AppFolio Q4 2024 Earnings Report

AppFolio EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.92
• Beat/Miss: Missed by -$0.34
• One Year Ago EPS: N/A

AppFolio Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $200.00 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

AppFolio Announcement Details

• Quarter: Q4 2024
• Date: 1/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 5:00PM ET

AppFolio (NASDAQ:APPF), together with its subsidiaries, provides cloud business management solutions for the real estate industry in the United States. The company provides a cloud-based platform that enables users to automate and optimize common workflows; tools that assist with leasing, maintenance, and accounting; and other technology and services offered by third parties. It offers AppFolio Property Manager Core, a platform that provides the basic functionalities required to operate a property management business, as well as serves as a system of record; AppFolio Property Manager Plus, which offers housing management, student housing management, complex accounting, leasing insights, large-scale operations support, role-based permissions, stack integrations, and enhanced customer support services; AppFolio Property Manager Max offers customer relationship management functionality, field customization, customer database functionality, and customer success management services; and AppFolio Investment Manager, a software that provides investment management, asset management, and relationship management solutions. The company also provides value-added services that are designed to enhance, automate, and streamline processes and workflows for property management businesses, such as electronic payment, tenant screening, and insurance services. AppFolio, Inc. was incorporated in 2006 and is headquartered in Santa Barbara, California.

AppFolio Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good afternoon and thank you for standing by. Welcome to AppFolio Inc. 4th Quarter 2024 Financial Results Conference Call. Please be advised that today's conference is being recorded and a replay will be available on AppFolio's Investor Relations website. I would now like to hand the conference over to Laurie Barker, Investor Relations.

[Lori Barker, Investor Relations at AppFolio]

Thank you. Good afternoon, everyone. I'm Laurie Barker, Investor Relations for AppFolio. And I'd like to thank you for joining us today as we report AppFolio's Q4 and full year 2024 financial results. With me on the call today is Shane Trigg, AppFolio's President and CEO.

[Lori Barker, Investor Relations at AppFolio]

This call is simultaneously being webcast on the Investor Relations section of our website at appfolioinc.com. Before we get started, I would like to remind everyone of AppFolio's Safe Harbor policy. Comments made during this conference call and webcast contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions, business performance or future product enhancements or developments is a forward looking statement. AppFolio's actual future results could differ materially from those expressed in such forward looking statements for any reason, including those listed on our SEC filings.

[Lori Barker, Investor Relations at AppFolio]

Appfolio assumes no obligation to update any such forward looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including our Form 10 ks for the fiscal year ended December 31, 2023, which was filed with the SEC on February 1, 2024. In addition, this call includes non GAAP financial measures. Reconciliation of these non GAAP financial measures with the most directly comparable GAAP measures are included in our Q4 earnings release, which is posted on our Investor Relations section of our website. With that, I will turn the call over to Shane Trigg.

[Lori Barker, Investor Relations at AppFolio]

Shane, please go ahead.

[Operator]

Please stand by, ladies and gentlemen. We're having some technical difficulties. We can hear you now, sir. Please proceed.

[Shane Trigg, CEO & DIrector at AppFolio]

Thanks, Laurie, and welcome to everyone joining us for AppFolio's 4th quarter and fiscal year 2024 financial results. Our 4th quarter caps off a transformative year of delivering value to our customers through differentiated industry leading innovation and strong execution of our financial strategy. 4th quarter revenue grew 19% year over year to $204,000,000 resulting in a 28% annual increase to $794,000,000 Non GAAP operating margin during the 4th quarter was 20% and for the full year, we more than doubled operating margin from 12% to 25%. These financial results along with our continued growth in customers, units and ARPU strengthen our position as the real estate innovation leader and allow us to unlock even more value for our customers. That leadership was evident at AppFolio's inaugural Future Conference in San Diego, where we brought together 2,200 customers, prospects, partners and AppFolians plus industry leaders from NAA, NMHC, NARPM and more.

[Shane Trigg, CEO & DIrector at AppFolio]

We showed how we're building the platform where the real estate industry comes to do business through our investments in industry leading innovation and how we're delivering real meaningful customer impact across investors, property managers, residents and vendors. We heard from one attendee, Dom Beverage, the Principal of Multifamily Industry Resource 20 for 20, This show is now on par for attendance and content with the largest user conferences in our industry. More impressively, Future presented the broadest and most cohesive vision I have seen of how AI may change property management. I left Future with gratitude for our customers and a sense of pride in our team and how we're showing up as a voice of trust and leadership for our industry. One of the exciting announcements we made in the days leading up to Future was our acquisition of LiveEasy to accelerate the potential we see in the resident industry segment.

[Shane Trigg, CEO & DIrector at AppFolio]

We talked last quarter about how Folio space will enable AppFolio's property management customers to create a unified and elevated experience for the millions of residents they serve from application through renewal. By integrating LiveEasy and offering its services as part of FolioSpace resident onboarding, we'll reduce the stress of moving, deliver increased convenience and save renters time and money. The integration of our teams and technology is progressing well and I'm confident that the combination will drive significant value for residents and property managers through our platform. The outcomes we've achieved and the momentum we've built demonstrate that our strategy is working. I want to share how the pillars of this strategy are powering success for both our customers and our business.

[Shane Trigg, CEO & DIrector at AppFolio]

Our first strategic pillar is differentiate to win. Leveraging advanced AI technologies is creating better experiences and performance for our customers. The generative AI powered capabilities of RealmX automate routine tasks and key workflows, streamline communications and enable property managers to transform their operational performance. Since launching RealmX to every customer following future, over 1,000,000 actions have been completed in RealmX Assistant and users are rapidly automating their processes in RealmX flows, which is available to customers on our AppFolio Property Manager Plus and Max plans. Our legacy workflow capability took 4 years to reach the adoption level RealmX flows has reached in only 3 months.

[Shane Trigg, CEO & DIrector at AppFolio]

We're accelerating the pace of AI innovation across our customers' day to day workflows in accounting, leasing and maintenance. At Future, we showcased 2 updates to our AI powered smart maintenance offering. First is the smart maintenance scheduling, an in app calendar that allows teams to schedule and assign work orders in a single step. 2nd is smart maintenance billing, allowing users to set strategic billing rules and automate bill creation. Through our recent integration of AppFolio's stack partner, Lula, we can now connect smart maintenance customers with the Lula vendor network, a community of qualified local vendors.

[Shane Trigg, CEO & DIrector at AppFolio]

This integration enables our customers to automatically dispatch a Lula vendor to ensure work gets done even after hours. According to Jesse Watts, Principal Broker and Owner of Aspire Realty Group with 208 units on AppFolio, Smart Maintenance assigns the work order and notifies the vendor via text and email. The vendor can accept it all before I wake up. It's been a lifesaver. Our second strategic pillar is deliver value efficiently.

[Shane Trigg, CEO & DIrector at AppFolio]

Customers of all sizes are switching to and growing their businesses with AppFolio as their trusted partner. In May, we won our largest customer to date. In September, we won our largest customer to date. And again, in November, we won our largest customer to date. More customers are choosing our Plus and Max plans for their flexibility and extensibility to power their growth.

[Shane Trigg, CEO & DIrector at AppFolio]

In fact, 1 in 5 of our customer units is now on one of these premium plans. One of our many new customers in 2024 is the Breeden Company in Virginia Beach, Virginia with 9,800 plus units spanning multifamily and commercial. Breeden evaluated and ultimately chose AppFolio for our shared commitment to innovation. After seamlessly migrating their entire portfolio, Breeden is now live on our MAX plan and has adopted many of our services from payments, TapFolio Stack, FolioGuard, AI Leasing Assistant Lisa, smart maintenance screening and websites. According to Bonnie Moore, Breeden's President of Property Management, We built such a wonderful partnership with AppFolio and that partnership means everything to us.

[Shane Trigg, CEO & DIrector at AppFolio]

Their team truly listens to everything we have to say and values our input to help us improve. Along with innovation, another way we're standing out in the market is by delivering exceptional service at scale, which is a top priority for our customers. We exited 2024 with a 3 61 percent year over year increase in instant support case resolutions and a service satisfaction score of 92%. Throughout the year, we consistently earned top recognition from peer to peer software marketplace G2, thanks to the feedback from the people who matter most, our customers. The 3rd pillar of our strategy is great people and culture.

[Shane Trigg, CEO & DIrector at AppFolio]

You've heard about the innovative ways we're differentiating ourselves to win and delivering value efficiently to our customers and it's all made possible through our people. We're honored to be recognized in 2 new lists from Forbes, America's Best Companies for 2025 and Most Trusted Companies in America for 2025. Forbes evaluated the nation's largest public companies and considered factors such as financial performance, trust and customer and employee satisfaction. Across the organization, we're operating with a sense of urgency and focus and it shows in our results and the value we're delivering to our customers. With that, I'll now share more about AppFolio's 4th quarter financial results.

[Shane Trigg, CEO & DIrector at AppFolio]

In the Q4, we delivered revenue of $204,000,000 growing 19% year over year. Full year revenue was $794,000,000 representing 28% growth year over year. Core solutions revenue was $47,600,000 in the 4th quarter, a 15% year over year increase driven by growth in new customers and total units under management. In addition, as I mentioned earlier, we continue to win larger customers and more customers are choosing our Plus and Max plans. At the end of the year, we managed approximately 8,700,000 units from 20,784 customers compared to 8,200,000 units from 19,737 customers a year earlier.

[Shane Trigg, CEO & DIrector at AppFolio]

This represents a 6% increase in ending units and a 5% increase in customers as we continue to emphasize residential portfolios. For the full year, core solutions grew 15% year over year. 4th quarter revenue from value added services grew 20% year over year to $153,000,000 As expected in 2024, we had sequential increases in value added services revenue in the first, second and third quarters and a sequential decline in revenue in the 4th quarter due to the seasonal nature of revenue associated with leasing activities. Full year value added services revenue growth was 33%, primarily resulting from our decision to stop waiving e check fees in August of 2023, higher resident usage of online payments, increased adoption of risk mitigation services and growth in units under management, partially offset by reduced fees associated with certain card based payments. Other revenue includes revenue from the Lidazy acquisition, which was completed in October.

[Shane Trigg, CEO & DIrector at AppFolio]

Turning to spending. We exited the quarter with 1634 employees, which is an increase of 9% compared to the Q4 of 2023 and up 5% from the prior quarter. This reflects employee growth primarily due to our acquisition of LiveEasy and also continued investment in innovation, including strategic initiatives such as Rollbacks, the resident experience and expanding into new property types. Cost of revenue, exclusive of depreciation and amortization in the 4th quarter was 37% of revenue compared to 35% last year, primarily due to increased adoption of credit cards for payments and the reduction in fees associated with certain card based transactions. For the full year, cost revenue declined more than 200 basis points as growth from our decision to stop waiving e check fees and operational efficiencies were partially offset by the impact of increased adoption of credit cards for payments and the reduction in fees associated with certain card based transactions.

[Shane Trigg, CEO & DIrector at AppFolio]

The sequential quarterly increase reflects typical seasonality due to the decline in revenue associated with leasing activities. As a percent of revenue in the Q4, combined sales and marketing, R and D and G and A expense grew to 41% from 37% last year. For the full year, operating expenses as a percentage of revenue declined from 46% in 2023 to 38% in 2024. Sales and marketing expenses as a percentage of revenue increased from 12% in the Q4 of last year to 15% this quarter. This includes increased investment in our future conference, which shifted from the Q3 to the Q4 this year, additional hiring and the impact of the LiveEasy acquisition.

[Shane Trigg, CEO & DIrector at AppFolio]

For the full year, sales and marketing decreased from 16% to 13%. Our R and D expenses as a percentage of revenue increased from 17% in the Q4 last year to 18% this quarter. This includes additional hiring to resource strategic initiatives. On a full year basis, R and D declined from 21% to 17%. Our G and A expenses as a percentage of revenue were comparable in the Q4 of last year at 8%.

[Shane Trigg, CEO & DIrector at AppFolio]

For the full year, G and A declined from 10% to 8%. Overall, in the Q4, non GAAP operating margin was 20.2% compared to 24.3% last year. Through disciplined execution of our financial strategy, we expanded non GAAP operating margin to 25% for the full year, which was a significant improvement from 12.2% in 2023. Free cash flow margin this quarter was 17.3% compared to 19.9% in the Q4 of last year and expanded to 23% in 2024, a significant increase from 12% in 2023. The acquisition of LiveEasy for $79,000,000 exemplifies how creating investment flexibility is enabling us to deliver on our strategy.

[Shane Trigg, CEO & DIrector at AppFolio]

Even with this investment, our cash and investment securities grew to $278,000,000 from $212,000,000 at the end of 2023. Our 2025 guidance for annual revenue is $920,000,000 to $940,000,000 which implies a full year growth rate of 17% based on the midpoint of this range. We expect to deliver non GAAP operating margin between 24.5% 26.5% and diluted weighted average shares outstanding are anticipated to be approximately 37,000,000 for the full year. We expect to continue growing our customers and units under management. We also believe we will continue growing ARPU as we increase adoption of our Plus and Max plans and our value added services and a small but growing contribution from the Residence segment.

[Shane Trigg, CEO & DIrector at AppFolio]

Consistent with 2024, we believe the high interest rate environment will continue to limit our current customers' ability to expand their portfolios. We anticipate 2025 revenue seasonality to be mostly consistent with 2024. Cost of revenue, exclusive of depreciation and amortization, is expected to remain relatively flat as a percentage of revenue compared to the prior year as we believe the benefit from operational efficiencies will be mostly offset by product mix. Our 2025 ending headcount is projected to grow as we continue to invest in high priority initiatives that enable us to achieve our strategic objectives. However, we expect the rate of headcount growth to be less than revenue growth as we maintain our focus on operational efficiency.

[Shane Trigg, CEO & DIrector at AppFolio]

In summary, I'm proud of our strong performance in 2024. We are acquiring, growing and retaining customers while delivering exceptional service and our investments in AI and the resident experience are translating into meaningful outcomes for our customers. As we continue the process of selecting a new CFO, I want to thank Tim Eaton, our Interim CFO and the rest of our team for their commitment during this transition. We are truly building the platform where the real estate industry comes to do business and creating a resilient and sustainable future for growth. Thank you all for joining us today.

[Shane Trigg, CEO & DIrector at AppFolio]

Operator, this concludes today's call.

[Operator]

Thank you everyone for participating in today's conference and you may now disconnect.

Participants

Executives

• Lori Barker, Investor Relations
• Shane Trigg, CEO & DIrector