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RealPage (NASDAQ:RP)
Q1 2019 Earnings Call
May. 06, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the RealPage, Inc. first-quarter 2019 conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Rhett Butler, vice president of investor relations.

Thank you, sir. Please begin.

Rhett Butler -- Vice President of Investor Relations

Thank you, operator. Good afternoon, and welcome to the RealPage financial results conference call for the first quarter ended March 31, 2019. With me on the call today are Steve Winn, our chairman and chief executive officer; and Tom Ernst, our chief financial officer and treasurer. In our remarks today, we will include statements that are considered forward-looking within the meaning of 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, May 6, 2019 and are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties is contained in our annual report on Form 10-K, previously filed with the SEC on February 27, 2019 and our earnings release and materials distributed today. RealPage undertakes no obligation to update any forward-looking statement, except as required by law.

Finally, please note that on today's call, we may use or discuss non-GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure are included in today's earnings press release. In addition, please reference the explanation of Non-GAAP Financial Measures section of today's earnings press release for more information. With that, I'll hand the call over to Steve.

Steve Winn -- Chairman and Chief Executive Officer

Thanks, Rhett. Good afternoon, everyone, and thank you for joining us. We look forward to reviewing the first quarter with you as we continue our march toward becoming a more strategic platform provider by improving our operational excellence, accelerating innovation and positioning ourselves as a best-in-class partner to our clients. In the first quarter, total revenue grew 16% compared to the prior year and adjusted EBITDA grew over 20%.

Financial performance was solid and executing our strategy remains our focus. The last quarter, we highlighted that 2019 is about improving our ability to make clients successful faster. We call this Yes-To-Success, which begins the moment that a client gives us the verbal green light to the ongoing use of our platform post-implementation. We have tangible action plans in motion to drive improvements over the course of this year to address our growing backlog.

I'll briefly touch on a couple of areas. We've implemented a global onboarding process and invested in the team responsible for initial client orientation to shepherd the client through each aspect of the implementation process, particularly for suite sales. All client orders are now routed through this team to ensure a more seamless experience. We're investing in the project management resources with deep multiproduct expertise to accelerate the Yes-To-Success cycle for suite sales.

We are optimizing the team leveraging domestic and international resources to enable 24/7 focus on helping clients become successful on the RealPage platform as quickly as possible. We plan to continue improving our cross-functional orchestration as we peel back each layer of the implementation process. These improvements combined with continued focus have already driven some impressive client implementation success stories. For example, the WinnResidential Yes-To-Success cycle is nearly complete and the positive feedback has been encouraging.

In particular, Winn has been impressed by the ease-of-use of our platform, the seamless migration experience and the robust training that enables fast, active employee engagement. According to Jennifer Goldberg, VP of WinnResidential, RealPage has guided us through every step of the deployment of our platform to nearly 50,000 units nationwide and it has been a seamless experience. This is something that we are laser-focused on repeating and accelerating. While it's still early days in transforming toward -- through the Yes-To-Success model, I'm encouraged by early indications that we're on the right track.

Seven-figure deals like MidPen Housing, which selected us in the first quarter due to our integrated platform, validate what we already are doing well. They are using -- they were using a competitor software, but were frustrated with the lack of transparency into their financials and operations and a lack of integration between modules. With RealPage, MidPen can continue to scale while simultaneously addressing the many facets of its business from investors to construction to operations to compliance. I'm proud of this seven-figure deal and excited to have MidPen within the RealPage family.

While we continue to tackle process improvement, 2019 is also very much about accelerating innovation. We believe that cultivating innovation from idea to maturity is critical to our long-term success and survival. We're excited to be showcasing several new products of RealWorld in July, in Orlando, and I hope you will join us as we unveil these disruptive innovations. For example, we recently released AI screening with great fanfare.

Leveraging our massive repository of resident data and our data science teams, AI screening not only identifies a resident's financial capability to pay rent, but also their willingness to pay. This new paradigm enables property owners and managers to further reduce bad debt expense by more accurately predicting default risk. Our data science team back-tested this new model and discovered that it would have saved existing screening clients approximately $30 per unit per year over their current screening models. Applied to approximately 10 million conventional multifamily units, if you think about the whole market, that's $300 million of incremental NOI delivered to the industry if everybody were to adopt it.

At a 5% cap rate, this translates into $6 billion of value creation for our industry. That's a big number. Importantly, this underscores the power of RealPage's leading position as the premier data analytics company in our industry because we're now turning analytics into action. We do not believe our competitors can match this performance because they lack the data and analytics to create actionable outcomes.

Our Go Direct Marketing Suite is another example of organic innovation already in-flight. The RealPage Go Direct Marketing Suite is a powerful tool used to originate and capture more direct leads that convert two to three times higher than indirect leads generated from Internet listing services. Go Direct is a property owner's alternative to ever-increasing prices from some listing services that deliver lower quality leads. The Go Direct Marketing Suite is powered by our LeaseLabs experts who provide marketing strategy assessments, digital marketing optimization and creative branding services.

This is the starting point on the journey to shift leads from lower-quality, high-cost indirect lead channels to direct high-quality, less expensive lead channels. Our clients repeatedly tell us they don't want more leads. They want fewer higher quality leads so that they can improve the productivity of their leasing staff. Wasatch Premier Communities use this approach and the results are impressive.

They saved $1 million per year and reduced marketing cost. Cost per lease was reduced by 48%. Cost per lead was reduced by 60% and annual search engine traffic increased by 212%. While most of our innovations are organic, we have the balance sheet that enables us to acquire innovations from smaller, single-solution providers.

In early April, we acquired Lease Term Solutions, or simply LTS, bringing us cutting-edge innovation in risk mitigation that enables clients to vastly expand liability insurance coverage to all of their units instead of just a few. While LTS has some really innovative new approaches to risk mitigation, they are relatively small, needed the horsepower that the RealPage sales team affords them. Our long-term vision and commitment to innovation have proven critical to capturing the trust of new clients. For example, we gained a new property manager in the first quarter, Aldon Management, based in Maryland, with nearly 2,000 units in its portfolio.

They told us they need a strategic partner that could provide tangible results today while also providing the innovation and scalability that would help fuel their growth for years to come. This was a very competitive deal, but our North Star commitment to both innovation and simplification were a critical component to winning this client. Aldon has already started migrating to our core platform and is expected to go live this quarter. With 2019 slated as the strategic platform year, we are shedding our product company routes and evolving into a platform provider committed to enabling our clients to transform their businesses.

Supporting this, we have recently invest in consultative resources consolidated under one leader. The purpose of the team is to build a more a strategic partnership with our clients, drive platform adoption and ultimately to unlock operational insights that drive value. The team has delivered numerous detailed asset optimization reviews with fantastic feedback from our clients. For example, during the first quarter, the team delivered an asset optimization review for an operator managing and owning 13,000 units across the U.S.

The team analyzed every aspects of the client's operation, including technology and processes, as well as in-depth on-site interviews with senior management. Considering the client's objectives, the team recommended many areas of improvement across eight major themes. They uncovered an estimated annual time saving for the client of over 5,000 hours by just more efficiently utilizing existing technology solutions. This was merely one suggestion from one of the eight names presented to the client that can eventually translate into million -- millions of dollars of improved NOI.

I'm excited about our work here and we expect to continue to invest in this team. We are committed to becoming a strategic partner in providing actionable insights to our clients as a critical part of our business model. To conclude, the first quarter represents another great leap toward our North Star vision of simplification and innovation and these are exciting times for RealPage. This year, our positioning as a strategic platform will take more shape as we revamp efficiency, spark innovation and create long-term partnerships.

We believe we are well positioned to achieve our goal to become a $1.5 billion business by 2022. Thank you. Thanks to all of you, our teammates, our clients and our shareholders for your support. I hope to see many of you at RealPage in July, in Orlando.

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

Tom Ernst -- Chief Financial Officer and Treasurer

Thanks, Steve, and good afternoon, everyone. first-quarter financial performance was solid reflecting continued execution against our vision of becoming a strategic platform partner to our clients. Total revenue grew 16% year over year and adjusted EBITDA grew 20%. Looking at the drivers of our top-line performance in Q1.

Total new sales bookings growth was strong consistent with revenue growth. Strategic suite and multiproduct bookings, whether for new logos or existing customers expanding their usage, continue to represent a larger percentage of overall bookings. Areas gaining momentum included Go Direct within leasing and marketing, revenue management within asset optimization, insurance within Resident Services and our vacation rental suite. As we highlighted last quarter, we are feeling some modest growth pressure with backlog at an elevated level.

This is because our strong success in selling more strategic deals with more complexity has exposed inefficiencies in the speed at which we process clients through implementation and to full utilization of our platform, what we call Yes-To-Success. We have put action plans in motion to drive efficiency in Yes-To-Success and have gained a much deeper understanding and ability to monitor the process from end-to-end. Our work here will continue and while we haven't yet made an overall reduction in backlog as a percentage of revenue in the first quarter, it is stabilizing and we are confident in our plan. Overall, we executed with revenue in the first quarter in the upper half of our guidance range.

In Q1, we expanded adjusted EBITDA margins to 27.8%. We now have over $250 million of operating cash and a 1.3 times leverage ratio, which puts us in a very strong financial position to execute against our strategy. Looking at the bottom-line drivers. We saw the operating leverage we expected with an expansion of nearly 100 basis points.

Expansion was driven by strong operating leverage in G&A and in product development. As we highlighted last quarter, we anticipate stronger leverage in the back half of the year as we have ramped investment in the first half around some of our bigger innovation initiatives. You'll recall that we discussed last quarter how we had centralized product development around projects and away from products. We did this to enable us to rapidly scale up and down our innovation initiatives and to enable the drawing of talent across the global pool based on need.

While we're still early in the new system, we are very excited about how we have already been able to get teams moving and tuned the prioritization of efforts. We continue to have confidence that there's strong productivity gains to be realized. Turning to our outlook. We're encouraged by our new bookings.

We're optimistic that we have performance gains and Yes-To-Success to be realized and we're excited to see the benefit from several major initiatives, some already released while others are coming over the course of the year. While we anticipate that we will gain success across the initiatives, for the year outlook, we are taking the approach of assuming only partial execution on them as a whole and prudently taking an even more conservative posture toward realizing any benefits in the second quarter. So for the full-year 2019, we expect non-GAAP revenue of $982 million to $1 billion, raising the low end of the range to reflect contribution from LTS, which Steve mentioned in his remarks. Adjusted EBITDA is expected to be $276 million to $285 million and non-GAAP diluted earnings per share is expected to be $1.71 to $1.79.

For the second-quarter 2019, we expect non-GAAP revenue of $242 million to $244 million. Adjusted EBITDA is expected to be $67 million to $69 million and non-GAAP diluted earnings per share is expected to be $0.42 to $0.44. Backing up to the big picture, clients are responding to our vision, and we continue to see strong demand. We're excited about our positioning and strategy and that we are headed in the right direction.

This gives us conviction in our long-term 2022 goal of $1.5 billion in revenue and $500 million of adjusted EBITDA. As Steve discussed, 2019 is very much about leveraging the scale and breadth of our organization toward becoming the best strategic platform vendor to our clients that we can be. A key component of this is not only consistently accelerating Yes-To-Success, but also driving innovation that turns our data into action. In our efforts to bring innovation to market, we anticipate a banner year as we go through 2019 and into 2020.

This concludes our prepared remarks. Operator, let's open the call for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of John Campbell with Stephens. Please proceed.

John Campbell -- Stephens Inc. -- Analyst

Hey, guys. Good afternoon. 

Steve Winn -- Chairman and Chief Executive Officer

Hi. Good afternoon.

John Campbell -- Stephens Inc. -- Analyst

Hey, with the 2Q '19 rev guidance, that was a little lower than we had forecasted, but your full-year guidance was still solid. That's just I guess implying a pretty sharper -- a little bit sharper ramp in the back half. I'm just trying to get a sense for how much of that was just kind of business seasonality that we just kind of miss-modeled versus how much of a boost you expect in organic growth? And before you touch on that, maybe if you just provide what you're assuming for the organic growth in 2Q '19.

Tom Ernst -- Chief Financial Officer and Treasurer

Sure, absolutely, John. So as -- you're right as we look toward the full year, we're raising the low end of our guidance range maintaining the high end, which is maintaining effectively the same organic growth that we talked about last quarter. As we look at the second-quarter growth, we're assuming slightly slower growth than that. I think the things we think as -- think about as we look at the year is we have several actions in place, whether new product or some of the actions Steve talked about in our Yes-To-Success program that we anticipate are going to provide us some momentum lift.

And as we look about the full year, we anticipate that we will benefit from a portion of those at a minimum. Obviously, we plan to benefit from all. But looking toward the second quarter, I want to make the conservative assumption that we really don't get the lift until I see it. So Q2, I'm planning for a little bit milder growth than the overall year plan.

John Campbell -- Stephens Inc. -- Analyst

OK. That makes sense. So I guess it's fair to say if you had your implementation times as maybe you have set out for your goal, maybe it's 100, 200 bps or so of growth that would have fallen into the first half. Is that the way to think about it?

Tom Ernst -- Chief Financial Officer and Treasurer

Well, we actually think there's quite a ripe opportunity across the whole Yes-To-Success spectrum, so I think that the impact of -- let's talk about the Winn example that Steve mentioned, highly successful customer that raves about the implementation. It was still a two-year implementation of a strategic deal. If the things that we have programmatically in place can make dramatic improvements in that type of a time frame, which means that the next deployment with Winn will come all that much faster. So I think there's some dramatic gains that can be had over the long term as we look at the whole cycle of Yes-To-Success.

John Campbell -- Stephens Inc. -- Analyst

OK. And the last one for me on the demand units. That looks like another great quarter of kind of organic unit adds. What product or maybe just kind of broader segment is contributing the most to the new units in the mix?

Tom Ernst -- Chief Financial Officer and Treasurer

Yes. The unit growth was 25% year on year. Looking at it -- looking at the organic production, our organic growth is about half driven by unit expansion and about half driven by RPU expansion, which is consistent with what you've seen from us in recent quarters. So looking at the reported level, the ClickPay acquisition certainly brought on a lot of units, so that's the majority or the primary leader for the inorganic acquisition.

The organic units really are coming from products across our capabilities and I think reflect the fact that customers are choosing us as a suite vendor, as a strategic vendor. Specific traction within the suite includes, as I mentioned, vacation rental, HOA market, within the marketplaces, many products within multifamily. So really it's broad spread.

Operator

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

Jackson Ader -- J.P. Morgan -- Analyst

Great. Thanks, guys. This is Jackson Ader, on for Sterling tonight. A question from our side.

So we heard the global onboarding process team is getting kind of spun up or ramped up on the implementation side and you mentioned that there are specific plans in place for the second half. Do you mind just giving us a flavor of what those specific plans are? And whether you would expect them to be bigger undertakings or smaller undertakings than the projects you've already put into place?

Steve Winn -- Chairman and Chief Executive Officer

The -- unfortunately, this is not one thing that's going to drive performance. It's a large number of moves that collectively will add up to reducing mean time to implement a suite. I should put this in perspective. We're implementing individual products as fast as we always have.

Where things have slowed down is in the area of combining multiple products into larger suites that, by definition, take longer or more complex, customer expects the whole suite to come in versus one product at a time. We've been somewhat overwhelmed by the success candidly of suite sales and that's the focus of a lot of these changes. Instead of deploying one product at a time, you want to deploy the whole suite. So when we talk about global consolidation of the implementation teams, what we're doing is bringing together each of the products into a central team so that we can deploy the suite at one time and accelerate mean time to implement the overall suite.

You're going to see gradual progress throughout the year.

Jackson Ader -- J.P. Morgan -- Analyst

Yes. All right. Understood. Then a quick follow-up just on the Go Direct product.

Within leasing and marketing, how big should we think about Go Direct as a mix of that? And maybe how big do we think that it could be?

Steve Winn -- Chairman and Chief Executive Officer

Well, leasing and marketing has been organically flat for several years. You should start to see it tick up as LeaseLabs kicks in with the Go Direct product, which we are now in the process of deploying. It has shown really dramatic results allowing clients to shift the percentage of the overall lead flow that they get from indirect channels to direct, which convert two to three times better. I mean our goal and achievement in the many of the clients that we've deployed is shifting as much as 20% of their overall leads from indirect to direct.

Now if you think about that, that 20% shift with a conversion rate of two to three times is really a dramatic change in the buying opportunity for the customers. I think we gave one example of a customer that saved $1 million. We've got many other examples where there's significant improvement in overall marketing spend. More importantly, if a client can receive fewer high-quality leads, they're better able to manage their leasing staff.

Today, the leasing staff has to pick through leads that aren't likely to convert, but they don't know that. And so to the extent we can deliver to them higher quality leads, it's going to make the leasing staff more productive. So we're quite enthusiastic about Go Direct. It is the key initiative in our leasing and marketing suite and I think it's a very large property when you consider the fact that most operators are spending anywhere from $150 to $200 a unit a year on their overall marketing spend.

Jackson Ader -- J.P. Morgan -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of Pat Walravens with JMP Securities. Please proceed. 

Pat Walravens -- JMP Securities -- Analyst

Oh, great. Thank you very much. I guess I have two questions. First of all, and I know this is oversimplifying, but is there some way you guys can give us an idea in terms of like days or months for how long it used to take you to get your customers live and where we are now with the -- having so many more suite deals that you have to do?

Tom Ernst -- Chief Financial Officer and Treasurer

Good question, Pat, and the challenges you have to get and ask an apples-to-apples deal, right? So when we actually get in and look at, as Steve mentioned the product-wise comparison, and our data has gotten much better at this in the last couple of months. We've been diving in this in quite some detail. The data actually looks pretty good. In most products where we've created some streamline processes and we've made improvements on the days basis.

That actual days to implement, just focusing on the implementation part to your question, ranges by product. Some are quite quick and some are a few months before you're typically live. The challenge that we're facing, as Steve, I think highlighted, at least in the big picture is we're getting customers that are asking for much more complex bundles. So our organization is aligned around and sold suites that oftentimes have significant sequencing to them.

And I think our -- we've experienced inefficiencies, particularly in handoff between product teams. Hence, our efforts in some of the major initiatives that Steve talked about that we've put into place here in Q1 and are going into place here in Q2 are around the orchestration of the interworkings of product teams and capabilities to put those bigger suites in. So they're -- if you take that altogether, the time to implement our typical deal is definitely going up. It's just not an apples-to-apples comparison.

Pat Walravens -- JMP Securities -- Analyst

OK. I mean you know where this is coming from, Tom, which is with ultimate software, they basically -- it used to be six months, then it went to seven months and people get easily sort of wrapped their heads around that, but it sounds like you don't think giving an average is the right way to do it.

Tom Ernst -- Chief Financial Officer and Treasurer

Right. Well, I'm not as deep as -- into what exactly happened at Ultimate. We have a far more comprehensive strategic platform than they had. So I think the difference between a Winn properties implementation and a stand-alone individual product implementation is dramatic.

You don't have that same range there. So it's not uncommon that we have customers that have signed up for deals that can take us a year now, one and a half years to implement.

Pat Walravens -- JMP Securities -- Analyst

OK. Great. And then my second question is just on the competitive front. Is there anything that's changing? And in particular, I get questions about AppFolio.

Do you see them anymore than you used to?

Steve Winn -- Chairman and Chief Executive Officer

No. They're still in the low end of the multifamily market. They're very strong in the single-family space. I think they compete with Propertyware and a company called Buildium in that market.

It's a good company. They're trying to come upstream and they're candidly just following the value-added services model that we adopted years ago by bundling in things like screening and payments and insurance and that sort of thing. I suspect we'll see more of them. But so far, we haven't lost enough business to them nor gained, candidly enough business for them to move the needle in a nosed way.

Tom Ernst -- Chief Financial Officer and Treasurer

I want to add one more moment to your previous question, Pat, as well to help you out on that because I think we have a significant opportunity post implementation to ramping our customers to full success that we have realized as we've been studying this over the last several weeks. And so in these larger strategic deals, what we're finding is that not enough attention is being placed into the handoff to make sure that some components of the suite that require utilization and usage to ramp to full revenue value for us are being properly orchestrated and coached and customers are getting trained along. So we think we have a significant opportunity post the implementation date on these ramped products.

Pat Walravens -- JMP Securities -- Analyst

OK. Great thank you, both.

Operator

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

Brian Essex -- Morgan Stanley -- Analyst

Hi. Good afternoon. Thank you for taking the question. Steve, I was wondering if you can maybe point on the comments that were made about the consultative shifts in the model.

How pervasive is that throughout the organization? Are they kind of housed in the sales and marketing? Or is it a different arm? And then how is that priced? Is that maybe built into the sales and marketing? Or is it a separate sea? I'm just trying to understand some of the unit economics and how we might anticipate that if it takes off to impact the margins.

Steve Winn -- Chairman and Chief Executive Officer

It's -- in sales and marketing, they're advisory services. The most interesting service -- we offer many services in that area, but the most interesting is asset optimization study that we began early last year where we go in and analyze how is a customer utilizing their systems, processes and people in order to drive improved revenue, reduce expense and mitigate risk. And we found with these in-depth studies, which we can typically do literally on a small number of properties where we can really get into the meat, is they're not utilizing the systems as effectively as they should. They are not exploiting all of the product opportunities that we have to drive revenue.

So while we get paid a consulting fee to deliver the service, we -- the real value has nothing to do with the consulting fee. That's a rounding error. The real value is in the ability to sell or upsell additional product that will allow them to optimize the overall yield that they get from our platform. Is this is a significant amount of consulting at this point? It's not significant.

Is it going to grow? It will be the fastest-growing area we fund because we're so excited about the results we're seeing from this. So I'm excited about that this is going to work. We've proven it works and we're going to do more of it.

Brian Essex -- Morgan Stanley -- Analyst

Got it. That's helpful. And maybe, Tom, one for you. If we could talk about the backlog a little bit.

As you look at the kind of the extended backlog timeline, how much backlog has fallen out due to deployment issues? And maybe could you talk about how your win rate might have been affected as a result?

Tom Ernst -- Chief Financial Officer and Treasurer

Yes, absolutely. Good question, Brian. So I think that that's actually minimal. I think there are anecdotes here or there.

But largely from the customers' perspective, they perceived that RealPage is actually getting easier to do business with and they're engaging us more and they are signing up to buy more. So from their perspective, they're not experiencing these inefficiencies. I don't think that lets us off the hook. We want to move more product to them faster and get them ramped to usage faster to meet their demand.

So it's less a case of us not being able to deliver product. It's more a case that they're asking for more complex deployments of larger suites that we need to be able to deliver faster.

Steve Winn -- Chairman and Chief Executive Officer

And you do become a victim of your own -- of your client's change management. They have 50% turnover at the site and so deploying new systems can be a challenge and in part of what we're focused on in this whole area of improved Yes-To-Success performance is how do we reduce the amount of change management that the customer has to go through to adopt these larger suites. At the end of the day, that is what's going to drive the needle the most.

Brian Essex -- Morgan Stanley -- Analyst

Right. And maybe just kind of one more fine point on that. Are these primarily brand-new customers? Or are these conversions of existing platforms within the installed base?

Tom Ernst -- Chief Financial Officer and Treasurer

No, it's both. It's both. It's customers signing up for complex, larger suites.

Brian Essex -- Morgan Stanley -- Analyst

Got it. Helpful. Thank you very much.

Operator

Our next question comes from the line from Matt Hedberg with RBC Capital Markets.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Hey, it's Dan Bergstrom for Matt Hedberg. You talked a little bit about accelerating an invasion in the prepared remarks. You highlighted analytics product. I think you're bringing your larger suite of new products to market in 2019.

Are there any additional products or innovations you'd like to highlight? Anything we should keep an eye out for at RealWorld or beyond?

Steve Winn -- Chairman and Chief Executive Officer

Well, one I'm most excited about is AI screening. This is a -- it's a new screening model that our data scientists discovered by analyzing tens of millions of transactions and correlating that to a lot of third-party data that we brought together. And lo and behold, they figured out they could cut the balance that average resident owes to an owner by almost 50% with a new model. That translates to about a $30 per unit per year gain.

We are now pushing that innovation out into the market. We are charging for that as an upsell, but I don't -- the customer would be crazy not to adopt this because of the immense improvement that it delivers in the overall performance of the property. Another advantage to this is it simplifies the screening model where we used to have much more complicated rules incorporated into the statistical models. Now this new model pretty much eliminates the rules, which drastically reduces the overall cost of supporting screening.

This is one example of how we use our advantage in data to recommend actions that our customers should take and deliver products that allow them to act and to produce better performance by either revenue, reduced expense or mitigate risk. We're using analytics in many other areas at this point. Our data science team is large and they really become an asset that I think is going to be difficult for competitors to match. And even if they could match the skill of the analytics team, they don't have the data footprint that RealPage has.

And so I think this -- don't think about us an analytics company, think about us as taking analytics and using that to drive action that improves client performance.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Interesting. And then it looks like the average renewal rate has been trending up here for five quarters now. It bottomed in late 2017. Maybe what's driving this? And then if you could remind us what was occurring in 2017 where it was trending a little lower.

Steve Winn -- Chairman and Chief Executive Officer

So the meaningful enough trend to even comment on?

Tom Ernst -- Chief Financial Officer and Treasurer

Yes. I don't think so. So thinking about the renewal rate, we've seen it largely consistent. So I think one thing that's been driving some up-ticking is as we get more distance from our LRO acquisition, we experienced some turnover in the wake of that acquisition due to just customer concern over the direction while it was in limbo while we're under HSR review.

So I think as we're putting some distance, we're benefiting from marginless attrition, but I'd say, it's largely a consistent trend of attrition and renewal.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great. Thanks.

Operator

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

Stephen Sheldon -- William Blair and Company -- Analyst

Hi, good evening. So appreciate all the detail on the changes you're making to the implementation process. I wanted to ask at a high level how far along are you in correcting I guess these issues? And based on what you can see so far when would you roughly expect to be able to potentially catch up and reduced overall backlog? Should that -- could that happen in the second half of the year?

Tom Ernst -- Chief Financial Officer and Treasurer

So again, thinking about the issue as the whole Yes-To-Success cycle, so this is the whole process of customer says yes, they're ready to contract with us to the full realization of the revenue at the booking. We've been growing that whole Yes-To-Success backlog until this quarter where I think we're about treading even. So this has been something and I think we've recognized as has been a challenge over the last two to three quarters. And as you heard from us last quarters the challenge that we got laser-focused on, one, that needs full attention and an aggressive approach.

So I think some of the things that Steve highlighted in his prepared remarks are things that we anticipate can have tangible and near-term effects. But once again, we've been building backlog until this most recent quarter and we're stabilized. I'd like to see performance improvement before I prepare an outlook for you that includes that.

Stephen Sheldon -- William Blair and Company -- Analyst

Makes sense. And then can you just talk about the asset optimization business and the bookings trend there along with conversion? It seemed like it slowed down quite a bit. So is that just the implementation challenges that may be impacting that business more than others? And then did you also provide an overall bookings growth number for the quarter? Apologies if I missed that.

Tom Ernst -- Chief Financial Officer and Treasurer

No worries. We said that the bookings growth was consistent with our revenue performance, both total and organic. And you're right, the asset optimization business, I think there's a couple of main drivers. The biggest of which is it is most commonly getting sold in the strategic bundles and is often slated very late in the implementation.

So people are getting very excited in choosing to be -- to choose RealPage as a platform partner. And unfortunately that means for the AO products that they're often product No. 3 or No. 4 in a larger suite of products rather than being sold one by one.

Lesser effect I think is we still have some of the aftereffects in comparison from the -- on the revenue management side from the LRO acquisition. That's just pure math. So those two come together, we've seen some nice acceleration in the bookings line across all the product families within the AO suite, but the net effect is that the near-term revenue growth rates are still -- have still slowed to what we expected them to slow to when we talked to you about it last quarter.

Operator

And thank you. [Operator instructions] Our next question comes from the line of Mark Schappel with the Benchmark Company. Please proceed. 

Mark Schappel -- Benchmark Company -- Analyst

Hi. Good afternoon. Thank you for taking my questions. Steve, starting with you.

If I recall correctly from last quarter, the company centralized its product development efforts. And -- number one, I was wondering if this is part of the Yes-To-Success program. And number two, if you could just talk about maybe some of the early benefits you're seeing from that change.

Steve Winn -- Chairman and Chief Executive Officer

This was long overdue. We're so excited about this consolidation coupled with a new system that we've deployed that allows us to much more accurately analyze the amount of resource that we've deployed against each innovation or each development project in the pipeline. What we're now seeing is there is opportunity to improve that asset allocation or that resource allocation, if you will. One of the areas that t I'm really delighted about is product development didn't grow that much in Q2 and yet we're innovating more than we have ever innovated in the past.

And so I'm anticipating we're going to continue to see improved leverage in product development now with no impact on the -- our ability to continue to innovate with this enough resource to deliver products faster. So this has been a very positive change for us and I just think it's going to get better from here.

Tom Ernst -- Chief Financial Officer and Treasurer

And Mark, I'll add on to that. One of the tangible things we saw right away from the system, Steve is mentioning, is previously, we have -- we had product-wise developers and engineers working on our major projects. And one thing that we've gained insight into right away is that those engineers were spending time that we didn't want them spending on in pet projects or in products that -- or in initiatives that weren't adding value from a strategic standpoint. And so I think we got the ability to make sure we really had the focus and prioritization happening.

So we're very excited to actually have the data and make real-time adjustments.

Mark Schappel -- Benchmark Company -- Analyst

Great. And then, Tom, with respect to your implementation project backlog, did it actually go up in the quarter?

Tom Ernst -- Chief Financial Officer and Treasurer

It did grow, but as a percentage of revenue, we're essentially consistent. And again, that's the whole pipeline Yes-To-Success.

Mark Schappel -- Benchmark Company -- Analyst

OK. Great. Thank you 

Operator

Thank you. Our next question comes from the line Peter Heckmann with Davidson. Please proceed.

Peter Heckmann -- D.A. Davidson -- Analyst

Hey, good afternoon. Most of my questions have been answered, but I just wanted to see if you'd give us an update on the outlook for additional M&A. How you see in terms of properties, trading hands, competition for deals and valuations?

Tom Ernst -- Chief Financial Officer and Treasurer

Yes. Absolutely, Pete, I'll address that and Steve will jump in if you want. So there continues to be a healthy opportunity pipeline. There are interesting companies out there.

I think as we highlighted last quarter, 2019 and as we think forward is really about accelerating organic innovation. And I think on the margin, you're going to see our growth shift that way. That being said, we're in a great position to be the natural acquirer of focused point companies that made an invention and add something interesting and we see a handful of those and we're well capitalized to be able to continue to bring those into the RealPage mix where they make sense. Valuations.

Well, I mean we're in a healthy market. And I think private company valuations reflect the public company valuations to an extent. And we're doing our best to be smart about what is the right way to get real return, right? So we are grounding ourselves in the fundamentals of the economic returns top and bottom line and that's obviously deal dependent, depends on the strategy we're looking at. So we don't follow a public market-driven value perspective.

We follow what is the return we can generate from a hard quantified standpoint. So bringing that altogether, there is still a healthy opportunity pipeline for us.

Peter Heckmann -- D.A. Davidson -- Analyst

All right. And just to provide additional -- a little additional color on that. How about on the international side? I mean do you still, over the next three years in order to continue to drive attractive growth rates, do you see international becoming a large component of the growth?

Tom Ernst -- Chief Financial Officer and Treasurer

Well, first, the motivation for M&A is going to be about driving our strategy, right? We are about taking data and driving action out of the data and we're about making sure that we're the best strategic platform vendor to our customers. So international is a driver for us as we think long-term strategically in many ways because many of our best -- our biggest strategic customers want us to be international with them. So we already have gone internationally with customers and I think we are evaluating what are the best ways to -- and the ways that are going to drive us the greatest return for our shareholders and moving internationally. But it's not -- my point is that it's not about driving growth, it's about driving the right strategy.

Peter Heckmann -- D.A. Davidson -- Analyst

Got it. Thank you.

Operator

We've reached the end of our question-and-answer session. Allow me to turn the floor back over to management for closing remarks.

Steve Winn -- Chairman and Chief Executive Officer

Thank you very much. I hope to see you in Orlando.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Rhett Butler -- Vice President of Investor Relations

Steve Winn -- Chairman and Chief Executive Officer

Tom Ernst -- Chief Financial Officer and Treasurer

John Campbell -- Stephens Inc. -- Analyst

Jackson Ader -- J.P. Morgan -- Analyst

Pat Walravens -- JMP Securities -- Analyst

Brian Essex -- Morgan Stanley -- Analyst

Dan Bergstrom -- RBC Capital Markets -- Analyst

Stephen Sheldon -- William Blair and Company -- Analyst

Mark Schappel -- Benchmark Company -- Analyst

Peter Heckmann -- D.A. Davidson -- Analyst

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