AppFolio, Inc.
Q3 2019 Earnings Call Transcript

Published: 28 Oct 2019

[Operator:]

Thank you for joining us today. Welcome to the AppFolio Third Quarter 2019 Financial Results Conference Call. I would now like to turn the call over to Erica Abrams. Thank you.

[Erica Abrams:]

Thank you, Christine. Good afternoon, ladies and gentlemen. Thank you for joining us today as we report AppFolio's third quarter 2019 financial results. I'm joined today by Jason Randall and Ida Kane of AppFolio to discuss these results. This call is simultaneously being webcast on the Investor Relations section of our website at www.appfolioinc.com. Before we get started, I would like to call everyone's attention to our safe harbor policy. Please note that certain statements made on this call will be forward-looking statements, which are subject to considerable risks and uncertainties. Actual results or performance may be materially different from any results, performance expressed, or implied by the forward-looking statements.

[Ida Kane:]

Thank you, Erica, and welcome to everyone joining us on the call today for AppFolio's third quarter 2019 financial results. Total revenue for the quarter increased by 36% over the same period one year ago to $67.9 million. GAAP net income was $5 million or $0.14 per diluted share, which includes a $1.3 million income tax benefit related to research and development tax credits. For those of you who track non-GAAP results our Form 10-Q that was filed today includes more detailed information that you might find helpful in calculating non-GAAP results including stock-based compensation expense. The third quarter of 2019 continues to reflect our investments ahead of potential revenue in several growth areas that we believe will positively impact long-term shareholder value, including AppFolio Property Manager Plus, our offering that serves larger, more complex real estate property manager customers; AppFolio Investment Management, which serves real estate investment managers; Lisa, AppFolio's AI leasing assistant, which we developed from the technology acquired through the Dynasty acquisition and is now offered as a Value+ service; and AppFolio Utility Management, which we developed from technology acquired through the WegoWise acquisition and is also now offered as a Value+ service. Core solutions revenue in the third quarter was $22.5 million, a 26% increase year-over-year, primarily due to a 19% increase in property manager units under management and an 11% increase in the number of property manager customers. We closed the third quarter with 14,034 property manager customers, managing 4.41 million units. Growth in net new units under management per customer reflects our ongoing focus and success serving property managers with larger and more complex portfolios. As a reminder, customers that are not subscribing to our core solutions, including for example stand-alone Dynasty and WegoWise customers are not included in our customer and unit count.

[Jason Randall:]

Thanks, Ida, and thanks to everyone for joining us today as we report our third quarter 2019 financial results. In the third quarter, we furthered our mission of revolutionizing vertical industry businesses in both the real estate and legal verticals that we serve today. We remain focused on our long-term strategy of providing innovative software solutions for our customers and their stakeholders, delivering outstanding customer experiences, and supporting a thriving corporate culture. We believe that this focus results in sustainable growth over the long term. In our real estate vertical, we continued our investment in innovation, notably in connection with the expansion of our core functionality and the development of new opportunities in our Value+ service offerings. Our technology platforms form the foundation for systems of record, engagement, and intelligence that continue to evolve and deepen our customer relationships. We are our customers' trusted partner in innovation and look for opportunities to further strengthen our partnership through connection points from on-site property visits to attendance at industry events and most recently our seventh annual AppFolio Property Manager Customer Conference held here in Santa Barbara. At this year's conference, we hosted over 800 attendees from a variety of market segments including residential, commercial, student housing, community association, and real estate investment management. The conference offered customers a chance to get even more from their investments in AppFolio Property Manager, AppFolio Property Manager Plus and AppFolio Investment Management through three days of industry and technology workshops, educational sessions, hands-on experiences, one-on-one time with our team, and plenty of networking. The sessions included topics such as how we are using our tools and technologies, including artificial intelligence to further automate processes and increase efficiency across our customers' businesses. Turning to our technology. We expanded the capabilities of AppFolio Property Manager Plus in the third quarter as we added audit functionality with user action logs for better management oversight across the platform. Our configurable workflows functionality grew to include additional levels of configuration and automation for customers that manage complex, repeatable processes across distributed portfolios. Automation, artificial intelligence, and data-driven insights help maximize the property's performance bringing staff members to deliver high touch customer experiences. We continue to leverage artificial intelligence as a transformational technology for the real estate industry. Today, we're incorporating AI to automate routine tasks and deliver business efficiencies for our customers. AppFolio's AI leasing assistant LISA, which is built on technology acquired in the Dynasty acquisition earlier this year automates the leasing experience by leveraging conversational AI to schedule appointments, streamline communication, and deliver performance insights.

[Operator:]

Thank you for participating in today's AppFolio third quarter 2019 financial results conference call. This call will be available for replay beginning at 7