RealPage, Inc. (NASDAQ:RP)
Q4 2015 Earnings Conference Call
February 23, 2016 5:00 PM ET
Rhett Butler – Vice President-Investor Relations
Steve Winn – Chairman, Chief Executive Officer
Bryan Hill – Executive Vice President, Chief Financial Officer
Jeff Houston – Northland
Matt Swanson – RBC Capital
Michael Nemeroff – Credit Suisse
Pat Walravens – JMP
Good afternoon and welcome to the RealPage Fourth Quarter and Full Year 2015 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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.
Good afternoon and welcome to the RealPage financial results conference call for the fourth quarter and full year ended December 31, 2015. 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 23, 2016 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 5, 2015. Our Form 10-K for 2014 previously filed with the SEC on March 2, 2015 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 will refer to certain non-GAAP financial measures in which we will exclude certain non-cash or non-recurring items, otherwise included in their corresponding GAAP measures.
Please reference today’s earnings press release for more information on our non-GAAP financial measures and a reconciliation of non-GAAP performance measures to GAAP financial results. We believe non-GAAP financial measures provide useful information to investors regarding certain financial and business trends relating to our financial condition and results of operations.
In addition, you can also access the slides that accompany today’s webcast on the Investor Relation section of our website.
With that, I’ll hand the call over to Steve.
Thanks, Rhett. Good afternoon and thank you for joining us for our year-end 2015 conference call. I’m pleased to report that financial results across all of our metrics improved considerably. Non-GAAP total revenue grew 15% to $466 million compared to the prior year. Adjusted EBITDA grew 31% to $92 million and operating cash flow grew 37% to the record setting $96 million. These results validate the investment decisions we’ve made during 2014 to grow the business coupled with expense discipline we’ve maintained to become more efficient.
I’m proud of the progress we’ve made during 2015, especially when comparing our results to the SaaS universe of nearly 50 public companies that we track both horizontal and vertical providers. Based on our 2016 estimates RealPage is expected to have the seventh largest revenue stream and sixth highest EBITDA. Total revenue CAGR, the CAGR since we went public has been 20% based on estimated 2016 revenue. Our free cash flow return on invested capital at the end of 2015 was 17% markedly better than our peers and underscoring the effectiveness of our acquisition strategy.
Today, I'd like to give a macro update on our industry and talk about our emphasis for 2016. From a macroeconomic perspective, our industry continues to be healthy. Occupancy at the end of the fourth quarter was 95.9% up from 95.5% last year. Rents for new residence grew 4.8% in 2015, which makes six consecutive years of rapid rent increases. Breaking down the supply side a total of nearly 230,000 units were completed in 2015, which is well under the 282,000 units initially scheduled, primarily fueled by delayed deliveries related to certain labor shortages.
Over 450,000 units are currently under construction. With 317,000 of those units targeted to be delivered during 2016. However, we can tell with from actual lease transaction data, the current supply is not adequate enough to soak up demand due to low vacancy rates and high retention rates. While total supply numbers are manageable at a macro level, MPF research as you may have seen from their quotes in the recent Wall Street Journal article does have some concerns about whether the type of supply in this cycle will match well with where demand is expected to be over the next couple of years. We believe that strength of the apartment market is shifting from urban to more suburban locations. When measuring the market, our data science team uses our large repository of lease transaction data to ascertain new launches in supply and demand down to the street corner level of detail.
One of the many things, we discovered is that the renter base is much more diverse than many, may perceive, while millennials represent nearly half of apartment households. There are also plenty of Gen X and Baby Boomer renter’s. These older households generally have higher incomes, which is influencing rent to income ratios. Accordingly, many of the affordability concerns largely covered by the media are overblown. And on average renters spend 21% of their income on rent.
Economists believe that until rent to income ratios reach 30%. Apartment living is still affordable. We strongly believe there is not an affordability crisis in the conventional multi-family housing industry, contrary to what the press and some of our competitors have suggested because they don’t have access to render income data.
Now that’s a story for conventional market rate apartments. But the story changes if you examine subsidized affordable housing in the U.S. We believe there is a severe shortage of affordable housing units serving a growing number of low income households. These renters couldn’t afford markets rate apartments even prior to the rent rate hikes. The Joint Center of Housing Studies at Harvard University estimates that for every 100 low income renters in the country, there are only 58 affordable units available. This lack of low income, housing options will require significant subsidies and incentives to address, which may be difficult to get in today’s gridlocked Congress.
Looking at all these factors the bottom line is that rental housing outlooks continue to be healthy. Despite some signs of softness in select products segments and markets. Importantly, it is the strength of our lease transaction data and our ability to unlock insights that strongly differentiates our platform in the industry.
As a case study when others in the industry we’re highlighting deceleration in effective rents to the low-single digits and expressing affordability concerns. Our research team predicted a little over a year-ago that rent growth would continue to accelerate 3.5% to 4% and completions would be approximately 250,000. While we ended the year with rent growth of 4.8%, partially driven by delayed deliveries and lower completions. We consider that not bad. This degree of accuracy underscores while lease transaction data matters. With the largest repository of data in our industry going back decades, we believe we are the undisputed leader in multi-family predictive analytics.
Lastly, I like to touch briefly on the transaction side of multi-family, which is another indication of macro health. Apartment sales volume reached $150 billion in 2015 and now tracks in line with commercial office sales. This underscores the fact that the multi-family asset category is becoming more of a primary investment vehicle, no longer an immature secondary asset class.
Cap rates have come down to around 6%. The spreads relative to the 10-year treasury rate are attractive, helping to spur aggressive investments in apartments. In addition multi-family loan to value ratios are still under they're pre-global financial crisis peak and multi-family loans as a percentage of all loans held by U.S. banks have risen dramatically to almost 4% in 2015. This is the highest share in more than two decades. Multi-family loans are the fastest growing loan category when indexed to pre-recession peak during 2008.
So what are the implications of this macroeconomic data and how does it impact RealPage. First, all of these points reinforce my belief that the rental housing environment is healthy and should continue to receive significant capital inflows on the transaction side as well as the operating side. It is clear that the sleeping multi-family giant has awakened. It is now attracting dramatically more capital. This includes providers of technology the draft off the industry.
We've seen well over $2 billion of capital flow into the rental housing technology sector in the past 18 months. The investment community now believe what I've been shouting for years. This industry has a total addressable market of over $11 billion for our current service offerings. It's growing and it has been slow to adopt technology. The increase in capital and validation of our TAM has created greater competition across our platform, but particularly in our leasing and marketing solutions.
We believe these factors in addition to the strong macroeconomic environment will continue to present headwinds for some of our leasing and marketing solutions over the near-term. Because there are simply less demand for solutions that help owners lease more as we are already reaching maximum occupancy. Conversely, we believe property owners and managers will continue to focus on operating excellence and residence satisfaction. Our comprehensive platform will assist them in achieving their objectives to outperform in these areas.
Having said that we welcome increase competition and believe it’s good for the industry. As more and more new market entrants make a case for the benefits of technology. The industries adoption rate increases. Accelerating adoption is good for RealPage because customer is no longer asked the question, why they need technology, but rather who should they buy it from. We’re well positioned to respond to this question due to our resident data, our continued focus on innovation and the breadth of our ecosystem and scale of our sales organization.
RealPage has always revolved around innovation. We've been a leading technology innovator for the rental housing industry for almost two decades. During 2016, we expect to extend our lead by investing in three key areas. First, additional features and functionality that leverage our massive repository of resident data, second, our acquisition of NWP, and third, our sales force.
First, we spent the last couple of years investing in our SaaS delivery and data infrastructure to scale over the long-term. In 2015, we process nearly 600 billion transactions up from 430 billion in 2014. 2016 will focus on implementing insights, we’ve unlocked from our repository of resident data. The foundation of our data is based on real time lease transactions and transactions in the outstanding capability of our data sciences team.
This resource is not available to other competitors in the market and gives us a significant competitive advantage. Our investments will be across our platform. In our leasing and marketing product family, we expect to amplify our message around the efficient marketing spend and invest in products that originate, capture and manage lease. Despite, anticipated headwinds in this area we must continue to invest here.
It is important we get this right and we have the data to do it, but our approach lacks scale. So we plan to bolster our lead generation capabilities with our repository of resident data. We define our value based on the quality of leads we deliver. Our lead origination investment initiatives are focused on disruptive new technology that matches prospects social profiles to community social footprints. Therefore, improving the quality and conversion of leads. Our goal is to statistically quantify a lead score that reflects the propensity of the lease to convert to – of a lead to convert to a lease as well as a lifetime value of that lease.
This message is in stark contrast to the ILS models, which focused on the number of leads that they deliver which is probably updated and not aligned with property owners needs or the needs of the consumer. Our lead capture investment is focused on technology to improve capture rates by utilizing more data specific to the prospect and integrating live agents who can be a catalyst for prospective renters to find the perfect apartment based on their unique requirements.
Ultimately, we believe that it's possible to deliver half the number of qualified leads to a community in a year compared to a traditional ILS and produce the same number of leases. We believe increased investment here coupled with having one of the largest live agent platforms and rental housing will make the process of renting an apartment seamless. Lead management is about providing tools that help leasing agent separate leads through the sales funnel with optimal efficiency and effectiveness.
Our investment in this area is targeted towards leveraging data to help marketing personnel optimize asset yields from increased revenue, reduced advertising spend and lower leasing agent labor costs. In property management, we intend to leverage the momentum we’ve experienced with our accounting solutions and invest in improving our international accounting, asset management and advanced institutional BI or business intelligence capabilities.
Competitors have made modest inroads in our platform and solutions that integrate investment management and property management and we intend to close that gap. We believe institutions want flexibility for acquisitions and dispositions, forecasting abilities and advanced analytics across all asset classes, all based on actual lease data. And asset optimization RealPage is historically marketing products that help owners improve asset returns while they owned them.
We've done little to advise owners about where and when to buy or sell assets in order to optimize the entire return from acquisitions to sale. This was a significant hole in our analytics platform because owners typically make may be a third of their total return while they operate a property and two-thirds of their total return when they buy and sell that property. This change during 2016, with the launch of RealPage investment analytics, our first product aimed at optimizing the entire lifecycle of an asset. Feedback from asset managers, institutional investors and lenders has been extremely positive. Clients love the user interface accessibility from any device. Exclusive inclusion of lease transaction based data that fuels accurate forecasting as opposed to market comps or property – as opposed to market comps.
Now to understand – to underscore the power of our lease transaction data in the transaction side of multi-family, recently a large lender contract or contacted us regarding the Houston market. The lender noted that there are data sources, which relied heavily on surveys and ILS data, were showing no meaningful market slowdown in Houston. But this client was sensing trouble ahead. We pulled lease transaction data to show the lender that the slowdown had actually already begun.
Units were sitting vacant longer, from an average of 27 days in the fourth quarter of last year to 30 days in the fourth quarter of 2015. Resident retention rates it also dropped 170 basis points compared to last year. We also showed some deterioration in the buying power of incoming renters leveraging our screening data and that resident incomes have dropped more than 4% compared to last year.
In addition through our exclusive lease trade out data, we showed that the market was deteriorating, measuring a 1.9% growth during the fourth quarter of 2015 the weakest growth since 2010. Lease trade out measures the least price that renters actually sign for compared to the price of the previous lease on the exact same units. Competitors don’t have this transacted data or rents, which is the critical differentiator for us.
In an industry, that traditionally measures rent growth by looking only at sticker prices for units available for lease – our data is the critical piece that enables clients to outperform. It offers clients the ability to find inflection points and adjust their asset management and investment strategies accordingly.
I’d like to also point out that this is a fraction of the insights we can deliver. The real value is taking this insight into smaller and smaller submarkets of granularity. So the Houston example is only the average of the entire area. There’s much more going on here under the covers, when you look deeper into the sub-markets at various asset classes. We literally can perform this analysis down to a street corner. And then utilize information to forecast and drive our YieldStar optimization models. During 2016, we expect to leverage early momentum here and invest in expanding this platform and the data set for our YieldStar price optimization engine. We want to enable owners, investors, lenders and brokers to gain actionable insight using real time lease transaction data to accurately forecast financial, economic and demographic trends at the street corner level of detail.
Second emphasis in 2016 is our resident services product family with the acquisition of NWP. We announced this acquisition today and we expect to close it during March and are already preparing for the integration process. NWP provides cloud based resident billing electronic payments, energy management, back office accounting and IT infrastructure solutions. RealPage offer similar services under its velocity payments, portals and cloud solutions.
After integrating NWP solutions during 2016, the combined offering is expected to create the leading resident billing, energy management and back office service platform in our industry. The new platform will enable property owners and managers to increase the collection of rent utilities small balances and bake in unit energy recovery with greater efficiency.
We believe the acquisition of NWP create synergies that are compelling across all rental housing markets and selected RealPage product families. As we integrate the best of both platforms over time, we also expect to remove redundant technology and some back office cost. Most importantly NWP serves rental housing units that are new to RealPage. Increasing our total units that use one or more of our solutions by approximately 200,000 to 10.8 million units. These units offer a significant opportunity to accelerate revenue growth through cross selling our current solutions, which aggregate to a gross potential of $300 per conventional property per unit each year.
Lastly, we expect to continue investing in our salesforce. Despite lower overall productivity primarily due to the dilution of new reps and investment in lower quota sub markets. We will target our investment on high growth sectors such as vacation, senior and student living. Aggregate productivity is likely to continue to decline modestly as we expect to grow sales in line with revenue. Sales headcount however, we expect leverage share has total sales and marketing spend as a percentage of revenue should decline slightly going forward.
In the core multi-family side, we expect to moderate sales headcount growth and focus on accelerating productivity. Daryl Rolley, our Chief Revenue Officer has really made strides in understanding our customer's needs and paying points as well as our competitive position. He has partitioned, our salesforce to focus on new logos, penetration or expansion into our installed base, add-ons resulting from clients’ property portfolio activity and renewals of existing licenses. This improved structure will also align compensation to drive accelerated gross – growth.
We are also migrating to multi-year committed contracts and expect to move a significant percentage of our clients to these longer-term contracts in 2016. During the year, we will also continue to invest in our demand generation platform. Our multi-channel strategy has yielded qualified pipeline growth that is nearly doubled compared to last year. We're excited about our prospects here and we are ultimately focused on increasing customer loyalty over the long-term.
In summary, 2015 was a great year for RealPage and we're well positioned to go forward in 2016. Our investments in additional features and functionality that leverage our massive repository of data, our acquisition and integration of NWP, and our salesforce all are critical to the achievement of the goal we have set for ourselves and that is to grow the business to $1 billion in revenue by 2020, while expanding EBITDA margins to at least 30%.
We expect to accomplish this through both organic growth and acquisitions, balanced with sound capital allocation strategy seeking an IRR north of 20% and free cash flow return on investment – invested capital north of 20%. I believe we have the right step strategy and I'm excited about the prospects of blowing through $500 million of revenue in 2016, but even more excited about reaching our $1 billion goal.
With that, I will turn the call over to Bryan Hill, who was and then was not, and now he is our Chief Financial Officer and Treasurer. I'm having a little fun with Bryan, but we're delighted that he's staying with RealPage and believe he will continue to provide the necessary financial leadership and operational and strategic insight we need to balance revenue growth and margin expansion as we progress through our 2020 objectives.
Thanks, Steve, and good afternoon. What Steve did not mention is that I'm extremely excited about the future of RealPage. When I look back over my nine-year tenure, I'm amazed at what we've accomplished. During this time, we built $466 million revenue company from an $80 million run rate. This is a significant accomplishment.
As I reflected on this accomplishment and RealPage’s future opportunity, I determine there was unfinished business. We have a winning strategy. We are extremely well positioned and the market opportunity has never been greater. I believe we can build rental housings first billion dollar software company. This should create significant value for all stakeholders including clients, employees and shareholders. I have a strong desire to help lead this success. But for now, let's focus on 2015 which was an outstanding year for RealPage.
Financial performance for the fourth quarter was solid underscoring broad customer adoption across all of our product families and strong expense discipline. We achieve 16% total revenue growth over 530 basis points of adjusted EBITDA margin expansion, 78% non-GAAP EPS growth and significant operating cash flow of 39%. On demand revenue for the fourth quarter grew 15% compared to last year. Our subscription revenue stream grew 14% compared to the prior year and represented 90% of on demand revenue.
ACV or annual client value grew to $470 million or 16% compared to the prior year. Our top 100 ACV clients possess an average RPU of $63. We ended the quarter. with 10.6 million units representing an increase of 11% compared to the same quarter last year. RPU was well over $44 an increase of 5% compared to last year. Our top 50 RPU clients possess a RPU range of $126 to $296 with an average RPU of $162.
Tracking our top RPU clients is an important measure of our success penetrating the market as well as our installed base with the entire platform. The top 50 RPU clients include a diversified representation of our enterprise, corporate and SMB submarkets. The top RPU level for each submarket is $208 for enterprise, $296 for corporate and $278 for SMB.
Moving on to profitability for the quarter. Our expense discipline continues to drive significant operating leverage. Gross margin was 64% for the fourth quarter, at 300 basis points compared to the prior year. Gross margin expansion is benefiting primarily from the efficiency of our core multi-family solutions, despite incremental costs we've added as a result of the Indatus acquisition.
Total operating expense grew 10% compared to last year. As a percentage of revenue, it declined over 250 basis points to 45%. Our plan to improve margins by leveraging our international workforce, further integrating office locations resulting from our acquisition program, and optimizing certain operational functions is driving this performance. With respect to the individual components of total operating expense, product development expense was flat compared to last year.
And as a percentage of revenue, it declined 190 basis points to 12%. Leverage continues to be driven by our international expansion efforts and lower cost international labor. So as the marketing expense grew 17% compared to last year, but as a percentage of revenue it was relatively flat at 21%. The primary driver of expense growth was higher sales compensation costs due to increased headcount. Sales team headcount was 375 at the end of the fourth quarter up 76 sales team members or 25%. I would like to emphasize that the majority of this headcount increase is occurring in the SMB markets and our lead generation teams.
General and administrative expense grew 9% compared to the prior year. But as a percentage of revenue, it declined 80 basis points to 12%. The primary drivers of expense growth of increased personal cost, increased professional fees and acquisition costs. Leverage is being driven by a headcount mix that contains a higher international component similar to other operating expense categories.
Non-GAAP net income for the fourth quarter was $12.5 million or $0.16 per diluted share. Adjusted EBITDA for the fourth quarter was $26.5 million or 22% of revenue representing 530 basis points of margin expansion. The fourth quarter marks the sixth consecutive quarter of margin expansion and we expect to continue to yield further margin improvements as we progress to our objective as adjusted EBITDA margin of 30% or higher.
Moving to cash and liquidity. Cash and cash equivalents were $31 million at December 31, 2015 compared to approximately $27 million at December 31, 2014. Cash flow from operations for the fourth quarter was nearly $28 million representing growth of 39%. DSO was 52 days down from 54 days last year. Total debt was $40 million. Capital expenditures were nearly $15 million for the quarter and just over $33 million for the year. During the quarter, we purchased nearly 220,000 shares of our common stock, and program to-date, we've purchased 2.8 million shares. At current stock levels, we continue to believe share repurchases are a compelling use of capital, with a potential for a significant return.
Consistent with Q4, our full year results represent a solid performance and highlight continued progress towards our goal of $1 billion in revenue and at least $300 million of adjusted EBITDA by 2020. Subscription revenue growth accelerated to 16% for the year and transactional revenue grew 5%. This growth was driven by 33% growth in resident services, 13% growth in property management, 13% growth in asset optimization, and the expected flat performance for leasing and marketing.
Our investments in product development and the sales force over the last couple of years are clearly paying off and helping to accelerate revenue growth. Compared to the midpoint of our original 2015 revenue expectations, we exceeded those expectations by $11 million. Profit performance was another area of strong execution during the year.
Our plan to leverage our international workforce, consolidate our real estate footprint and optimize certain operational functions helped fuel adjusted EBITDA margin expansion of 240 basis points. This also translated into significant cash-flow generation, where operating cash flow grew 37% compared to last year. Our disciplined approach around capital expenditures drove free cash flow growth of nearly 100%. The management team is proud of this performance and our success will provide a solid foundation for 2016 and beyond.
As Steve mentioned, our focus for 2016 will be investments in additional features and functionality leveraging our massive repository of resident data, continuing our strategic acquisition program, and further expansion of the sales team. Despite increased investment, we still expect to deliver 200 basis points of organic adjusted EBITDA margin expansion. We expect leverage to be driven by all of our operating expense categories related to a continuation of our plan to become more efficient.
However, while accretive to profitability and non-GAAP EPS, NWP during 2016 will place pressure on our year-over-year margin expansion. Post-integration, we expect the NWP business to contribute to our long- term target adjusted EBITDA margin objective, as we realize the significant operating synergy opportunity. From a capital perspective, for 2016 and beyond, we intend to deploy our capital in a balanced, flexible framework that we expect will return significant value to our shareholders.
Our capital allocation philosophy will be focused in two primary areas. First, internal growth and acquisition investments will be our priority to drive compelling risk-adjusted returns for our shareholders; and second, as we have excess capital within reasonable leverage levels, we will seek methods to return capital to our shareholders. We currently believe that continued execution of our share repurchase program is the best method, and within certain thresholds, can drive compelling value over the long-term.
We believe this strategy will provide us a flexible framework to deploy capital in opportunistic areas, such as the acquisition of NWP, which fits perfectly into our strategy. During 2016, we also expect to incur elevated capital expenditures primarily related to our headquarters and data center moves. In the aggregate, we expect to spend $60 million, which is net of a $19 million tenant improvement reimbursement from the property owner of our new facility. We expect to generate returns on these investments by incurring lower future rent expense per FTE and long-term transaction processing scale.
Starting in 2017 and beyond, capital expenditures should return to more normalized levels, which we target at approximately 5% of revenue for maintenance and growth initiatives. I'd also like to highlight a couple of points regarding the financial accounting treatment of our headquarters move. Generally accepted accounting principles require tenant improvements to be reported gross of any reimbursement or allowance in the investing activity section of the cash flow statement.
However, the tenant improvement allowance will be reported in the operating activities section of the cash flow statement as the cash is received. In essence, this will result in inflated reporting of 2016 capital expenditures and operating cash flow levels that are not indicative of fundamental business execution. In addition, generally accepted accounting principles require rent expense recognition for a new facility to begin once access to the property is granted and not upon lease commencement.
Therefore, RealPage will begin incurring rent expense for its new facility as the tenant improvements begin, as opposed to the date of actual occupancy. This results in duplicative rent expense and one-time moving costs totaling approximately $5 million occurring from Q1 through Q3 of 2016. We expect to adjust for these costs in our adjusted EBITDA reconciliation of GAAP to non-GAAP financial measures.
Now moving onto guidance. For the first quarter of 2016, we expect the following: total revenue in the range of $125 million $127 million, which includes approximately $2.5 million from the acquisition of NWP expected close during March of 2016. Adjusted EBITDA in the range of $26.3 million to $27.3 million, which includes approximately $300,000 from the acquisition of NWP, and excludes approximately $1.1 million of duplicative rent expense and other one-time moving cost and non-GAAP EPS of $0.16 per share.
For 2016 full year, we expect the following; total revenue in the range of $565 million to $575 million, which includes approximately $45 million from the acquisition of NWP. Adjusted EBITDA in the range of $118 million to $123 million, which includes approximately $5 million from the acquisition of NWP and excludes approximately $5 million of duplicative rent and one-time moving costs, and non-GAAP EPS of approximately $0.68 to $0.72.
And now, we will open the call up for any questions.
Our first question comes from Jeff Houston of Northland. Please go ahead.
Hey guys, thanks for taking my questions. Looking at the residential services growth in the quarter it seems pretty strong. Was the organic growth and which of the sub products was in that category performed the best that really looked at the results for that product group?
Hey Jeffrey, how are you doing? And so organic growth within that product group was just under 20% for the quarter and we have the typical players that were contributing to that. We had strong growth coming our renter’s insurance product as well as our payments process, our payments processing product and to a lesser extent from our online rents and product.
But all the products in this group Jeffrey, they are growing well and we are seeing lots of traction from a new bookings, new sales booking perspective. So as we roll into 2016, we’ll expect further solid growth from this group.
Great. And shifting gears a bit to the leasing and marketing segment. It sounds like there's kind of continued to be some headwinds with occupancy being so high going into 2016. What type of growth are you assuming in 2016 for leasing and marketing, I assume maybe low-single digits?
Yes. You’re right. And in fact that's in line with Q4 which we actually had 6% growth during the quarter. And as we mentioned in our prepared comments it was relatively flat for the year, which was what was expect it coming into 2015.
Jeff, I might add to that the while the overall occupancy levels and rent increases are high across the U.S. We are seeing selective markets start to crest. I think Houston is a great example, but there are other examples like this. So while averages lead you to one conclusion if you start to look at the individual MSAs around the country you are getting a little different story.
Makes sense. One last question for me is you talked about 375 sales people and that was up 25% in 2015. How many of those are fully ramped and how does that compare with going into last year?
With the hiring throughout the year has been fairly readable. So ever 375 we are coming into the year with the most tenured salesforce that we’ve ever had. So that should lead to strong productivity from the sales team in 2016.
Great, thank you.
Our next question comes from Matt Hedberg with RBC Capital. Please go ahead.
Hey, this is Matt Swanson on for Matt. Thanks for taking my questions. The acquisition of NWP sounds like it has a lot of strong synergy for you guys. Could you talk a little about the amount of headcount additions going to be coming as part of the acquisition and just how that affects hiring plan for next year?
So, NWP currently has approximately 300 employees, but what's important to note is all of their employees are domestic and our similar business that we operate today our velocity business a good portion of those employees are offshore. So one of the integration plans related to NWP would be as we grow that business to take more positions offshore. And NWP is a very strong business within this market and the employee base we are excited to have joined with RealPage and we’re excited to combine the two forces together.
And then, last quarter you talked a lot about the data center investments over the next two years to support the future analytics business. And based on the commentary today and last few quarters, it seems like you're finding new ways every quarter to leverage the massive data pools. Could you talk about what the – or how much growth in data volume, which you're expecting in the next couple years coming from your existing products? And then maybe how much is in the pipeline of products you see coming down the road.
That's a level of granularity.
I guess more generally, yes.
We expect overall transaction processing to increase much faster than the rate of the business as we find new and creative ways to leverage our data footprint. So we grew from 430 billion to 620 billion transactions. I think I would expect that rate to continue or even potentially accelerate as we move forward a time.
All right. Thanks for the time.
Our next question comes from Michael Nemeroff with Credit Suisse. Please go ahead.
Hey guys, thanks for taking my questions. Just want to focus in on NWP a little bit. How fast did NWP grow in 2015 and what rate if it did?
Yes. NWP was a kind of a 5% growth Company. What we saw in the acquisition was more the expense synergy of combining the two business together Michael. In addition to that NWP has a couple of products that we do not offer and that should provide some additional revenue synergy as we cross sell that into our existing base. These companies…
No, no, no, please, Steve.
These companies while we were in the same business, they were actually quite complementary. NWP has an amazing invoice processing platform this is almost fully automated. They also pay bills electronically for their customers. We don't do that, so we're going to be adding that functionality to our velocity product. We have a much stronger resonant payment platform and NWP will be adapting our payments platform. NWP has a great contact center for resident inquiries around bills and payments. We don’t have that so we will be offering that service into our velocity clients. We also expect to really vastly expand our active building resident portal to start to include some of the smart home automation technology that NWP has developed.
We will be combining our cloud services operation NWP had that and so do we were – we are quite a bit larger than they are. So that will fold into our cloud services. NWP has an accounting service that they offer under the trade name smart source. We don't have that service and we will be promoting that through our 375 sales reps. So this is really not – I would say an expense synergy played by itself. It really is extraordinarily complementary in terms of the product revenue synergies that we think we can get by integrating products we have they don’t or vice versa.
That’s helpful. And maybe you could what percentage of the revenue is transactional for subscription and the 58 to 45, that you’re expecting to pull in 2015. How much of that is business disruption versus write down from contracts normal revenue write down that we see.
So they have approximately $10 million of revenue, Michael, that’s associated with submetering which we would view significant component of that is more transactional in nature. However they tend to achieve the same amount of revenue each year related to that. So there is some recurring benefit to it even though it’s more project oriented.
And just lastly for me, so when I – so if I strip out the stub from Indatus and the contribution that you are expecting to get from NWP. I get somewhere organic total revenue growth somewhere in the low-double digits around 11%. I’m just curious embedded within that what are your unit versus ARPU assumptions for 2016.
So our calculation of organic growth and the guidance range that we gave is a 12% to 14% organic number and as we continue and as we have said in the past we would expect between half to two-thirds of revenue growth to be more RPU driven versus unit driven. I would expect that we would continue adding organically 100,000 or so units a quarter sequentially as we proceed through 2016, which is very consistent with 2015.
Very helpful. Thanks, guys. Appreciate it.
[Operator Instructions] Our next question comes from Pat Walravens with JMP.
Great. Thank you. Congratulations you guys. All right, so Bryan I understand why you would want to stay at RealPage. But what made you think of leaving and then what changed your mind.
Well, I mean, so obviously I stayed so that is the best opportunity for myself. But quite honestly, Pat, as you consider leaving a Company, it’s not a decision that you ever take lightly and when you’re section 16 officer sometimes the regulatory reporting requirements are quicker than the actual decision-making process. I just ultimately determined that the opportunity at RealPage was just too great and Steve and I kept the dialogue alive the entire time and I continued as the CFO and we had continuity up to this point. So for me personally and for the Company and the Company stakeholders it was just in the best interest for me to stay at RealPage.
Well, I agree. I am glad you are staying. So that's good. You are in good Company by the way same thing happened at sales force in 2006. Talk about that some other time. And then more broadly – more broadly I am curious about the asset optimization space YieldStar and if you guys could just sort of comment, what the demand trends are like there and competitively what you are saying. I'd love to hear that where it's coming from has actually got a positive comment about YieldStar from one of your competitors, so that doesn't happen very often. That's what's prompting the question.
Repeat that comment out of them. The fourth quarter actually accelerated in this area. We are seeing good growth in the YieldStar pricing engine. We are adding additional capability to that which will make it even more accurate more accurate in terms of optimizing revenue. Our business intelligence platform is growing substantially faster than that because for the first time we were able to benchmark metrics of performance and show owners and operators how they compare to their peers not just how they compare to their own assets. So the analogy I like is looking to the mirror you always look better yourself than do when – when the other people look at you and now we are able to expose the true picture of how each asset is performing with this product.
Finally we are launching in late 2015 our first product that allows really the institutional lender market to start to assess the attractiveness of different geographic or asset opportunities on the sale of disposition side. This product I think has enormous upside because the industry itself makes about two-thirds of its return based on how well they buy and they sell assets not, what they do in operating and traditionally we focus all of our energy on improving the operation of the assets. We are getting into a new area and we are doing it with undisputed data leadership and at the end of the day data statistical analysis wins over rules and we expect to do very well in this particular area.
Great. Thank you and congratulations again.
Thanks. You bet.
This concludes our question-and-answer session as well as today’s conference call. Thank you for attending today’s presentation. You may now disconnect.
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