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RealPage Inc (RP) Q4 2018 Earnings Conference Call Transcript

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RealPage Inc  (NASDAQ: RP)
Q4 2018 Earnings Conference Call
Feb. 25, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the RealPage Inc., Fourth Quarter 2018 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I'd like to turn the conference over to Rhett Butler, Vice President of Investor Relations. Thank you. Please begin.

Rhett Butler -- Vice President: Investor Relations

Thank you, Operator. Good afternoon, everyone, and welcome to the RealPage financial results conference call for the fourth quarter and year-ended December 31, 2018. With me on the call today is Steve Winn, our Chairman and Chief Executive Officer; and Tom Ernst, our Chief Financial Officer and Treasurer.

In our remarks today, we will include statements that are considered forward-looking within the meaning of the 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 25, 2019, 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 6, 2018, and our earnings release and materials distributed today. RealPage undertakes no obligation to update any forward-looking statement, 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 will hand the call over to Steve.

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Thanks, Rhett. Good afternoon, everyone, and thank you for joining our fourth quarter and year-end 2018 conference call. We entered 2019 and in position to create significant incremental value for our customers and drive continued organic growth for RealPage. This is because we've created a widening position as a strategic platform partner to our clients with capabilities that manage the most important drivers of performers -- of performance that our clients need to succeed. We are differentiated, because we have the most accurate and comprehensive data repository of real-time client data and data science in our industry.

The linchpin for driving innovation and empowering our clients transformation. While, we continue to have a healthy acquisition pipeline to expand our positioning and open up new TAM, I've never been as excited about our opportunities and capabilities to innovate organically as I am now. We'd like to set ambitious goals, but we are confident in our 2022 goal of $1.5 billion in revenue and $500 million in adjusted EBITDA.

Tom will be providing more detail on our financial results. But you can't do that if we don't at least give them a proper introduction, so I'm proud to say, as many of you saw from our press release in January, that Tom Ernst, has joined the RealPage team as CFO & Treasurer. Tom has already hit the ground running, and I believe this is primarily due to the fact that Tom and I share the same long-term vision for RealPage and have joined -- have enjoyed a multifaceted working relationship for many years.

Our booking performance and backlog levels are at historic highs and we believe our market positioning has never been stronger. In a moment, I'll speak to a number of successes that we have achieved in 2018. However, I'd like to first discuss in some depth the biggest thing we're focused on in improving in 2019. Last year, we did not achieve our internal goal to reduce backlog through more efficient implementations. Our process inefficiencies in overall implementations and particularly with implementing larger platform sales impacted us during the fourth quarter and full year, improving the quickness by which we turn sales into revenue during 2019, is one of our top priorities and is getting a significant level of attention.

How will we achieve this improvement? We're focused on improving the platform for more streamlined and unified configuration. We need to better define and refine our processes and platform bundles to utilize standard implementation, best practices and make clients change management experience more seamless. While we already employed broad and useful KPIs in managing the business. We are working to deploy a more rigorous scientific approach to executing the entire sales to success cycle to drive continuous improvement. We're focused on optimizing this process to achieve both fast gains and long term excellence.

Our North Star mission for the company encompasses both innovation and simplification. Importantly, innovation is not just about product development, which I'll speak about more shortly; and simplification is not just about margin expansion. I'm challenging the organization as a whole to look deeply into our infrastructure processes and orchestration everything we do to unlock improvements that will make us better at serving our clients.

So let's discuss some of the highlights of our successes over the past year. In 2018, we brought multiple product innovations to market, for example, we delivered to market the initial functionality for our long-term Unity initiative with great fanfare and encouraging response from our customers, asset optimization gained more traction with the release of expense bench marking as part of our business intelligence platforms. New features and functionality in our spend management platform including online vendor payments helped drive that revenue stream to the largest in our property management category. All of these areas also contained components that were part of a larger suite sale both for new clients as well as existing clients.

We expect to accelerate our ability to innovate this year. In January, we completed an organizational initiative that centralized product development. This structure enables us to apply to innovation projects, the right talent from across our organization, rather than being constrained to reply -- to relying upon the talent that exists only within a particular product team or business unit. This approach also enable us the flexibility to rapidly an efficiency scale up and scale down project resources. This is a big deal, 2019 will leverage this new organizational vision combined with projects already in motions that are designed to drive disruptive innovation around the front end of our platform, around Unity and other innovations. So I'm quite excited about what we've been working on, so stay tuned for more on that later.

We began to simplify the service experience for our customers during 2018 by unifying our support teams into a single organization transitioning away from point products support to a platform-based experience and it's paying-off. 2018 notched another increase in our customer net performer -- performer score satisfaction driven primarily by faster resolution of inbound client issues and reduced escalations. Next, employee engagement around our North Star mission continues to improve from already high levels. We've been tracking our progress here for the last few years in a rigorous manner and working carefully to galvanize our culture around innovation and simplification and the RealPage promise.

RealPage are the heart of our organization and our success is driven by their support and dedication. Clients are recognizing the value of the Real -- of RealPage as a strategic platform partner in lieu of their current disparate point solutions. I hear existing and prospective clients increasingly say that RealPage is innovating, is an easier company to do business with and is an a central platform for their operations. Now, this is a journey folks, but this feedback is encouraging and I'm confident that we have the right strategy. We are becoming more and more, the strategic vendor they need us to be. This is paying off in our strong sales momentum and particularly in our ability to sell large bundles and suites.

Tom will discuss the details in a moment, but let me highlight a few specific examples. We secured a seven figure deal in the fourth quarter with a leading regional property manager that operates 30 -- 4,000 units in the 14 states. This New York based client implemented a competitor's core accounting system just three years ago, but also continued to rely upon several third party point solutions. This client has chosen to fully convert to the RealPage platform and take advantage of our solutions across every product family, outside of product for platform traction, I'm particularly pleased that our strong accounting offering help drive the pull-through of this larger suite. We've invested significantly in our accounting product over the last couple of years and clients are broadly realizing that RealPage accounting Enable's their property accountants and payables personnel to manage more properties with the same number of people.

This client is certainly excited to transform their user experience, improved processes and integrate across systems with the simplicity of a single sign-on. Our sales team cultivated a relationship with this client over many years and I'm particularly proud of this win. Another example is a seven-figure enterprise deal close -- closed in the fourth quarter, in which our North Star mission and commitment to innovation again played a pivotal role. The client owns approximately 20,000 residential units and 2.5 million square feet of commercial space across 31 cities, as the client prepares for its next phase of growth. They knew they needed to embark on a major platform change with the partner, focused on the future that could support their mixed use needs in accounting and commercial property management, as well as multifamily.

Our commercial property management solution, which has evolved materially in recent years. Outperformed our competitors in their evaluation. They had already been a YieldStar, and On-Site client for many years, and finally made the push to adopt the core RealPage suite, along with solutions such as renter's, insurance, to take advantage of integration across the platform. We're winning the strategic platform deals across the entire client spectrum as well, at the enterprise level with owners managing 20,000 or more units at the corporate level with owners and operators managing 5,000 units to 20,000 units, as well as our SMB market which is owners with less than 5,000 units.

For example, Lexington Partners, who is a fast-growing property management and construction company in New England in the SMB space. With a strong appetite for expansion through internal development and acquisition, Lexicon soug -- sought out a strategic partner that could scale alongside their operations. In RealPage, they found best in class property management platform, but critical to this deal was our data analytics tools, which provide the business intelligence they need to manage price, improve profit and fuel expansion.

Our sales team had the vision to capture the loyalty of Lexington Partners well before they matured into a large enterprise. I absolutely love this example because it highlights how quickly we can get a client on our platform. What we are doing right as well as the opportunity that exists, if we can get even more efficient across all of our implementations is a core priority in 2019.

In summary, 2018 was a great year. You'll hear even more from us around deepening our position as a strategic platform during our RealWorld User Conference in July. In addition, you will also hear about many major new product innovations that are being released throughout 2019, that are intended to drive accelerated organic revenue growth toward our objective of becoming a $1.5 billion business by 2022. This is an exciting time for RealPage and I appreciate the support we've received from our teammates, clients and shareholders.

With that, I'll turn the call over to Tom.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Steve, and good afternoon, everyone. Today, I will review operational highlights for the year. Our financial strategy going forward and our financial outlook for 2019.

First off, I'm thrilled to be at RealPage and excited by the depth of talent across the organization. I would also like to extend a thank you to Bryan Hill and to the outstanding finance organization here for the support on my transition into the company over the last month, and more importantly for building such a solid foundation that we can expand upon to support our long-term strategy. I believe we are at a pivotal moment where we have tremendous opportunity to leverage the scale and breadth of our organization to become a more strategic platform vendor to our clients. That is the core of our vision and it complements our North Star focus on innovation and simplification.

From a philosophical perspective, I commit to continuing our proud track record of transparency and alignment with shareholders as we execute against this vision. Proactively working to communicate effectively will be a priority for us. As we look forward and as our strategic platform vision continues to unfold, we will look to support you with metrics and analysis that help you understand this journey better. This vision is the key to opening up new value creation and accelerating growth opportunities. Accordingly, the vision cuts across everything we do. We will share more information as the year progresses, that will help translate our executional success. You should expect to hear us talk about all areas including product development, sales and marketing, implementations and support.

Now, let's discuss some of our successes and challenges from 2018. Financial performance was strong, reflecting solid execution on the expectations we communicated. Total non-GAAP revenue grew 29% year-on-year and adjusted EBITDA grew 41% representing margin expansion of nearly 230 basis points. Highlighting our successes as a strategic platform, the revenue per unit of our Top 50 RPU clients averaged almost 20% expansion in 2018.

Our reported ACV grew 17% compared to 2017 and exhibited some contraction sequentially as the fourth quarter contains the most seasonality, which in turn affects our transactional ACV in revenue. I will note this metric is not optimal on the way that was calculated, as it magnifies fourth quarter seasonality by a factor of four because mathematically the formula annualizes quarterly revenue to calculate ACV. We will look ways to create a better measurement for you in 2019. Our bookings beat our internal expectations growing 28% compared to 2017 and our churn metrics are consistent with our historical average.

Cash flow from operations was also impressive growing 34% to nearly $188 million, excluding the impact resulting from changes in restricted cash relating to accounting treatment changes. As we look at the business momentum to the product family lends, we are seeing consistent contribution from property management and resident services at approximately 10%, and mid-teens respectively on an organic basis. The implementation process inefficiencies that Steve mentioned are impacting us across the platform. We are seeing the phenomenon where some of our products are commonly slated for implementation later and faced rollouts of strategic platform deals, and when implementations take longer those products received more of the revenue delay impact.

One area in particular we're seeing some organic growth pressure is asset optimization, where organic revenue growth is trending more in line with our corporate average versus the mid-teens we have been discussing prior in 2018. This is despite seen yet another significant acceleration in new sales bookings in this product family. While the effects of these process and efficiencies are disappointing to us, I would be more deeply concerned if they were driven by demand issues, which they are not. The challenge has arisen because of our success in driving -- in driving greater proportions of platform sales and I'm excited to tackle these growing payments and processing efficiencies, and confident that we can drive both quick and long-term improvements here.

We have completed our integration efforts for the 2017 acquisition cohort and we're encouraged so far by the pace of integration of our 2018 acquisitions. We plan to complete the system integration work fully with the 2018 cohort this year. However, we are -- our planning is somewhat more aggressive investment posture, particularly in the first half of 2019 given the strong revenue synergy opportunities that we aim to drive. One of the biggest benefits from the 2018 acquisition cohort is that they further bolstered RealPage's ability to integrate with third-party property management systems, as these assets all had made significant inroads with property management systems outside of the RealPage platform. We are excited about the opportunity to more materially unlock the benefits of platform sales into the portion of the market that doesn't use RealPage for its core property management system.

During the quarter, we also executed $30 million of our $100 million repurchase authorization, resulting in the repurchase of 600,000 shares at an average purchase price of $46.83. We do continue to -- we expect to continue to be opportunistic here. So stepping back, we had a solid 2018 and fourth quarter, and we also have a couple of focus areas for opportunity for improvement. As Steve mentioned, we believe we are doing a fantastic job driving new sales bookings and this has resulted in elevated backlog levels. However, we did not meet our internal goal for driving process efficiencies to reduce implementation times in the fourth quarter. Instead, we actually saw a small decrease in efficiency. We have made tackling this challenge as top priority in 2019. This did adversely impact our revenue in the quarter and without the drag, we would have been at the high-end of our revenue range and surpass the high-end of our adjusted EBITDA range.

Our goal going forward is to drive market improvement in 2019, but until we get a deep -- until we get deeper in executing against that goal, I will make prudent assumptions in our outlook and guidance that do not include these gains until we actually see and sustain them. Moving on to our financial outlook. We believe the future has never been brighter for RealPage and we are confident in our 2022 goal of $1.5 billion in revenue and $500 million of adjusted EBITDA.

For 2019, we expect non-GAAP revenue of $980 million to $1 billion. Adjusted EBITDA is expected to be between $275 million to $285 million. Non-GAAP diluted earnings per share is expected to be $1.70 to $1.79. This assumes organic growth of over 10% at the midpoint of the range and assumes a continuation of 150 basis points to 200 basis points of margin expansion per year. Since, we updated you last, our outlook for the year and first quarter has been impacted by our revised assumptions on implementation efficiencies. For the first quarter, we expect non-GAAP revenue of $233 million to $235 million.

Adjusted EBITDA is expected to be $64 million to $66 million and non-GAAP diluted earnings per share is expected to be $0.39 to $0.41. This assumes organic growth in the 9% to 10% range and adjusted EBITDA expansion that ramps as the year progresses due to investment in the 2018 acquisition cohort, which is expected to be more front-end loaded.

I'd like to also highlight two priorities the finance team will be focused on in 2019. First, leveraging our scale and scope to embed finance as more of a strategic partner throughout all levels of the organization; and second, refining our processes to cultivate in innovation from idea to maturity. Toward the first priority as Steve mentioned, we intend to play a more rigorous scientific approach to measuring the platform throughout the sales to success cycle. Finance, we'll be partnering more deeply across the organization to enhance our culture, processes and technology infrastructure to enable more data driven decisions.

For the second priority, finance will also be partnering throughout the organization to help create (ph) the innovation lifecycle, that enabling us to rapidly incubate growth opportunities or leverage quick learnings to reallocate resources to their highest and best use. As Steve mentioned, organic innovation will be a primary focus area and is key to our long-term success. We want to leverage the scale and scope of our organization to institutionalize learnings and drawn cross-functional resources to bring our innovation, vision to reality. We also expect to enhance coordination across initiatives focusing on the best growth prospects and scaling them the right way to optimize investments that support the achievement of our long-term goals.

In summary, we had a great year and we have tremendous opportunity ahead of us. I believe strongly in the mission and direction of RealPage and I'm excited and grateful to work with you as we execute on our vision.

This concludes our prepared comments. Operator, we'd like to open the call for questions, please.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Thank you. Our first question comes from the line of John Campbell with Stephens. Please proceed.

John Campbell -- Stephens Inc -- Analyst

(Technical Difficulty) And then Tom, I think you made it pretty clear that you factor that into the full-year guidance. Just curious, I mean, I think you said 10.5% organic growth is kind of the assumption, if you're getting your implementation timelines, its kind of where you expected -- would that, is it safe to say that would probably be more like the high-end of that organic growth rate, 12% or so.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

So, John, I think we missed the first part of your question.

John Campbell -- Stephens Inc -- Analyst

Just around the implementation timelines. I mean, I think it held you guys back in the quarter. It sounds like by $1 million or $2 million and then you talked to it, basically impacting the full-year guidance. So just trying to kind of get a better, can we get my arms wrapped around just organic growth rate. I think you said maybe 10.5% is what you're factoring in right now, but if you had the implementation timelines or you maybe -- we're expecting, is that closer or -- maybe a 12% or so, organic growth rate?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Sure, thanks for the question, John. So the implementation in efficiencies did impact us on Q4, and I think as I mentioned on the call, we would have been in the high-end or exceeded the high end of our range if we had not have them. That being said, we think it's prudent to -- to not assume that we're going to gain those efficiencies back as we look into the year until we see them. So our outlook for the full year is 9% to 12%. I'm making -- making what I think are prudent assumptions in our ability to drive efficiency from this point and in particular, you can see in Q1 that we're actually looking toward the lower end of that 9% to 12% range, so --.

John Campbell -- Stephens Inc -- Analyst

Okay, got it. And then on the units managed, you guys are having some really good kind of underlying organic growth, I'm getting about 5% or so this quarter, I think you guys have held at mid single-digit range for several quarters now. So just -- just curious two things there. How much of that is driven by just kind of the broader industry lift versus share gains and then any kind of commentary -- kind of what you expect to see for the remainder of this year.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, addressing the numbers first, we are seeing healthy growth both in units but also in revenue per unit. I highlighted in my prepared remarks that we have seen a uplift our top 50 revenue per unit customers and growing almost 20%, this is happening as you look down the basis as well, we're in our -- our top 100 ACV customers. It's over 10% growth as well we're seeing healthy lift.

And yeah, market share, you want to -- I'll take that as well. I think Steve highlighted a couple of examples, in his prepared remarks where the RealPage -- RealPage vision is really exciting customers to think about us as a platform and to consider replacing competitive solutions with us, we're definitely seeing benefit.

John Campbell -- Stephens Inc -- Analyst

And as far as the end market tailwind, -- is that a 50 bps, 100 bps or so of incremental lift you guys have seen?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

What do you mean by end market tailwind, John?

John Campbell -- Stephens Inc -- Analyst

Just the general build outs in industry just from -- or the units managed standpoint?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Overall unit growth in the industry.

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

The overall unit growth is in the 400,000 range, we're going to lose 100,000 that are demolished every year relative to the overall 20 million or 19 million multifamily units that we have. It's not a significant percentage, but we are enjoying this building cycle because they are the largest and most lucrative segment of the market for us. So I hope the new construction boom continues because we are beneficiary of it, but I wouldn't over emphasize it, I mean we are not getting like 5% lift out of those units because they're just not building that many.

John Campbell -- Stephens Inc -- Analyst

Right, makes sense, thanks guys.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Operator

Thank you. Our next question comes from the line of Monika Garg with KeyBanc. Please proceed.

Monika Garg -- KeyBanc Capital Markets -- Analyst

Hi, thanks for taking my question. I'm just trying to understand more about this process and -- in efficiency, if you talked about, which is leading to more implementation times. Could you talk about when did you find these issues. How long do you think before these are behind us?

Rhett Butler -- Vice President: Investor Relations

We were disappointed that we didn't improve what we call mean time to implement in the fourth quarter, it's actually got a little longer. What's happening to us is, we're having great success with what we call suite sales or bundled sales or this were about the entire strategic platform is licensed at one time and that has impacted the time to deploy the suite. We are optimistic, we're going to get this improved and substantially improved over the mid to long-term, and of course the way to do that is through the Unity process that we've discussed in previous calls, where we are creating a very consistent set -- standards for all of our products, and of course, my ultimate goal is to be able to implement all products, the first first time we touch a customer.

There is a lot of room for improvement here and in its the -- I don't want to say it's the number one focus of RealPage in 2019, but it is the close to the number one focus. We have to get this MTTI reduced. The good news is, we seem to be selling more than we planned. So part of it is you plan for a certain amount of deployment and then you sell more than you expected. So you don't, -- it's hard to gear up the resources, you need to address your success. So it's a good news, bad news story, I'm candidly, the demand is -- the hardest thing to generate, if we can generate more demand, I feel real good about the business, because I know we can get more efficient.

Monika Garg -- KeyBanc Capital Markets -- Analyst

Thanks, Steve. And then, Steve, you had talked about that, in case when we see softness in rent growth, that could have a positive impact on the demand for the data solutions. Could you talk about, if you us -- what you are seeing in the market, are you seeing increased demand given that rent growth seems to be somewhat flattening in some markets?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

This market has been amazingly resilient, to be honest with you. We're still seeing rent growth in many, many markets, but there are pockets of slowness that are starting to appear around the country. And whenever we see demand softened the need for our products becomes more acute because customers need to better manage their pricing and they need to generate or stimulate more demand. They need to capture more of that demand and those are -- these are all things that RealPage provides the tools that allow you to do.

So, yes, we're -- I think part of the reason we're seeing bookings accelerate the way they have in 2018, is there's just a general need for more and more RealPage products. And the fact that we've become more of a platform, than a single property or for single product company. People now don't buy RealPage because of one specific product, they're buying the entire platform and that's a strategic position that we want to nurture and expand.

Monika Garg -- KeyBanc Capital Markets -- Analyst

Thank you so much.

Operator

Thank you. Our next question comes from the line of Sterling Auty with JPMorgan. Please proceed.

Sterling Auty -- JPMorgan -- Analyst

Yeah, thanks. Hi guys. First of all, Tom, congratulations. And welcome to the CFO seat, how does it feel being on that end of the line for one of these calls for a change.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, it feels great. Thank you, Sterling. Hope you're well? I couldn't be more excited to be here.

Sterling Auty -- JPMorgan -- Analyst

That's great. So, I wasn't sure if you answered it with one of the earlier questions -- to one of the earlier analyst. But, so in terms of the ACV and the sequential drop. You mentioned just -- the calculation of it and how it kind of magnitude the seasonality, but I believe this is the first ACV drop we've seen in at least the last three or four years. Can you just kind of walk us through why is it different this year?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, absolutely, Sterling. So, last year it was masked by acquisition add that came in the Q4 that provided some significant ACV step-up quarter-on-quarter that didn't show the normal seasonality in our business. And in addition, we do have some more seasonality within our subscription business that's natural with the business that relates to the leasing cycle. So I think, if you'd see -- if we could see through what happened last year, we would have a little bit more seasonality this year as well.

Sterling Auty -- JPMorgan -- Analyst

Okay. And then one follow-up question. In terms of the implementation efficiencies, is it data migration, API coding. What are some of the things that you think you can actually dial-in to drive those improvements and efficiencies?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Well, Unity is probably top of my list. This is a enormous initially focused on implementing consistent ways of implementing all products at one time. I think we need to manage the customers change management better than we have. If our products are much easier to implement, ideally self provisioned, then change management becomes a much less problematic for our customers. In many cases, we can't implement because the customer has guided our implementation process because they can't digest as much change as we would like to impose.

And then I think we just have a number of fairly basic improvements that I think can be made by the centralization of our implementation, account management and support organizations, we've in the past, manage these in silos. And I think the consolidation of the implementation process of the entire platform into somewhat of a factory is the way to think about it, that we will drive measurable improvement in this area.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

I'll add one thing to that as well. To run the factory, we are already a data-driven business and we measure and monitor that business on KPIs, but we think that there is some rich opportunity to be much more sophisticated with how we measure monitor and adjust, and ensure that we're just a rigorous data driven company that gets more real-time and more focused on process improvement.

Sterling Auty -- JPMorgan -- Analyst

That makes sense. Thank you, guys.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Operator

Thank you. Our next question comes from the line of Stephen Sheldon with William Blair. Please proceed.

Stephen Sheldon -- William Blair -- Analyst

Hi, thanks. So I guess just first year, it sounds like bookings trends in asset optimization was -- were pretty strong, but it was impacted by the implementation challenges. So can you maybe just help us frame the trend in booking the activity in asset optimization throughout the year. And then your level of confidence about seeing organic growth there accelerate over the next -- the course of the next year or so?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, absolutely Stephen, happy to help with that. So I think we probably have two drivers going on in the asset optimization, product family. First, the one that we've highlighted a lot tonight, where this product family in particular, it can be slated in some of these strategic bundles as the third or fourth product to implement. And if things -- reach any level of slowing, that's something they can get pushed out on the margin. So we've seen some of that.

In addition, we've talked about it on past -- on prior calls as well. In our revenue management products, we have -- we talked about how we saw some hold up, while we are acquiring the LRO business and bringing that on board. We have begun to see the bookings acceleration come out of that. The revenue impact is imminent and lifting but really hasn't lifted out of that bookings acceleration. So both of those factors are driving what we're seeing is a very strong acceleration through four quarters and the business that has not translated into revenue uptick yet.

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Yeah, there is one more acquisition that falls into the same category. We acquired a company called Rentlytics, which was one of our larger competitors in the business intelligence and performance analytics area. And I think there was a pause in the market where prospects that we are considering these products from either company said, let me freeze, let me understand what RealPage's intentions are with respect to future direction and if it's candidly is tracking exactly the same thing that happened when we acquired LRO. So, I'm quite bullish on the uptick that we should see in the overall asset optimization category supported by the fact that we have above average bookings. They are at the higher end of the bookings spectrum for the last quarter or two. So they all should do fine.

Stephen Sheldon -- William Blair -- Analyst

Got it. That's helpful. And then I guess, just second I guess within that business still, I wanted to ask about database integration. I think you had been maintaining some databases separately including, I believe the underlying databases for YieldStar and LRO. So I guess, first, where are you now in terms of database integration and two, how you're thinking about your ability to extract more data out of the 16 million unit ecosystem you built to feed into your analytical solutions?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

That's a very good question. Axiometrics and MPF was the first database integration that we had to contend with and that is complete. The LRO, YieldStar, database integration is partially complete. We have populated both databases with the overlap or the missing data that was in each of the individual databases, but they're still separate. They will remain separate until we deploy the next generation of our revenue management which should be next year sometime.

The last integration is BI, Performance Analytics and we are in the middle of combining the Rentlytics database to the business intelligence, performance analytics databases that RealPage operates. I'm very excited about this integration because it vastly expands the amount of data that we can use for bench-marking which directly correlates to the precision of our bench-marking and forecasting engine. So long answer is, we are not complete yet, but we are, this is high priority for us.

Stephen Sheldon -- William Blair -- Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Matt Hedberg with RBC Capital Markets. Please proceed.

Matthew Hedberg -- RBC Capital Markets -- Analyst

Thanks guys for taking my questions. Tom, I'll offer congrats as well. Steve, when you think about increasing rents -- resident services as a percentage of overall revenue. What are some of the -- some of them are more creative or non-traditional ways that resident services can be better monetize?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Well, the key to significant growth here is monetization of amenities offered to the residents. So to the extent we can start to broker -- parking passes and yoga classes and virtually any transaction that occurs at the point-of-living resident services will benefit. We will monetize these opportunities through payments in most cases, so you should see the payments revenue stream, continue to grow substantially as part of our resident service offering.

Matthew Hedberg -- RBC Capital Markets -- Analyst

Got it. And then maybe one for Tom, difficult compare for the transactional business this year. But any sort of guidance on how we should think about the growth of transactional revenue this year.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

So our transactional revenue is actually consistent as a percentage of our total revenue with what you've seen historically. That being said, what we are seeing an increase in is our seasonal revenue. So we have a number of products within our product families that have seasonal components to them. These are subscriptional businesses that are tied to underlying cycles such as the leasing cycle and -- obviously larger one is the ClickPay acquisition, which brings in a number of -- a significant number of product that that drives this transaction business.

So that's more meaningful. I think, we will -- we will look to take that as homework to help you understand a little bit more about our seasonal factors as we talk about 2019. And I don't have new metrics for you today, but just to highlight what we saw in Q4, the -- that the metrics a little bit misleading and I think the seasonally one metric, I can't share the seasonal factor for some of those seasonal businesses would show a sequential decline in the order of 20%-ish quarter-on-quarter.

Matthew Hedberg -- RBC Capital Markets -- Analyst

Got it. Thanks guys.

Operator

Thank you. Our next question comes from the line of Mark Schappel with Benchmark Company. Please proceed.

Mark Schappel -- Benchmark Company -- Analyst

Hi, thank you for taking my question. And Tom welcome to board. Steve, with respect to the implementation time is getting longer. How much of this matter in your view is a capacity issue and how much of it is more of a process issue?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

I think it's a process problem. The capacity is -- it was part of the issue in Q4 because our bookings was successful, it was little bit higher than we had forecasted but I would say that is really pales in comparison to the gains we can get simply by improving the process and the systems that we use to drive the factory. The whole mindset has to be moved away from this notion that you implement one product at a time to more of an assembly line where you are implementing the suite and customizing the suite. To me individual customer needs with configurations, that can be set literally at the click of a button. I -- we were disappointed in the results here, but on the other hand, I don't see anything -- any obstacle here too -- our ability to address this. I certainly don't need more capital or any of those types of constraints that you think about, when you think about factories.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

I'll add to that Mark. I think we agree that it's not a level of capacity that we have in our implementation. That being said, we are definitely investing our talent and on the margin to make sure that we attack product processes and systems to make this better. Right and on -- and so there is a level of investments as I look toward 2019. We're going to -- I would expect that you'll see less gross margin expansion, for example as we invest to really tackle this problem in the scale to make sure we have an impact.

I think, I'll take the opportunity as well to highlight a marginal shift that we have, as we look toward 2019 where we're at, and one of the things that I found most remarkable while coming in at this juncture for the company is, the company has really shifted over the last two years to invest in a remarkable way in product development.

Our product development spend is up 63% as we have gone on to tackle a bunch of great innovation -- innovation vision and as we look toward 2019 with that healthy spend level in the innovation projects we have, I think you'll see us look to invest in as we've highlighted on this call. The implementations, but I think even from a from a bigger standpoint, this is about investing and taking it to market, you're going to see us some pivot -- a little bit toward sales and marketing investment. So we've got to scale product development and where we can begin to drive leverage there, and obviously we will continue to drive leverage in our G&A. And 2019 is going be about investing and getting them to market.

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

I had a little heart attack here, when Tom said 63%, that's over two years.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

That is over two years.

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

It is still a very significant investment and we've never had as large a -- backlog of new innovations that will hit the market in 2019 than we have today and I would encourage as many of you as possible to attend RealWorld 2019, in July and -- because you'll see most of this innovation announced either before at that conference.

Mark Schappel -- Benchmark Company -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Brian Essex with Morgan Stanley. Please proceed.

Jonathan -- Morgan Stanley -- Analyst

Thanks for taking my question. Jonathan (ph) on for Brian. You mentioned some pretty aggressive acquisition plan in the first of '19. What types of profiles are you looking forward to do these acquisitions?

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Well, we -- any time we can find a product that we currently don't offer that we can extend into our channel. That is a candidate for RealPage to acquire. A competitor that generally is willing to sell on an opportunistic level would be considered. We do have a sizable pipeline of acquisition opportunities. Most of them fall into either of those two categories. I will say the competition for acquisitions has gotten a little more rigorous over the last year since we've seen a lot more private equity interest in the space, but the advantage that RealPage has when we have an acquisition that makes sense as we can generally extract synergies that a PE firm is not able to obtain. So I think we have an advantage here.

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

And Jonathan, just to clarify as well. I think, Steve, I think your question asked on -- if we are being more aggressive, I don't think that was what was Steve was trying to message and we do have a healthy acquisition pipeline and so I would expect that you will see us continue to look at innovation that's away from us and opportunities. However, the central message is that we're actually incrementally more excited about our organic growth opportunity. So over time, I would think you'll see the mix shift on the margin to organic innovation.

Jonathan -- Morgan Stanley -- Analyst

Got it. That's Helpful. And Tom, you mentioned changes in the finance department, and you alluded to them helping to support achieving the long-term goals. Are these changes necessary to achieve fiscal '22 targets and if so why now as opposed to earlier or later?

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

It's a great question. I'm sure, they're going to be grateful you asked that as well, because we really do have an outstanding finance organization, so it's not about changes that are necessary. I view it more as about leveraging the scale and scope we now have at this organization, to really get in and be a champion for driving cross-functional innovation. And that's an opportunity that's on the table for us to just be more sophisticated.

Jonathan -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

Thank you. We have reached the end of our Q&A session. I'd like to hand the floor back over to management for closing remarks.

Rhett Butler -- Vice President: Investor Relations

Thank you very much everyone. And we look forward to communicating with you again as the quarter progresses.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.

Duration: 55 minutes

Call participants:

Rhett Butler -- Vice President: Investor Relations

Stephen T. Winn -- Chairman of the Board, Chief Executive Officer

Thomas C. Ernst -- Executive Vice President, Chief Financial Officer and Treasurer

John Campbell -- Stephens Inc -- Analyst

Monika Garg -- KeyBanc Capital Markets -- Analyst

Sterling Auty -- JPMorgan -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Matthew Hedberg -- RBC Capital Markets -- Analyst

Mark Schappel -- Benchmark Company -- Analyst

Jonathan -- Morgan Stanley -- Analyst

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