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Section 1: 8-K/A (8-K/A LROFINANCIALS)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 15, 2018 (December 4, 2017)
REALPAGE, INC.
(Exact name of registrant as specified in its charter)

 
 
 
 
 
Delaware
 
001-34846
 
75-2788861
 
 
 
 
 
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)


 
 
 
2201 Lakeside Boulevard
Richardson, Texas
 
 
75082-4305
 
 
 
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (972) 820-3000
 (Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Explanatory Note
RealPage, Inc. (the “Company” or “we” or “us”) filed a Form 8-K with the Securities and Exchange Commission on December 4, 2017 (the “Original Filing”) to report the completion of our previously announced acquisition of substantially all of the assets and liabilities that comprise the multifamily revenue optimization business of Rainmaker Group Ventures, LLC, commonly referred to as Rainmaker’s Lease Rent Options (LRO) business. In the Original Filing, we stated that the required financial statements and pro forma financial information would be filed by amendment within seventy-one (71) calendar days from the date that the Original Filing was required to be filed. This Form 8-K/A is being filed to amend the Original Filing to provide the required financial statements and pro forma financial information described under Item 9.01 below.

Item 9.01
 
Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The audited financial statements of LRO (a carve-out of Rainmaker Group Ventures, LLC) as of and for the year ended December 31, 2016 are filed as Exhibit 99.2 to this Form 8-K/A and incorporated herein by reference.
The unaudited condensed financial statements of LRO (a carve-out of Rainmaker Group Ventures, LLC) as of and for the nine months ended September 30, 2017 and 2016 are filed as Exhibit 99.3 to this Form 8-K/A and incorporated herein by reference.
(b) Pro Forma Financial Information
The unaudited combined condensed pro forma financial information with respect to the Company’s acquisition of LRO is filed as Exhibit 99.4 to this Form 8-K/A and incorporated herein by reference.
(d) Exhibits

 
 
 
Exhibit No.
 
Description
23.1
 
Consent of Aprio LLP.
 
 
 
99.2
 
LRO audited financial statements as of and for the year ended December 31, 2016.
 
 
 
99.3
 
LRO unaudited condensed financial statements as of and for the nine months ended September 30, 2017 and 2016.
 
 
 
99.4
 
Unaudited combined condensed pro forma balance sheet at September 30, 2017; unaudited combined condensed pro forma statement of operations for the year ended December 31, 2016; and unaudited combined condensed pro forma statement of operations for the nine months ended September 30, 2017.









SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
REALPAGE, INC.
 
By:  
/s/ W. Bryan Hill
 
W. Bryan Hill 
 
Chief Financial Officer, Executive Vice President and Treasurer 
Date: February 15, 2018






EXHIBIT INDEX


 
 
 
Exhibit No.
 
Description
 
 
Consent of Aprio LLP.
 
 
 
 
 
LRO audited financial statements as of and for the year ended December 31, 2016.
 
 
 
 
 
 
LRO unaudited condensed financial statements as of and for the nine months ended September 30, 2017 and 2016.
 
 
 
 
 
Unaudited combined condensed pro forma balance sheet at September 30, 2017; unaudited combined condensed pro forma statement of operations for the year ended December 31, 2016; and unaudited combined condensed pro forma statement of operations for the nine months ended September 30, 2017.




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Section 2: EX-23.1 (EXHIBIT 23.1)

exhibit231_auditorxconse
Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-168878, 333-172573, 333-179773, 333-186964, 333-202462, 333-210189, and 333-176742) of RealPage, Inc. of our report dated September 7, 2017, with respect to the financial statements of Multifamily Housing Operations (a carve-out of the Rainmaker Group Ventures, LLC) as of December 31, 2016 and for the year then ended, and included in this Current Report of Form 8-K/A (No. 001-34846) of RealPage, Inc. dated February 15, 2018. Atlanta, Georgia February 15, 2018


 
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Section 3: EX-99.2 (EXHIBIT 99.2)

lro2016auditedfs
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) FINANCIAL STATEMENTS DECEMBER 31, 2016 Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) TABLE OF CONTENTS PAGE Independent auditors' report 1 - 2 Financial statements: Balance sheet 3 - 4 Statement of income and members' equity 5 Statement of cash flows 6 Notes to financial statements 7 - 14 Exhibit 99.2


 
INDEPENDENT AUDITORS' REPORT To the Members of The Rainmaker Group Ventures, LLC We have audited the accompanying carve-out financial statements of Multifamily Housing Operations, a carve-out of The Rainmaker Group Ventures, LLC (a Delaware limited liability company), which comprise the carve-out balance sheets as of December 31, 2016, and the related statements of income and members' equity and cash flows for the year then ended, and the related notes to the carve-out financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these carve-out financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of carve-out financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these carve-out financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the carve-out financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the carve-out financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the carve-out financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the carve-out financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the carve-out financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Multifamily Housing Operations, a carve-out of The Rainmaker Group Ventures, LLC, as of December 31, 2016, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Aprio, LLP Five Concourse Parkway, Suite 1000, Atlanta, Georgia 30328 404.892.9651 Aprio.com Independently Owned and Operated Member of Morison KSi Exhibit 99.2


 
Emphasis of a Matter We draw attention to Note A of the carve-out financial statements, which describes the basis of presentation used in preparing these carve-out financial statements. Our opinion is not modified with respect to this matter. Atlanta, Georgia September 7, 2017 Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) BALANCE SHEET DECEMBER 31, 2016 ASSETS Current assets Cash $ 140,812 Accounts receivable, net of allowance for doubtful accounts of $230,634 4,513,735 Prepaid expenses 817,033 Total current assets 5,471,580 Property and equipment, at cost Leasehold improvements 2,015,766 Office furniture and computer equipment 2,286,050 Software 722,190 Internally developed software 4,623,529 9,647,535 Accumulated depreciation (6,658,188) 2,989,347 Other assets Goodwill 2,544,139 Intangibles, net 455,000 2,999,139 Total assets $ 11,460,066 See accompanying notes to financial statements -3- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) BALANCE SHEET DECEMBER 31, 2016 LIABILITIES AND MEMBERS' EQUITY Current liabilities Accounts payable $ 329,840 Accrued expenses 1,795,712 Current portion of deferred revenue 820,205 Acquisition related liabilities 341,999 Current portion of deferred rent 168,184 Total current liabilities 3,455,940 Long-term liabilities Deferred revenue, net of current portion 397,635 Deferred rent liability 748,253 1,145,888 Members' equity 6,858,238 Total liabilities and members' equity $ 11,460,066 See accompanying notes to financial statements -4- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) STATEMENT OF INCOME AND MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2016 Revenues $ 35,586,077 Cost of revenue 6,165,006 Gross profit 29,421,071 Selling, general and administrative expenses Product development 6,467,262 Sales and marketing expenses 9,792,625 General and administrative 5,766,252 22,026,139 Net income 7,394,932 Members' equity - beginning of year 6,835,550 Net intercompany transfers (7,372,244) Members' equity - end of year $ 6,858,238 See accompanying notes to financial statements -5- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2016 Cash flows from operating activities Net income $ 7,394,932 Adjustments to reconcile net income to net cash provided by operating activities: Change in allowance for doubtful accounts 9,013 Depreciation and amortization 1,490,044 Deferred rent liability (86,951) Changes in operating assets and liabilities: Accounts receivable (683,444) Prepaid expenses and other assets (128,561) Accounts payable (310,576) Accrued expenses 87,395 Deferred revenue 418,414 Acquisition related liabilities 61,091 Total adjustments 856,425 Net cash provided by operating activities 8,251,357 Cash flow from investing activities Acquisition of property and equipment (134,046) Internally developed software (662,004) Net cash used in investing activities (796,050) Cash flows from financing activities Net intercompany transfers (7,372,244) Net increase in cash 83,063 Cash, beginning of year 57,749 Cash, end of year $ 140,812 See accompanying notes to financial statements -6- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note A Summary of Significant Accounting Policies Nature of Operations: The Rainmaker Group Ventures, LLC ("RMGV" or "the Company") is a software company that develops revenue management applications in the gaming, hospitality and multi-family housing industries throughout the United States. In February 2017, Rainmaker Group Ventures, LLC and RealPage, Inc., a Delaware corporation ("RealPage") entered into an Asset Purchase Agreement (the "Asset Purchase Agreement"). Pursuant to the Asset Purchase Agreement and subject to the conditions set forth therein, the Company (RMGV) will sell to RealPage certain discrete assets and liabilities that comprise the Multifamily Housing Operations business (collectively, the "MHO") of the Company. Pursuant to the Asset Purchase Agreement, RealPage will pay approximately $300 million in cash, subject to reductions for outstanding indebtedness and unpaid transaction expenses and working capital adjustment, in exchange for MHO. RealPage will retain a portion of the purchase price as a holdback to serve as security for the benefit of RealPage and its affiliates in respect of the indemnification obligations of the Company. Subject to any indemnification claims made, the holdback will be released to the sellers on or shortly after the first anniversary date of the closing of the transaction. The carve-out financial statements of MHO (a carve-out of "The Rainmaker Group Ventures, LLC") present the historical financial position, results of operations, changes in equity to support MHO, and cash flows on a carve-out basis of the MHO segment in connection with the Asset Purchase Agreement. The carve-out financial statements have been derived from the accounting records of The Rainmaker Group Ventures, LLC on a carve-out basis. Basis of presentation and methods of allocation: The carve-out financial statements of MHO (a carve-out of "The Rainmaker Group Ventures, LLC"), have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). These financial statements have been prepared solely to demonstrate the historical results of operations, financial position and cash flows related to MHO for the indicated periods. The carve-out financial statements include the assets, liabilities, revenue and expenses that are specifically identifiable to MHO. The carve-out financial statements reflect allocations of direct and indirect expenses related to certain overhead functions that are provided on a centralized basis by The Rainmaker Group Ventures, LLC. These expenses have been allocated to MHO on the basis of direct usage when identifiable, with others allocated based on relevant criteria. -7- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note A Summary of Significant Accounting Policies (Continued) Management believes the assumptions underlying the carve-out financial statements, including the assumptions regarding allocation of expenses, are reasonable. Nevertheless, the carve-out financial statements may not include all of the actual expenses that would have been incurred by MHO and may not reflect the MHO’s financial position, results of operations and cash flows that would have been reported if the MHO had been a stand-alone entity during the period presented. Intercompany transactions with The Rainmaker Group Ventures, LLC are considered to be settled for cash in the carve-out cash flow statement in the same period as reported by The Rainmaker Group Ventures, LLC. The total net effect of the settlement of these intercompany transactions is reflected in the carve-out cash flow statement as a financing activity and in the carve-out statement of income and members' equity within Net Intercompany Transfers. Net Intercompany Transfers represents the MHO’s cumulative earnings transferred to The Rainmaker Group Ventures, LLC. Revenue Recognition: Revenue is derived from hosting fees and related services that include maintenance, installation, integration, configuration, and training. Revenue from services are recognized when persuasive evidence of an agreement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. Hosting revenue is recognized ratably over the contract terms or estimated customer life beginning on the go live date of each contract. Certain arrangements with the multi-family housing industry customers require significant costs related to implementation. When the Company receives a non-refundable up-front payment for implementation that has to be deferred over the contract period, the Company capitalizes the costs associated with the implementation and amortizes those costs over the period that revenue is recognized for the related up-front payment. Deferred revenue consists of amounts billed to, or payments received from, customers for software licenses, maintenance, and services that have not met the criteria for revenue recognition. Accounts Receivable: Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company does not require that collateral be provided by customers to secure the Company's accounts receivable. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable, net of the allowance for doubtful accounts and net of any amounts for related discounts, if applicable. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience, as well as management’s assessment of the collectibility of specific accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. -8- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note A Summary of Significant Accounting Policies (Continued) Property and Equipment: Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired or otherwise disposed of and the related allowance for depreciation are eliminated from the accounts, and any resulting gain or loss is recognized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows: Leasehold improvements Lesser of estimated useful life or life of lease Office furniture and computer equipment 3-7 years Software 3 years Internally developed software 3 years Depreciation expense approximated $1,360,000 for the year ended December 31, 2016. Internally Developed Software: The Company capitalizes certain development costs incurred in connection with its internal use software. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. Internal use software is amortized on a straight line basis over its estimated useful life, generally three years. The amortization period starts upon completion of the development project and when placed in service. The Company did not record an impairment charge during the year ended December 31, 2016. Goodwill: Goodwill represents the excess of the purchase price of an acquisition that exceeds the fair value of the identifiable net tangible and intangible assets acquired in the purchase. Goodwill is not amortized, but is evaluated for potential impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. MHO values goodwill in accordance with Accounting Standards Codification (“ASC”) 350, Goodwill and Other Intangible Assets (ASC 350). ASC 350 requires goodwill to be either qualitatively or quantitatively assessed for impairment annually (or more frequently if impairment indicators arise). -9- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note A Summary of Significant Accounting Policies (Continued) Intangible Assets: The Company’s intangible assets consist of technology. Intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. The definite-lived assets are capitalized and amortized on a straight-line basis over the estimated useful life of the assets. The Company evaluates the propriety of the carrying amount of its definite-lived intangibles, as well as the related amortization period, to determine whether current events and circumstances warrant adjustment to the carrying values and/or estimates of useful lives. This evaluation is performed using the estimated projected future undiscounted cash flows associated with the asset compared to the asset's carrying amount to determine if a write-down is required. To the extent such projections indicate that the undiscounted cash flows are not expected to be adequate to recover the carrying amounts, the assets are written down to fair value as determined by discounting future cash flows. Management determined no impairment existed at December 31, 2016. Research and Development Costs: Research and development costs consist primarily of compensation and benefits paid to the Company's employees and related overhead expenses. For the year ended December 31, 2016, these expenses totaled approximately $5,625,000 and are included in product development expenses. Income Taxes: RMGV, the entity from which the assets and liabilities that comprise MHO were carved out, is a Limited Liability Company that is taxed as a partnership. Taxable income and losses are allocated directly to the members. Therefore, no provision for income tax has been included in the carve-out financial statements for MHO. The Company applies the provisions of accounting standards for income taxes. These standards require that uncertain tax positions be recognized or derecognized based on a ‘more-likely-than-not’ threshold. This applies to positions taken or expected to be taken in a tax return. The Company does not believe its financial statements include any material uncertain tax positions. Use of Estimates: The preparation of the financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the accounting for the allowance for doubtful accounts, the carrying amount of goodwill, intangibles and property and equipment, the deferral of revenues and costs related to certain customer agreements, sales taxes, and allocations of direct and indirect expenses related to certain overhead functions. Actual results could differ from those estimates. -10- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note A Summary of Significant Accounting Policies (Continued) Impairment of Long-Lived Assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Advertising Costs: Advertising costs are expensed as incurred. Advertising costs, which consist primarily of trade show and marketing expenses, approximated $1,596,000 for the year ended December 31, 2016 and are included in sales and marketing expenses. Fair Value of Financial Instruments: The Company’s financial instruments include cash, accounts receivable, accounts payable, and accrued expenses and are carried at cost, which approximates their fair value because of the short- term nature of these financial instruments. Note B Acquisition of Entity SlopeJet, LLC: In June 2015, the Company acquired tangible and intangible assets and assumed certain liabilities of SlopeJet, LLC ("SlopeJet"). SlopeJet develops and operates websites, databases, reports, and lead analysis solutions. As a result of the acquisition, the Company will increase the number and quality of leads generated to increase revenues. The Company accounted for this acquisition using the purchase method of accounting, and the purchase price was allocated to the assets acquired and the liabilities assumed based on their fair values at the date of acquisition. The purchase consideration was approximately $1,489,000, of which $1,146,000 was paid in cash and the remainder through the issuance of 53,907 Class A common shares, of which 16,384 shares with a fair value of $343,000 are not subject to adjustment and therefore included as part of the purchase price. The remaining 37,523 Class A common shares are subject to adjustment whereby additional shares may be issued or forfeited based on achieving or not achieving certain revenue requirements for the trailing twelve-month period ended June 30, 2016 and June 30, 2017, respectively, as fully defined in the agreement. Additionally, the ultimate issuance of the additional shares requires continuing employment by the selling shareholders. In accordance with ASC 805-10-55-24, contingent considerations that automatically forfeit when employment terminates would be deemed compensation for postcombination services. As a result, any contingent payments will be recorded as compensation expense in the period earned. Management estimated that it was probable that an additional 29,357 shares of Class A common shares with a fair value approximating $643,000 would be earned. -11- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note B Acquisition of Entity (Continued) At December 31, 2016, management recorded a noncash charge to compensation expense and members' equity approximating $307,000 representing services performed during 2016. In connection with the acquisition, two additional contingent cash payments may be required, which was also based on revenue targets for June 30, 2016 and June 30, 2017, as well as continuing employment of the selling shareholders. In accordance with ASC 805-10-55-24, these contingent considerations will be recorded as compensation expense in the period earned. At December 31, 2016, management determined it was probable that the contingent payment would be earned and therefore recorded compensation expense approximating $622,000 representing services performed during 2016. Compensation expense is included in general and administrative expenses in the accompanying statement of income and members' equity for the years ended December 31, 2016. The allocation of assets and liabilities was as following: Amount Accounts receivable $ 31,956 Prepaids 892 Intangibles - technology 650,000 Goodwill 841,040 Total assets acquired 1,523,888 Less: Deferred revenue 9,627 Accounts payable 20,466 Accrued salaries 5,139 Total liabilities assumed 35,232 Net assets acquired $ 1,488,656 Note C Goodwill Multifamily Housing Operation's goodwill reflected in these carve-out financial statements was recognized in connection with the acquisition of Rent Jungle, LLC in 2014 and the acquisition of SlopeJet in 2015. The purchase price for both acquisitions was allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The full balance of goodwill associated with these acquisitions has been attributed to MHO in connection with preparing these carve-out financial statements. Management believes that the fair value of the assets acquired has not been impaired over the period January 1, 2016 through December 31, 2016. -12- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note C Goodwill (Continued) To evaluate the recoverability of goodwill, Multifamily Housing Operation (MHO) first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of any of its reporting units is less than its carrying amount. MHO's qualitative assessment of the recoverability of goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry- specific and company-specific factors. Those factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of MHO's financial performance; or (iv) a sustained decrease in MHO's enterprise value below its net book value. After assessing the totality of events and circumstances, if MHO determines that it is not more likely than not that the fair value of any of its reporting units is less than its carrying amount, no further assessment is performed. If MHO determines that it is more likely than not that the fair value of any of its reporting units is less than its carrying amount, MHO calculates the fair value of that reporting unit and compares the fair value to the reporting unit’s net book value. If the fair value of the reporting unit is greater than its net book value, there is no impairment. Otherwise, MHO calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit. The implied fair value of goodwill is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference. Note D Intangible Assets The Company's intangible assets at December 31, 2016 were comprised of a $650,000 technology acquired in connection with SlopeJet acquisition. The assets are being amortized on a straight-line basis over a 5 year estimated life. Amortization expense for the year ended December 31, 2016 was $130,000 while accumulated amortization was $195,000. Estimated amortization expense for 2017 - 2019 is $130,000 per year and $65,000 for 2020. Note E 401(k) Plan The Company maintains an employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code (the "Code"), whereby employees may contribute a percentage of their compensation not to exceed the maximum amount allowable under the Code. At the discretion of the Board, the Company may elect to make matching contributions. For the year ended December 31, 2016, the Company made matching contributions approximating $394,000. -13- Exhibit 99.2


 
MULTIFAMILY HOUSING OPERATIONS (A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Note F Commitments and Contingencies Operating Leases: The Company is obligated under the terms of various operating lease agreements for office facilities expiring at various dates through August 2021. An office space operating lease agreement contains provisions for future rent increases, landlord allowances for tenant improvements, and periods in which rent payments are reduced. The total amount of rental payments due over the lease term is being charged to rent expense on the straight- line method over the term of the lease. The difference between rent expense recorded and the amount paid is included in long-term deferred rent liability in the accompanying balance sheet. Future minimum lease payments under the noncancelable operating lease agreements are as follows: December 31 Amount 2017 $ 709,840 2018 729,702 2019 742,946 2020 707,892 2021 485,049 $ 3,375,429 Rental expense for all operating leases approximated $514,000 for the year ended December 31, 2016. Sales Tax Liability: The Company determined that it was liable for certain uncollected sales tax on revenue transactions in states in which the Company determined that it had a nexus. As of December 31, 2016, the Company recorded a liability to the state jurisdictions of approximately $415,000, which is included in accrued expenses in the accompanying financial statements. Actual amounts could differ from those estimates. Note G Subsequent Events The Company evaluated subsequent events through September 7, 2017, when these carve-out financial statements were available to be issued. The Company is not aware of any significant events that occurred subsequent to the carve-out balance sheet date, but prior to the filing of this report, that would have a material impact on the carve-out financial statements. -14- Exhibit 99.2


 
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Section 4: EX-99.3 (EXHIBIT 99.3)

Exhibit

Exhibit 99.3











MULTIFAMILY HOUSING OPERATIONS
(A CARVE-OUT OF THE RAINMAKER GROUP VENTURES, LLC)

CONDENSED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)







Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Condensed Financial Statements:
For the Nine Months Ended September 30, 2017 and 2016



Table of Contents

Condensed Financial Statements:
 
Condensed Balance Sheets (Unaudited)
Condensed Statements of Income and Members’ Equity (Unaudited)
Condensed Statements of Cash Flows (Unaudited)
Notes to the Condensed Financial Statements (Unaudited)



Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Condensed Balance Sheets
September 30, 2017 and December 31, 2016
(in thousands)
 
 
September 30, 2017
 
December 31, 2016
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash
 
$
80

 
$
141

Accounts receivable, less allowance for doubtful accounts of $237 and $231 at September 30, 2017 and December 31, 2016, respectively
 
5,204

 
4,514

Prepaid expenses
 
891

 
817

Total current assets
 
6,175

 
5,472

Property and equipment, net
 
2,576

 
2,989

Goodwill
 
2,544

 
2,544

Identified intangible assets, net
 
358

 
455

Other assets
 
7

 

Total assets
 
$
11,660

 
$
11,460

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
440

 
$
330

Accrued expenses
 
1,612

 
1,796

Current portion of deferred revenue
 
1,131

 
820

Acquisition related liabilities
 

 
342

Current portion of deferred rent
 
142

 
168

Total current liabilities
 
3,325

 
3,456

Deferred revenue, net of current portion
 
398

 
398

Deferred rent liability
 
474

 
748

Total liabilities
 
4,197

 
4,602

Commitments and contingencies (Note 5)
 
 
 
 
Members’ equity
 
7,463

 
6,858

Total liabilities and members’ equity
 
$
11,660

 
$
11,460


See accompanying notes.


1


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Condensed Statements of Income and Members’ Equity
(in thousands)
(unaudited)
 
 
Nine Months Ended September 30,
 
2017
 
2016
Revenue
$
30,285

 
$
26,141

Cost of revenue
5,513

 
4,587

Gross profit
24,772

 
21,554

Operating expenses:
 
 
 
Product development
4,882

 
4,915

Sales and marketing
7,908

 
7,572

General and administrative
3,363

 
3,594

Total operating expenses
16,153

 
16,081

Net income
8,619

 
5,473

Members’ equity - beginning of period
6,858

 
6,836

Net intercompany transfers
(8,014
)
 
(4,806
)
Members’ equity - end of period
$
7,463

 
$
7,503


See accompanying notes.


2


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Condensed Statements of Cash Flows
(in thousands)
(unaudited)

 
Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
8,619

 
$
5,473

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for doubtful accounts
116

 
146

Depreciation and amortization
1,085

 
1,123

Deferred rent liability
(300
)
 
(50
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(806
)
 
(877
)
Prepaid expenses and other assets
(81
)
 
(57
)
Accounts payable
110

 
(148
)
Accrued expenses and other liabilities
(184
)
 
(678
)
Deferred revenue
311

 
421

Acquisition related liabilities
(342
)
 

Total adjustments
(91
)
 
(120
)
Net cash provided by operating activities
8,528

 
5,353

Cash flows from investing activities:
 
 
 
Acquisition of property and equipment
(107
)
 
(127
)
Internally developed software
(468
)
 
(444
)
Net cash used in investing activities
(575
)
 
(571
)
Cash flows from financing activities:
 
 
 
Net intercompany transfers
(8,014
)
 
(4,807
)
Net cash used in financing activities
(8,014
)
 
(4,807
)
Net decrease in cash
(61
)
 
(25
)
Cash:
 
 
 
Beginning of period
141

 
58

End of period
$
80

 
$
33


See accompanying notes.


3


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Notes to the Condensed Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(in thousands)
(unaudited)


1.
Summary of Significant Accounting Policies
Nature of Operations
The Rainmaker Group Ventures, LLC ("RMGV" or the “Company") is a software company that develops revenue management applications in the gaming, hospitality and multi-family housing industries throughout the United States.
In February 2017, the Company and RealPage, Inc., a Delaware corporation ("RealPage"), entered into an Asset Purchase Agreement (the "Asset Purchase Agreement"). Pursuant to the Asset Purchase Agreement, and subject to the conditions set forth therein, the Company agreed to sell to RealPage certain discrete assets and liabilities that comprise the Multifamily Housing Operations business (collectively "MHO") of the Company.
In exchange for MHO, RealPage agreed to pay approximately $300.0 million in cash, subject to reductions for outstanding indebtedness and unpaid transaction expenses and working capital adjustment. RealPage will retain a portion of the purchase price as a holdback to serve as security for the benefit of itself and its affiliates, in respect to indemnification obligations of the Company. Subject to any indemnification claims made by RealPage, the holdback will be released to the Company on or shortly after the first anniversary of the transaction’s closing date. As further discussed in Note 7, the sale of MHO was completed in December 2017.
The unaudited carve-out condensed financial statements of MHO present the historical financial position, results of operations, changes in equity to support MHO, and cash flows on a carve-out basis of the MHO segment in connection with the Asset Purchase Agreement. The unaudited carve-out condensed financial statements have been derived from the accounting records of the Company on a carve-out basis.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been omitted from the condensed financial statements. The Company believes that these condensed financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. The condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2016, included in this Current Report on Form 8-K/A as Exhibit 99.2.
Basis of Presentation and Methods of Allocation
The unaudited carve-out condensed financial statements of MHO have been prepared in accordance with GAAP. These unaudited carve-out condensed financial statements have been prepared solely to demonstrate the historical results of operations, financial position and cash flows related to MHO for the indicated periods. The unaudited carve-out condensed financial statements include the assets, liabilities, revenue and expenses that are specifically identifiable to MHO.
The unaudited carve-out condensed financial statements reflect allocations of direct and indirect expenses related to certain overhead functions that are provided on a centralized basis by RMGV. These expenses have been allocated to MHO on the basis of direct usage when identifiable, with others allocated based on relevant criteria.
Management believes the assumptions underlying the unaudited carve-out condensed financial statements, including the assumptions regarding allocation of expenses, are reasonable. Nevertheless, the unaudited carve-out condensed financial statements may not include all of the actual expenses that would have been incurred by MHO and may not reflect its financial position, results of operations and cash flows that would have been reported if MHO had been a stand-alone entity during the period presented.
Intercompany transactions with RMGV are considered to be settled for cash in the unaudited carve-out Condensed Statements of Cash Flows in the same period as reported by the Company. The total net effect of the settlement of these intercompany transactions is reflected in the unaudited carve-out Condensed Statements of Cash Flows as a financing activity and in the unaudited carve-out Condensed Statements of Income and Members’ Equity within the line “Net intercompany transfers”. Net intercompany transfers represents MHO’s cumulative earnings transferred to the Company.
Use of Estimates
The preparation of the unaudited carve-out condensed financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited carve-out condensed financial statements and the reported amounts of revenues and

4


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Notes to the Condensed Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(in thousands)
(unaudited)

expenses during the period. Significant items subject to such estimates and assumptions include the accounting for the allowance for doubtful accounts; the carrying amount of goodwill, intangibles and property and equipment; the deferral of revenues and costs related to certain customer agreements; sales taxes; and allocations of direct and indirect expenses related to certain overhead functions. Actual results could differ from those estimates.
Revenue Recognition
Revenue is derived from hosting fees and related services that include maintenance, installation, integration, configuration, and training. Revenue from services are recognized when persuasive evidence of an agreement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable.
Hosting revenue is recognized ratably over the contract terms or estimated customer life beginning on the go-live date of each contract.
Certain arrangements with the multi-family housing industry customers require significant costs related to implementation. When the Company receives a non-refundable up-front payment for implementation that has to be deferred over the contract period, the Company capitalizes and amortizes the costs associated with the implementation over the period that revenue is recognized for the related up-front payment.
Deferred revenue consists of amounts billed to, or payments received from, customers for software licenses, maintenance and services that have not met the criteria for revenue recognition.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company does not require that collateral be provided by customers to secure the Company's accounts receivable. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable, net of the allowance for doubtful accounts and net of any amounts for related discounts, if applicable. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience, as well as management’s assessment of the collectability of specific accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired or otherwise disposed of and the related allowance for depreciation are eliminated from the accounts, and any resulting gain or loss is recognized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows:
Leasehold improvements
Lesser of estimated useful life or life of the lease
Office furniture and computer equipment
3 - 7 years
Software
3 years
Internally developed software
3 years
Internally Developed Software
The Company capitalizes certain development costs incurred in connection with its internally developed software. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. Internally developed software is amortized on a straight-line basis over its estimated useful life. The amortization period starts upon completion of the development project and when placed in service.
The Company did not record an impairment charge during the nine months ended September 30, 2017 or 2016 related to internally developed software.

5


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Notes to the Condensed Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(in thousands)
(unaudited)

Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Goodwill
Goodwill represents the excess of the purchase price of an acquisition over the fair value of the identifiable net tangible and intangible assets acquired in the purchase. Goodwill is not amortized but is evaluated for potential impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. MHO values goodwill in accordance with Accounting Standards Codification 350, Goodwill and Other Intangible Assets (“ASC 350”). ASC 350 requires goodwill to be either qualitatively or quantitatively assessed for impairment annually, or more frequently if impairment indicators arise.
To evaluate the recoverability of goodwill, MHO first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of any of its reporting units is less than its carrying amount. MHO's qualitative assessment of the recoverability of goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. Those factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of MHO's financial performance; or (iv) a sustained decrease in MHO's enterprise value below its net book value. After assessing the totality of events and circumstances, if MHO determines that it is not more likely than not that the fair value of any of its reporting units is less than its carrying amount, no further assessment is performed. If MHO determines that it is more likely than not that the fair value of any of its reporting units is less than its carrying amount, MHO calculates the fair value of that reporting unit and compares the fair value to the reporting unit’s net book value. If the fair value of the reporting unit is greater than its net book value, there is no impairment. Otherwise, MHO calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit. The implied fair value of goodwill is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
Management concluded that no impairment of goodwill existed at September 30, 2017 or December 31, 2016.
Intangible Assets
The Company’s intangible assets consist of technology acquired in connection with the acquisition of SlopeJet, LLC (“SlopeJet”) in 2015. Intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. The definite-lived assets are capitalized and amortized on a straight-line basis over the estimated useful life of the assets. The Company evaluates the propriety of the carrying amount of its definite-lived intangibles, as well as the related amortization period, to determine whether current events and circumstances warrant adjustment to the carrying values and/or estimates of useful lives. This evaluation is performed using the estimated projected future undiscounted cash flows associated with the asset compared to the asset's carrying amount to determine if a write-down is required. To the extent such projections indicate that the undiscounted cash flows are not expected to be adequate to recover the carrying amounts, the assets are written down to fair value as determined by discounting future cash flows. Management determined no impairment related to these assets existed at September 30, 2017 or December 31, 2016.
Research and Development Costs
Research and development costs consist primarily of compensation and benefits paid to the Company's employees and related overhead expenses. During the nine months ended September 30, 2017 and 2016, these expenses totaled approximately $3,688 and $3,378, respectively, and are included in product development expenses in the accompanying Condensed Statements of Income and Members’ Equity.

6


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Notes to the Condensed Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(in thousands)
(unaudited)

Income Taxes
RMGV, the entity from which the assets and liabilities that comprise MHO were carved out, is a limited liability company that is taxed as a partnership. Taxable income and losses are allocated directly to the members. Therefore, no provision for income tax has been included in the unaudited carve-out condensed financial statements for MHO.
The Company applies the provisions of accounting standards for income taxes. These standards require that uncertain tax positions be recognized or derecognized based on a ‘more-likely-than-not’ threshold. This applies to positions taken or expected to be taken in a tax return. The Company does not believe its unaudited carve-out condensed financial statements include any material uncertain tax positions.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, accounts receivable, accounts payable, and accrued expenses and are carried at cost, which approximates their fair value because of the short-term nature of these financial instruments.
Concentrations of Credit Risk
The Company’s cash accounts are maintained at various financial institutions and may, from time to time, exceed federally insured limits. The Company has not experienced any losses in such accounts.
Concentrations of credit risk with respect to accounts receivable result from substantially all of MHO’s clients being in the multi-family rental market. MHO’s clients, however, are dispersed across different geographic areas.
Legal Contingencies
The Company reviews the status of each legal contingency and records a provision for a liability when it considers that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company periodically reviews these provisions and makes adjustments where needed as additional information becomes available. If either or both of the criteria are not met, the Company assesses whether there is at least a reasonable possibility that a loss, or additional losses beyond those already accrued, may be incurred. If there is a reasonable possibility that a material loss (or additional material loss in excess of any accrual) may be incurred, the Company discloses an estimate of the amount of loss or range of losses, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate of loss cannot be made.
2. Property and Equipment
Property and equipment consisted of the following at September 30, 2017 and December 31, 2016:
 
September 30, 2017
 
December 31, 2016
 
(in thousands)
Leasehold improvements
$
2,016

 
$
2,016

Office furniture and computer equipment
2,305

 
2,285

Software
809

 
722

Internally developed software
5,092

 
4,624

Property and equipment, gross
10,222

 
9,647

Less: Accumulated depreciation and amortization
(7,646
)
 
(6,658
)
Property and equipment, net
$
2,576

 
$
2,989

Depreciation and amortization expense attributable to property and equipment was $988 and $1,026 for the nine months ended September 30, 2017 and 2016, respectively.
3. Goodwill
MHO’s goodwill reflected in these unaudited carve-out condensed financial statements was recognized in connection with the acquisition of Rent Jungle, LLC in 2014 and the acquisition of SlopeJet in 2015. The purchase price for both acquisitions was allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The full balance

7


Multifamily Housing Operations
(A Carve-out of the Rainmaker Group Ventures, LLC)
Notes to the Condensed Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(in thousands)
(unaudited)

of goodwill associated with these acquisitions has been attributed to MHO in connection with preparing these unaudited carve-out condensed financial statements.
4. Intangible Assets
The Company's intangible assets at September 30, 2017 and December 31, 2016 consisted of technology acquired in connection with the SlopeJet acquisition. The acquired technology is being amortized on a straight-line basis over a 5 year estimated life. Amortization expense was $97 for each of the nine-month periods ended September 30, 2017 and 2016. The gross carrying amount of the acquired technology was $650, and the related accumulated amortization was $292 and $195 at September 30, 2017 and December 31, 2016, respectively.
5. Commitments and Contingencies
Operating Leases:
The Company is obligated under the terms of various operating lease agreements for office facilities expiring at various dates through August 2021.
An office space operating lease agreement under which the Company is obligated contains provisions for future rent increases, landlord allowances for tenant improvements, and periods in which rent payments are reduced. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is included in the lines “Current portion of deferred rent” and “Deferred rent liability” in the accompanying Condensed Balance Sheets.
Sales Tax Liability:
The Company determined that it was liable for certain uncollected sales tax on revenue transactions in states in which it determined that it had a nexus. As of September 30, 2017 and December 31, 2016, the Company recorded a liability to the state jurisdictions of approximately $81 and $88, respectively, which is included in the line “Accrued expenses” in the accompanying Condensed Balance Sheets. Actual amounts could differ from these estimates.
6. Acquisition Related Liabilities
In June 2015, the Company acquired tangible and intangible assets and assumed certain liabilities of SlopeJet. The purchase consideration included additional payments in the form of shares and cash, the payment of which was contingent upon SlopeJet achieving certain revenue targets in the post-acquisition period. In addition to achieving the revenue targets, payment was contingent upon selling shareholders remaining employees of the Company during the measurement period. As the payment of the contingent consideration was conditioned upon the continued employment of the selling shareholders, the additional payments were recorded as compensation expense in the period earned. The measurement period for the final contingent consideration payment elapsed on June 30, 2017. There were no outstanding contingent consideration obligations at September 30, 2017.
7. Subsequent Events
RealPage’s purchase of MHO was completed in December 2017. RMGV received a cash payment of approximately $298.0 million on the closing date, and RealPage will make deferred payments of up to $1.6 million, the majority of which will be paid on the first anniversary of the closing date. The deferred portion of the purchase price serves as security against indemnification obligations contained in the Asset Purchase Agreement and is subject to reduction for indemnification claims made by the purchaser.
The Company evaluated subsequent events through February 15, 2018, when these unaudited carve-out condensed financial statements were available to be issued. Except for the completion of the sale to RealPage as discussed above, the Company is not aware of any significant events that occurred subsequent to the carve-out balance sheet date, but prior to the filing of this report, which would have a material impact on the unaudited carve-out condensed financial statements.

8
(Back To Top)

Section 5: EX-99.4 (EXHIBIT 99.4)

Exhibit

Exhibit 99.4



UNAUDITED COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION

On December 4, 2017, RealPage, Inc. (“RealPage” or the “Company”) completed its previously announced acquisition of substantially all of the assets and liabilities that comprise the multifamily revenue optimization business of Rainmaker Group Ventures, LLC (the "Business"), commonly referred to as Rainmaker's Lease Rent Options ("LRO") business (the "LRO Acquisition"). The purchase price for LRO consisted of a cash payment of $298.0 million at close, a deferred cash obligation of up to $1.6 million and the assumption of certain liabilities totaling $0.4 million. The deferred cash obligation serves as security for the benefit of RealPage and its affiliates against the indemnification obligations of the Business. Subject to any indemnification claims made, the majority of the holdback will be released to the selling party on or shortly after the first anniversary of the closing date of the LRO Acquisition.
We have derived the following unaudited combined condensed pro forma financial information ("Pro Forma Financial Information") by applying pro forma adjustments to the historical consolidated financial statements of RealPage, included in our December 31, 2016 Annual Report on Form 10-K ("RealPage 10-K"), and our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017 ("RealPage 10-Q"), filed with the Securities and Exchange Commission ("SEC") on March 1, 2017 and November 7, 2017, respectively. The Unaudited Combined Condensed Pro Forma Statements of Operations for the twelve months ended December 31, 2016 and nine months ended September 30, 2017, as adjusted, give pro forma effect to the LRO Acquisition as if the transaction occurred at the beginning of the earliest period presented. The Unaudited Combined Condensed Pro Forma Balance Sheet as of September 30, 2017, gives pro forma effect to the LRO Acquisition as if it occurred on that date.
On September 26, 2017, RealPage completed its acquisition of certain discrete assets and liabilities of On-Site Manager, Inc., a California corporation, and certain other affiliated parties (collectively "On-Site"), comprising substantially all of the existing business of On-Site Manager, Inc. (the "On-Site Acquisition"). The Unaudited Combined Condensed Pro Forma Statements of Operations for the twelve months ended December 31, 2016 and nine months ended September 30, 2017, give effect to the On-Site Acquisition as if it had occurred at the beginning of the earliest period presented. Except for a change in the preliminary allocation of the purchase price between identified intangible assets and goodwill identified after the filing of the RealPage 10-Q, the Unaudited Combined Condensed Pro Forma Balance Sheet does not include pro forma adjustments attributable to the On-Site Acquisition. Pro forma adjustments related to the On-Site Acquisition were not required, as the assets and liabilities of On-Site were included in the consolidated assets and liabilities of RealPage at September 30, 2017. We collectively refer to the pro forma adjustments relating to the LRO Acquisition and the On-Site Acquisition as the “Acquisition Adjustments.”
We have described the Acquisition Adjustments, which are based upon available information and upon assumptions and estimates that management believes to be reasonable, in the accompanying notes. The Pro Forma Financial Information is for informational purposes only and should not be considered indicative of actual results that would have been achieved had the LRO Acquisition and the On-Site Acquisition (collectively, "Acquisitions") actually been consummated on the dates indicated and does not purport to be indicative of results of operations as of any future date or for any future period. The Pro Forma Financial Information reflects that we have recorded the acquisitions under our business combinations accounting policy. Under this policy, we have allocated the total purchase price for the Acquisitions to the net tangible and intangible assets based upon their estimated fair values. The allocation and valuation of the net tangible and intangible assets is preliminary in nature, and may change as we continue to review information that was available on the date of acquisition.
You should read our Pro Forma Financial Information and the accompanying notes in conjunction with (i) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes in the RealPage 10-K and RealPage 10-Q; (ii) the financial statements and related notes for LRO (a carve-out of the Rainmaker Group Ventures, LLC), included as Exhibits 99.2 and 99.3 in this Current Report on Form 8-K/A; and (iii) the consolidated financial statements and related notes for On-Site, included as Exhibits 99.2 and 99.3 in our Current Report on Form 8-K/A filed with the SEC on December 12, 2017.


1



RealPage, Inc.
Unaudited Combined Condensed Pro Forma Balance Sheet
September 30, 2017
(in thousands)
 
 
 
 
 
Pro Forma
 
RealPage
 
LRO
 
Acquisition Adjustments
 
Combined
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
109,334

 
$
80

 
$
(50,723
)
A
$
58,691

Restricted cash
92,560

 

 

 
92,560

Accounts receivable, net
101,164

 
5,204

 
(32
)
 
106,336

Prepaid expenses
14,554

 
891

 
(6
)
 
15,439

Other current assets
6,043

 

 

 
6,043

Total current assets
323,655

 
6,175

 
(50,761
)
 
279,069

Property, equipment, and software, net
147,069

 
2,576

 
(971
)
B
148,674

Goodwill
565,425

 
2,544

 
175,372

C, D
743,341

Identified intangible assets, net
143,447

 
358

 
116,157

D
259,962

Deferred tax assets, net
69,589

 

 

 
69,589

Other assets
9,643

 
7

 
877

E
10,527

Total assets
$
1,258,828

 
$
11,660

 
$
240,674

 
$
1,511,162

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
$
27,388

 
$
440

 
$
(158
)
 
$
27,670

Accrued expenses and other current liabilities
77,451

 
1,754

 
(608
)
H
78,597

Current portion of deferred revenue
103,243

 
1,131

 
(397
)
F
103,977

Current portion of term loan, net
4,600

 

 
4,670

G
9,270

Customer deposits held in restricted accounts
92,571

 

 

 
92,571

Total current liabilities
305,253

 
3,325

 
3,507

 
312,085

Deferred revenue
5,640

 
398

 
(140
)
F
5,898

Revolving facility

 

 
50,000

G
50,000

Term loan, net
114,719

 

 
193,780

G
308,499

Convertible notes, net
278,392

 

 

 
278,392

Other long-term liabilities
38,134

 
474

 
990

H
39,598

Total liabilities
742,138

 
4,197

 
248,137

 
994,472

Stockholders' equity:
 
 
 
 
 
 
 
Common stock
87

 

 

 
87

Additional paid-in capital
622,224

 

 

 
622,224

Treasury stock, at cost
(51,545
)
 

 

 
(51,545
)
Members' equity

 
7,463

 
(7,463
)
I
 
Accumulated deficit
(54,181
)
 

 

 
(54,181
)
Accumulated other comprehensive income
105

 

 

 
105

Total stockholders’ equity
516,690

 
7,463

 
(7,463
)
 
516,690

Total liabilities and stockholders’ equity
$
1,258,828

 
$
11,660

 
$
240,674

 
$
1,511,162


See accompanying notes to the unaudited combined condensed pro forma financial information.



2



RealPage, Inc.
Unaudited Combined Condensed Pro Forma Statement of Operations
For the Year Ended December 31, 2016
(in thousands, except per share data)
 
 
 
 
 
 
 
Pro Forma
 
RealPage
 
On-Site
 
LRO
 
Acquisition Adjustments
 
Combined
Revenue:
 
 
 
 
 
 
 
 


On demand
$
542,531

 
$
43,243

 
$
35,586

 
$
(454
)
F
$
620,906

On premise
2,836

 

 

 

 
2,836

Professional and other
22,761

 

 

 

 
22,761

Total revenue
568,128

 
43,243

 
35,586

 
(454
)
 
646,503

Cost of revenue
242,301

 
12,796

 
6,165

 
9,141

 
270,403

Gross profit
325,827

 
30,447

 
29,421

 
(9,595
)
 
376,100

Operating expenses:
 
 
 
 
 
 
 
 
 
Product development
73,607

 
11,277

 
6,467

 
544

J
91,895

Sales and marketing
135,213

 
13,123

 
9,793

 
17,499

J
175,628

General and administrative
85,013

 
6,000

 
5,766

 
(249
)
J
96,530

Impairment of identified intangible assets
750

 

 

 

 
750

Total operating expenses
294,583

 
30,400

 
22,026

 
17,794

 
364,803

Operating income
31,244

 
47

 
7,395

 
(27,389
)
 
11,297

Interest expense and other, net
(3,758
)
 
(80
)
 

 
(22,419
)
G
(26,257
)
Income (loss) before income taxes
27,486

 
(33
)
 
7,395

 
(49,808
)
 
(14,960
)
Income tax expense (benefit)
10,836

 

 

 
(16,540
)
K
(5,704
)
Net income (loss)
$
16,650

 
$
(33
)
 
$
7,395

 
$
(33,268
)
 
$
(9,256
)
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Basic
$
0.22

 
 
 
 
 
 
 
$
(0.12
)
Diluted
$
0.21

 
 
 
 
 
 
 
$
(0.12
)
Weighted average shares used in computing net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Basic
76,854

 
 
 
 
 
 
 
76,854

Diluted
77,843

 
 
 
 
 
 
 
76,854


See accompanying notes to the unaudited combined condensed pro forma financial information.



3



RealPage, Inc.
Unaudited Combined Condensed Pro Forma Statement of Operations
For the Nine Months Ended September 30, 2017
(in thousands, except per share data)
 
 
 
 
 
 
 
Pro Forma
 
RealPage
 
On-Site
 
LRO
 
Acquisition Adjustments
 
Combined
Revenue:
 
 
 
 
 
 
 
 
 
On demand
$
462,518

 
$
38,329

 
$
30,285

 
$
(141
)
F
$
530,991

On premise
1,982

 

 

 

 
1,982

Professional and other
18,783

 

 

 

 
18,783

Total revenue
483,283

 
38,329

 
30,285

 
(141
)
 
551,756

Cost of revenue
199,934

 
10,842

 
5,513

 
6,829

 
223,118

Gross profit
283,349

 
27,487

 
24,772

 
(6,970
)
 
328,638

Operating expenses:
 
 
 
 
 
 
 
 
 
Product development
63,562

 
8,289

 
4,882

 
282

J
77,015

Sales and marketing
116,965

 
14,543

 
7,908

 
7,166

J
146,582

General and administrative
82,625

 
9,264

 
3,363

 
(15,558
)
J
79,694

Total operating expenses
263,152

 
32,096

 
16,153

 
(8,110
)
 
303,291

Operating income
20,197

 
(4,609
)
 
8,619

 
1,140

 
25,347

Interest expense and other, net
(8,549
)
 
(14
)
 

 
(10,374
)
G
(18,937
)
Income before income taxes
11,648

 
(4,623
)
 
8,619

 
(9,234
)
 
6,410

Income tax benefit
(9,594
)
 

 

 
(2,044
)
K
(11,638
)
Net income
21,242

 
(4,623
)
 
8,619

 
(7,190
)
 
18,048

Net income per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Basic
$
0.27

 
 
 
 
 
 
 
$
0.23

Diluted
$
0.26

 
 
 
 
 
 
 
$
0.22

Weighted average shares used in computing net income per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Basic
79,045

 
 
 
 
 
 
 
79,045

Diluted
82,051

 
 
 
 
 
 
 
82,051


See accompanying notes to the unaudited combined condensed pro forma financial information.


4



RealPage, Inc.
Notes to the Unaudited Combined Condensed Pro Forma Financial Information
(in thousands)

1.
Basis of Presentation
The historical financial information of RealPage, LRO, and On-Site has been adjusted to give pro forma effect to events that are: (a) directly attributable to the Acquisitions, (b) factually supportable, and (c) with respect to the Unaudited Combined Condensed Pro Forma Statements of Operations, expected to have a continuing impact on the combined results. The Acquisition Adjustments included in the Pro Forma Financial Information are based on currently available data and assumptions that the Company believes are reasonable. However, the Unaudited Pro Forma Combined Condensed Statements of Operations do not include any expected cost savings or restructuring actions that may be achievable or that may occur subsequent to the Acquisitions, and have not been adjusted to remove the impact of any non-recurring activity that was not directly attributable to the Acquisitions. The Acquisition Adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed, and have been prepared to illustrate the estimated effect of the Acquisitions. These estimates could change, and such changes could be significant. The final determination of the purchase price allocation will be based on the final valuation of the fair values of assets acquired and liabilities assumed.
The Company derived the Pro Forma Financial Information from the historical consolidated financial statements of RealPage included in the RealPage 10-K and RealPage 10-Q. The Pro Forma Financial Information includes information from LRO's audited consolidated financial statements as of and for the year ended December 31, 2016, and unaudited condensed financial statements as of and for the nine months ended September 30, 2017 and 2016. LRO's financial statements (a carve-out of the Rainmaker Group Ventures, LLC) are included as exhibits in this Current Report on Form 8-K/A. The Pro Forma Financial Information also includes information from On-Site's audited consolidated financial statements as of and for the year ended December 31, 2016, and unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2017 and 2016. These financial statements were included as exhibits to RealPage's Current Report on Form 8-K/A previously filed with the SEC on December 12, 2017. The Unaudited Combined Condensed Pro Forma Statements of Operations for the twelve months ended December 31, 2016, and nine months ended September 30, 2017, give pro forma effect to the Acquisitions as if they occurred at the beginning of the earliest period presented.
On-Site's historical results of operations reflected in the Pro Forma Financial Information do not include activity related to On-Site's variable interest entity, On-Site Plant, L.P. ("On-Site Plant"), as RealPage did not acquire any assets or assume any liabilities from On-Site Plant. Additionally, this information does not reflect the minority interest held in On-Site's consolidated subsidiary DepositIQ & RentersIQ Insurance Agency, LLC (“DIQ”), as RealPage acquired all ownership interest in DIQ. Pro forma adjustments related to On-Site have been updated subsequent to the filing of our Current Report on Form 8-K/A on December 12, 2017, to reflect adjustments identified in the Company's ongoing review of information available at the acquisition date.
The Unaudited Combined Condensed Pro Forma Balance Sheet as of September 30, 2017, gives pro forma effect to the LRO Acquisition as if it occurred on September 30, 2017. The Acquisition Adjustments include an adjustment to increase the value assigned to identified intangible assets acquired in the On-Site Acquisition, with a corresponding reduction in the value assigned to goodwill. This adjustment to the preliminary On-Site Acquisition purchase price allocation reflects RealPage's ongoing review of information available on the date of acquisition. Except for this item, pro forma adjustments are not necessary to reflect the On-Site Acquisition in the Unaudited Combined Condensed Pro Forma Balance Sheet, as this transaction was completed prior to September 30, 2017, and such balances are included in RealPage's Condensed Consolidated Balance Sheet as of September 30, 2017.
2. Preliminary Purchase Consideration and Purchase Price Allocations
The acquisition-date fair value of the purchase consideration transferred to acquire LRO consisted of the following, in thousands:
Cash paid at closing
$
298,040

Deferred cash obligations, at fair value
1,506

Liabilities assumed, at fair value
377

 
$
299,923


5



The Company performed a preliminary analysis of the fair market value of the assets acquired and liabilities assumed. The following table summarizes the allocation of the preliminary purchase price as if the LRO Acquisition had occurred on September 30, 2017, in thousands:
Fair value of assets acquired:
 
Accounts receivable
$
5,172

Property, equipment, and software
1,605

Identified intangible assets
91,666

Other assets
715

 
99,158

Fair value of liabilities assumed:
 
Accounts payable and accrued liabilities
(1,008
)
Deferred revenue
(992
)
 
(2,000
)
Fair value of net assets acquired
97,158

Total purchase consideration
299,923

Goodwill recognized
$
202,765

3. Acquisition Adjustments
The following is a summary of the Acquisition Adjustments reflected in the Pro Forma Financial Information based on preliminary estimates, which may change as additional information is obtained:
A.
This adjustment reflects the cash consideration paid to acquire LRO, net of proceeds from borrowings, and eliminates cash not acquired. This adjustment also reflects RealPage's purchase of a representations and warranties insurance policy that was directly related to the LRO Acquisition.
B.
This item adjusts the acquired property, equipment, and software to their estimated acquisition-date fair value and eliminates assets which were not acquired. The following table summarizes the estimated fair value, useful lives, and related depreciation expense for property, equipment, and software acquired by RealPage in the LRO Acquisition, in thousands:
 
 
 
 
 
Pro Forma Depreciation Expense
 
Estimated Fair Value
 
Weighted Average Useful Life (Years)
 
Year Ended December 31, 2016
 
Nine Months Ended
September 30, 2017
Office furniture and equipment
$
618

 
3
 
$
314

 
$
140

Software
126

 
2
 
74

 
41

Leasehold improvements
861

 
4
 
204

 
153

 
$
1,605

 
 
 
$
592

 
$
334

Depreciation expense related to the property, equipment, and software acquired in the On-Site Acquisition reflected in the Unaudited Combined Condensed Pro Forma Statements of Operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 totaled $333 and $319, respectively.
C.
Reflects adjustment to remove LRO's historical goodwill and to record goodwill associated with the LRO Acquisition.
D.
This adjustment records the identified intangible assets acquired in the LRO Acquisition at their estimated acquisition-date fair value and eliminates LRO's pre-existing intangible assets. These assets acquired include trade names, customer relationships, and acquired technology. Trade names and acquired technology are amortized over their respective estimated useful life using the straight-line method; customer relationships are amortized over their useful life proportionately to the expected discounted cash flows derived from the asset.

6



The following table summarizes the estimated fair value of LRO's identifiable intangible assets, their estimated useful lives, and related amortization expense, in thousands:
 
 
 
 
 
Pro Forma Amortization Expense
 
Estimated Fair Value
 
Weighted Average Useful Life (Years)
 
Year Ended December 31, 2016
 
Nine Months Ended
September 30, 2017
Customer relationships
$
49,000

 
10
 
$
6,466

 
$
4,818

Acquired technology
42,000

 
7
 
6,000

 
4,500

Trade names
666

 
2
 
333

 
250

 
$
91,666

 
 
 
$
12,799

 
$
9,568

This adjustment also updates RealPage's Condensed Consolidated Balance Sheet as of September 30, 2017 to reflect an increase in identified intangible assets obtained in the On-Site Acquisition of $24,849, net of related adjustments to accumulated amortization, and a corresponding adjustment to goodwill. The adjustment reflects changes in RealPage's purchase price allocation made subsequent to the filling of the RealPage 10-Q. Additional adjustments to the On-Site Acquisition purchase price allocation may occur as the Company continues to review information available on the date of acquisition.
Amortization expense related to the intangible assets identified in the On-Site Acquisition reflected in the Unaudited Combined Condensed Pro Forma Statements of Operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 totaled $14,207 and $10,636, respectively.    
E.
This item adjusts the balance sheet to reflect the long-term portion of a prepaid insurance policy purchased by RealPage in connection with the LRO Acquisition.
F.
Represents the estimated adjustment to decrease the acquired deferred revenue obligations to fair value and related amortization of such adjustments. The fair value was determined based on the estimated costs to fulfill the remaining performance obligations plus a normal profit margin.
G.
These adjustments reflect incremental borrowings related to the LRO Acquisition and related pro forma interest and amortization expense. To finance the LRO Acquisition, RealPage utilized $50,000 of our revolving facility and obtained an incremental term loan of $200,000 under the Company's previously existing Credit Facility. The incremental term loan is presented in the Unaudited Combined Condensed Pro Forma Balance Sheet net of issuance costs and discount of $1,549.
At the Company's option, amounts outstanding under the Credit Facility, as amended, accrue interest at a per annum rate equal to either LIBOR, plus a margin ranging from 1.25% to 2.25%, or the Base Rate, plus a margin ranging from 0.25% to 1.25% . The base LIBOR is, at the Company's discretion, equal to either one, two, three, or six month LIBOR. The Base Rate is defined as the greater of Wells Fargo’s prime rate, the Federal Funds Rate plus 0.50%, or one month LIBOR plus 1.00%. At the onset of the above borrowings, the interest rate was 3.07%.
The On-Site Acquisition was financed using a portion of the proceeds from the Company's issuance of convertible senior notes in May 2017 ("Convertible Notes"). The Convertible Notes accrue interest at a fixed rate of 1.50%. Pro forma adjustments to interest expense in the Unaudited Combined Condensed Pro Forma Statements of Operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 were calculated using the effective interest rate of the Convertible Notes' liability component, 5.87%. The pro forma adjustment includes interest and amortization expense through May 22, 2017, the day immediately prior to the issuance of the Convertible Notes. The Company's Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017 included interest and amortization expense form the Convertible Notes from May 23 through September 30, 2017.
Pro forma interest expense, including the amortization of issuance costs and discount, reflected in the Unaudited Combined Condensed Pro Forma Statements of Operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 totaled $7,954 and $5,094 related to the LRO Acquisition and $13,446 and $5,217 related to the On-Site Acquisition. Additional information about the Company's Credit Facility and Convertible Notes is contained in the RealPage 10-Q.
This adjustment also includes interest expense arising from the deferred cash obligations included in the purchase consideration.
H.
These items include adjustments to eliminate liabilities not assumed by RealPage in the LRO Acquisition, to adjust liabilities assumed to their estimated fair value, and to accrue a liability for the deferred cash obligation included in the purchase consideration at fair value. The current and long-term portions of the deferred cash obligation totaled $41 and $1,465, respectively.

7



I.
This adjustment eliminates the historical members' equity in the carve-out of LRO.
J.
These adjustments to cost of revenue and operational expense include the following:
i.
adjustments to depreciation and amortization expense related to the acquired property, equipment, and software and identified intangible assets discussed under letters B and D above. These adjustments totaled $25,548 and $19,440 for the year ended December 31, 2016 and the nine months ended September 30, 2017, respectively.
ii.
elimination of expense associated with certain contracts not assumed by RealPage in the Acquisition;
iii.
adjustments to personnel expense to reflect executive compensation agreements directly related to, and executed in conjunction with, the Acquisition, resulting in an increase of $1,538 during the year ended December 31, 2016, and a decrease of $5,113 during the nine months ended September 30, 2017.
iv.
elimination of acquisition-related costs that were non-recurring in nature and directly attributable to the Acquisitions totaling $15,326 for the nine months ended September 30, 2017. A corresponding adjustment for the year ended December 31, 2016 was not necessary.
K.
Reflects the income tax effect of the pro forma adjustments based on the estimated combined statutory tax rate of 39%.

8
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