to be delivered at a pace that will keep leasing conditions competitive in the top-tier product niche. He also expects rent growth to remain moderate. In summary, we’re very excited about the future. We are extremely proud of the actions we took in 2017 and the strong financial performance we've achieved. However, our focus is forward on our North Star of Innovation & Simplification. This will not only got our strategy but our culture as well. I am appreciative of these sacrifices and the hard work of our teammates that enabled our vision in 2017 to become a reality. I believe we have the right team in place to drive long-term growth through our North Star focus and create value for employees, clients and shareholders. With that, I’ll turn the call over to Bryan.

[Bryan Hill:]

Thanks Steve, and good afternoon everyone. Today I'll review our 2017 full-year financial highlights, fourth quarter operating performance, and our financial strategy for 2018. 2017 was perhaps one of RealPage's most successful years. 2017 financial performance was a direct result of our team's hard work ensuring our innovation and investment strategy was well contemplated and executed. Specifically, we achieved total revenue growth of 19%, adjusted EBITDA margin expansion of 180 basis points and operating cash flow growth excluding tenant reimbursements in 2016 of 17%. Our strategy and financial performance have helped us outpace the annual required to achieve our 2020 objective of $1 billion in revenue and $300 million in adjusted EBITDA. I would like to focus on a couple of areas. 2017 was essentially about expanding our market share through strategic acquisitions and investing in our platform to ensure we achieve our long-term goals. The foundation of our investment strategy start with maintaining a cost-effective capital structure and to deploy that capital to achieve the highest risk adjusted returns for our shareholders. The primary objective of our investment strategy is to bring scale and innovation to the market and to invest in the long term in order to continue to accelerate revenue growth and operating efficiently. This strategy possesses organic and M&A components. From an organic perspective we invested in our infrastructure, products and our sales force. Some of our infrastructure and product investments included data analytics, leasing and marketing, and platform wide unity investments. As a result, full-year organic growth in our asset optimization product family accelerated significantly from 2016 levels and our leasing and marketing product family she did highest level of organic growth since 2015. Property management organic growth was solid and resident services organic growth continues to be well ahead of our 10% to 12% target for total revenue. Our sales investments also help drive significant new sales bookings which were up 20% over the prior year and then she improved sales force productivity as well. From an M&A investment perspective, we acquired five companies during 2017. I will speak to the four largest, starting with AXIOMetrics acquired for $75 million in January has enabled us to vastly expand our data footprint, improve our data analytics offerings, and begin to attack the transactional opportunity within multifamily rental housing assets which we believe is significant. We now have completed the vast majority of integration work for AXIOMetrics. AUM acquired for $70 million in June helped us expand the scale of our resident billing operations and brought valuable energy consumption and cost data. The integration effort has also made a significant progress as we exit 2018. The acquisition of On-Site and LRO clearing HSR review late in 2017 have everyone at RealPage excited about the future. Our integration still require dedication from our teams and incremental integration investment we have a clear path forward to achieve our innovation and integration goals. In summary, we are proud of the results from our investment strategy including both organic and M&A investments and the actions we've taken to strengthen our capital structure. Our market positioning has strengthened significantly and we are encouraged by our integration progress. In total, due to the strong operating synergies, we expect a total purchase price valuation for the four acquisitions discussed of 10 times adjusted EBITDA in aggregate on a run rate basis as we exit 2018. These moves were critical to enable the achievement of our long-term goals. Now for quarterly operational performance. First on-demand revenue grew 28% compared to the fourth quarter last year. Units grew 18% compared to the prior year quarter. It is important to note that acquired unique units totaled approximately $1.5 million during 2017. This is often an underappreciated aspect of our M&A strategy. These units present a substantial cross-sell opportunity and represent approximately three years of organic growth performance. Revenue per unit was over $58 and grew 12% despite the significant spike in units which typically dilutes RPU growth as the new units board at a much lower level than our aggregate RPU. Annual client value was over $751 million representing 33% growth. The primary drivers of total on-demand revenue performance were in continued consistent growth from property management of 10%, continued strong growth from resident services of 26%, significant growth from asset optimization of 66%, our leasing and marketing grew 36 compared all to the last year. Property management growth was driven by strong performance in our spend management solutions, as well as solid adoption of our one site property management and accounting solutions. Resident services is benefiting from a strong growth from our payments, resident utility management solutions which include AUM acquisition, and our renters insurance solution which recovered to normal levels after the impact from Hurricanes Harvey and Irma during the third quarter. Leasing and marketing primarily benefited from the acquisition of on-site manager. We continue to be excited with the growth prospects of this offering and the advantage it adds to secure clients utilizing third-party property management solutions. In addition, we are very pleased that leasing and marketing returned to positive organic growth at 4% compared to last year driven primarily by solid adoption of our online leasing and screening solutions. Asset optimization continues to show evidence of market acceptance of data-driven solutions. As a reminder, the acquisition of AXIOMetrics and LRO are included in this product family grew. Asset optimizations organic revenue growth accelerated to 25% when compared to the same period last year driven by our data analytics, [BR] and revenue management solutions. We're extremely excited about our future growth prospects for this product family given our strategy and intent to invest in this area the integration of LRO, new BR functionality, the transactional opportunity on the horizon and the overall strong asset optimization booking terms. Second, our profitability performance continues to track towards $300 million in adjusted EBITDA. We achieved $46.9 million of adjusted EBITDA, a margin of nearly 25% reflecting 30% growth. Gross margin was over 65% excluding depreciation, amortization and stock-based compensation and was accretive to aggregate margin expansion by 130 basis points. Gross margin expansion was driven by scale across our multifamily business, and improving efficiencies in certain lower margin product areas like contact center and screening. In addition, recent acquisitions in the asset optimization family have contributed to margin expansion due to solutions possessing higher software margins combined with targeted acquisition integration efforts. Total operating expense on a non-GAAP basis for the quarter was 43% of revenue. As we look at the components, product development expense as percent of revenue was 30% up over 130 basis points exhibiting margin compression primarily driven by our innovation and infrastructure investments I described earlier and incremental costs from acquisitions. Innovation investments and incremental acquisition costs during the quarter combined diluted margin expansion by approximately 140 basis points. Sales and marketing expense as a percent of revenue was 18% declining slightly compared to the prior year. The leverage was a result of the scale we've built in our sales and marketing engine partially offset by variable sales compensation linked to the over performance of our Q4 new sales bookings and modest incremental cost from acquisitions and our investment in new sales reps. These factors combine for the quarter diluted margin expansion by approximately 40 basis points. General and administrative expense as a percent of revenue was 11% down almost 90 basis points compared to the prior year. Leverage was driven by the infrastructure scale we feel partially offset by incremental cost from acquisitions and professional fees. Professional fees diluted margin expansion 35 basis points during the quarter. Moving to cash flow performance, during the quarter we generated $31 million of operating cash flow and capital expenditures were slightly over $11 million. CapEx for the year was 7% of revenue. During 2018, we expect CapEx of 6% to 6.5% of revenue exhibiting progress towards our longer term goal of 5% of revenue by 2020. Briefly I'd like to walk through our 2018 operational investments. We will continue to invest in areas we believe have tremendous opportunity like asset optimization, leasing and marketing and resident services. In addition, in order to achieve our synergy targets for On-Site and LRO, we expect to incur incremental investments that will modestly reduce margin expansion in the first half of 2018 but will result in accelerated margin expansion as we progress through the year. We expect to exit 2018 with an adjusted - Q4 adjusted EBITDA margin approaching 27%. Before moving to guidance, I’d like to briefly cover a couple of accounting related matters. With respect to ASC 606 revenue from contracts with customers based on our current analysis we believe these changes will have an immaterial effect on our revenue recognition. Client acquisition costs or more specifically sales force commissions will be deferred and amortized over a benefit period of three years compared to our previous practice of expensing as incurred. This will result in lower commission expense during 2018 and 2019 bouncing back to normal levels by 2020. Next, as many of you know the Tax Cuts and Jobs Act was recently passed. As a result of the legislation, during Q4 2017 we re-measured our deferred tax assets of the lower corporate tax rate and incurred a $25 million reduction of GAAP earnings. As of the fourth quarter of 2017, the gross value of our net operating loss carryforward was approximately $173 million. We believe our go-forward sustainable effective tax rate including state and foreign jurisdictions will be approximately 26%. Now moving to guidance. For the first quarter of 2018, we expect non-GAAP revenue in the range of $200 million to $202 million. Adjusted EBITDA is expected to be $51 million to $52 million and non-GAAP diluted earnings per share is expected to be $0.34 to $0.35 per share. For the full year 2018 we expect non-GAAP revenue of $835 million to $845 million. Adjusted EBITDA is expected to be $215 million to $221 million. Finally non-GAAP diluted earnings per share is expected to be $1.41 to a $1.47 per share. This concludes our prepared comments. Operator, I would like to open the call for questions.

[Operator:]

[Operator Instructions] Our first question comes from John Campbell with Stephens Inc. Please go ahead.

[John Campbell:]

On the announcement of the WinnResidential contract, it sounds like they’re coming over maybe from another vendor. Can you guys share who that was and then maybe what drove their decision and then its look like the 60,000 or so in new units that's a decent size - and I'm assuming that’s one 1Q and not in the 4Q number you guy just reported is that right?

[Bryan Hill:]

That’s correct, it is a recent one.

[Steve Winn:]

Yes, they are primarily Yardi and in [Trada] client and we’re converting both of those competitors to RealPage.

[John Campbell:]

That’s great. And so it sounded like if I read it correctly that you guys basically had a couple different offerings with them and then basically converted over the back or I guess the backend of the accounting side at the very end is that right?

[Bryan Hill:]

Yes. Winn has been a historical client of RealPage, the ACV value of the previous relationship was well significant it’s a small percentage of the overall value of the new Winn. This is more of a sweet win for RealPage that includes property management and the accounting solutions as you indicated.

[John Campbell:]

And then last question from me on the asset optimization, I mean 25% organic growth that was a really good number that is coming off I guess more difficult comps but I know you got the law of large numbers there but on other hand you guys do have a ton of new products that seem like they’re kind of still early stage adoption. So I guess just curious about kind of growth rate - organic growth rate expectations for 2018 is that you are guys seeing a little bit deceleration or do you think that could potentially even accelerate?

[Bryan Hill:]

What we've been factored into our guidance for the year is a growth rate that’s comparable to 2017. We’re extremely excited and extremely pleased with the hard work that the teams put into the new products that we’ve rolled out that in large part has resulted to the acceleration in Q4. We think there's still opportunity for that product family group to continue to grow at that level and potentially beyond especially as you begin to consider the transactional opportunity which we have in even at this point to fully address, but we have products coming out early in Q1 that will begin to address that opportunity.

[Operator:]

Our next question comes from Nandan Amladi with Deutsche Bank. Please go ahead.

[Nandan Amladi:]

So Bryan and Steve you both talked about the Unity program. How much work has been completed and what's left to do. And then as you contemplate more acquisitions, how much easier does Unity make it to integrate these acquired assets?

[Steve Winn:]

Well let me answer the second part first, Unity creates a platform that makes it much easier for us to integrate acquired companies. And we've seen evidence of that with the integration of AUM, NWP, [indiscernible] and On-Site all of them are using elements of Unity. This is a large project we’ve been funding a substantial number I think we disclosed 150 basis points of investment in Unity in prior years. And my expectation is we will continue to fund at that level because we’re rewriting essentially services that had been built independently by the divisions or companies we acquired are being rewritten into a shared services that everybody can utilize. This makes - it's one of the key projects that we have underway to help us drive margin expansion beyond 2020. If we can deprecate all of this code that candidly we don't need if we have shared services that everybody uses.

[Nandan Amladi:]

And a follow-up on the - as you move your products to the transactional side, as you just mentioned related to buying and selling of assets, what will be the selling motion for those products compared to the operational stuff that you traditionally done and what impact might that have on ARPU margins and so on?

[Bryan Hill:]

Nandan could you repeat the first part of that question, we didn’t pick up on…?

[Nandan Amladi:]

Yes, I was asking about the new products that address buying and selling of properties, that's the trust of lot of the analytical products that you’ve been acquiring and integrating. How does the selling motion for those products differ from the traditional operational products and what impact might that have on your ARPUs and margins and so on?

[Steve Winn:]

Well this is a new product so I don’t think it’s a going to have a material impact in the near-term, it’s a family of products. It will be sold through existing channels into our institutional customer base we’re already selling to them. We’ll also be selling these products to operators who want to able to mark to market their assets every quarter candidly and these tools will allow them to do that. We haven't, I don't think the size of the revenue here is going to have a material impact on ARPU but as we roll it out, we’ll talk some more to it.

[Bryan Hill:]

I mean Nandan as you think about the opportunity for this product, I mean it's more than our direct line it also has value to lenders and to large institutions such as Fannie Mae and Freddie Mac. As Steve mentioned, we would sell it through a normal channels at the institutional levels so we can leverage our existing scale and infrastructure. So from a margin perspective this will carry high margins, software margins if you will. And so yes, we’re really excited about it because it's yet another use of the deep data that RealPage possesses that quite honestly our competition does not possess today.

[Operator:]

Our next question comes from Stephen Sheldon with William Blair. Please go ahead.

[Stephen Sheldon:]

I guess just first the transactional revenue component, I know it's somewhat small, but it jumped quite a bit in the fourth quarter up I think over 60% year-over-year an almost close to doubling sequentially. Was there anything specific driving that increase?

[Bryan Hill:]

Yes, so the on-site acquisition which possesses application screening, online leasing and document management products, a large percentage of that revenue is transactional. And so that's what contributes to the transactional percentage that we reported this quarter and we will continue to report in future quarters. We expect that our subscription-based revenue will be in the 85% to 88% range depending on the quarter because there is seasonality that follows transactional revenue. But within the on-site client base it follows closely with the leasing season and it’s a very predictable transactional revenue stream.

[Stephen Sheldon:]

And then I guess just how much of a move up in kind of multifamily vacancy rates do you need before there is kind of notable increase in marketing spend by [Anderson]. And did you see any benefit of that in the fourth quarter just based upon the slightly improved organic growth rate in that business?

[Steve Winn:]

Well I don't know whether we can attribute to 4% increase to that. Clearly when occupancy comes under stress, operators will spend more money on tools to improve occupancy. So I think this is a - it’s a change from what's been going on for the last eight years where we were flying into a headwind. I think we’re going this thing is turning and we’re going to have a slight tailwind. But I wouldn’t attribute to a lot to that.

[Bryan Hill:]

Yes. It's hard to focus on what we refer to as leasing velocity in the Q4 period because that is the lowest level of leasing activities. So we need to continue to monitor this as we proceed through the leasing seasons of 2018. The primary driver of the organic revenue growth was our online leasing solution and our screening solutions. We still did see some headwinds within our contact center albeit we signed a large client in late Q4 related to the senior living space which we’re excited to rollout through 2018.

[Operator:]

Our next question comes from Thomas Robb with Morgan Stanley. Please go ahead.

[Thomas Robb:]

It's Thomas on from Brian Essex. Wanted to first dig into - I guess like using Winn as an example, how do you guys kind of go to market when you're attracting some of these larger customers. And it seems like you guys talked a lot about I guess you used the word spoke, and I just wondering is that like the [SOC] integration is that other SOC sales force is that SOC some sort of different software technology kind of anything and how you go to market that would be very interesting?

[Steve Winn:]

What we’re really referring to as it related to Winn is the ability given the diversity of our platform, the breadth of our platform. We can customize the product solutions into a suite that meets the immediate needs of the client that provides us a significant competitive advantage from a pricing perspective, as well as taking out multiple vendors as we customize the suite approach.

[Thomas Robb:]

And then maybe kind of as you guys are integrating three or four big acquisitions you have throughout the year. Can you kind of give us an idea of what's going to need to be done and kind of maybe the milestones you would expect to reach throughout the year and then maybe - what would have to happen for you guys to reach those goals earlier than expected? Thanks.

[Steve Winn:]

Yes, for a couple of the acquisitions specifically AUM and AXIO we feel like we are ahead of the plan that we originally had and in fact we’re already at the run rate purchase price valuation that we were hopeful to achieve and we expect that to continue. Our plan is as we deploy capital in a significant way for acquisition is to continue to provide the investment community transparency in our success with those acquisitions. And also the challenges that we’re facing to give you a couple of ideas in the aggregate the expense synergy opportunity for these four acquisitions were kind of $35 million to $37 million number. We have identified and acted upon 80% of that opportunity with the balance to come as we proceed to the first half of 2018. As we mentioned in our prepared comments, the integration effort in the first half of 2018 will put some slight margin expansion compression in those quarters. I would expect margin expansion more in the 130, 150 basis 150 basis points range but we’ll provide transparency on that as we also have on our organic investments.

[Operator:]

Our next question comes from Mark Chappell with Benchmark. Please go ahead.

[Mark Chappell:]

Steve just a follow-up question on your organic growth rate in the leasing and marketing segment. Is it fair to assume that the relatively new call center solution was responsible for the bulk of that growth?

[Steve Winn:]

No. In the fourth quarter it was screening and online leasing that were the major contributors. We are expecting a pickup in the contact center going forward because our bookings have been quite strong there particularly in the senior living area. We also have some new products that are coming out in that area that I think are going to help us differentiate the contact center.

[Mark Chappell:]

And then a follow-on question with respect to Unity. I was wondering if you could just give us a sense of what applications or solutions are on Unity today and what we can expect maybe in the next six months or so as far as our applications or solutions on Unity?

[Steve Winn:]

Well virtually every product solution is in various degrees of adoption of Unity. The core property management - the screening, all the usual candidates that - a lot of customers have are getting heavy focus but this is a companywide initiative that impacts all products solutions.

[Bryan Hill:]

Yes Steve mentioned simplification in his prepared comments and really the initial focus was how can we help our clients and how we interact with our clients, how we can simplify that given the products that we've added either through organic or M&A means. And so a lot of focus on a single user sign-on, common look and feel of the products, the ability to manage roles and rights from a central functionality, and so that’s the initial focus but as we keep moving down the path and implementing more of Unity, there will be more focus around which Steve mentioned on today's call the centralization of data in a - more in a common location that could be accessed by all products so to reduce the amount of duplicate entries those kinds of things. It will also impact the manner in which we sell our products, it will introduce a self provisioning, it will improve our ability and speed at which we can implement products. In addition, it will improve our billing and some of our back office administrative functions. So we're very excited about it because it is a requirement for these investments and this project as we truly start thinking about scaling beyond our 2020 objectives and to simplify the manner in which we go to market interact with our client base.

[Mark Chappell:]

And then the Bryan question for you here, a follow question here and with respect to organic growth rates in your property management and resident services business segments I didn’t catch those earlier. Could you just provide those for us.

[Bryan Hill:]

Yes so for property management total growth was 10%, while organic was 9% and resident services total revenue growth was at 26%, while organic was 13%.

[Mark Chappell:]

Is that the quarter or the year?

[Bryan Hill:]

That's for the quarter.

[Operator:]

This concludes our question-and-answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.