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AppFolio, Inc. Announces First Quarter 2024 Financial Results
Source: Nasdaq GlobeNewswire / 25 Apr 2024 15:05:00 America/Chicago
SANTA BARBARA, Calif., April 25, 2024 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF) ("AppFolio" or the "Company"), a technology leader powering the future of the real estate industry, today announced its financial results for the first quarter ended March 31, 2024.
"AppFolio’s first quarter results highlight our ongoing commitment to delivering industry-leading innovation and exceptional service for our customers," said Shane Trigg, President and CEO, AppFolio. "Innovation is the source of AppFolio’s differentiation, inspiring customers to choose and grow with us. We elevate our customers through the adoption of our products and services, helping them unlock extraordinary experiences on our platform. Our deep connection to customers is paving the way for AppFolio’s continued success.”
Financial Highlights for First Quarter of 2024
- Revenue grew 38% year-over-year to $187.4 million.
- Total units under management grew 11% year-over-year to 8.3 million.
- GAAP operating income was $34.1 million, or 18.2% of revenue, compared to an operating loss of ($26.5 million), or (19.5%) of revenue, in Q1 2023.
- Non-GAAP operating income was $48.2 million, or 25.7% of revenue, compared to an operating loss of ($2.1 million), or (1.6%) of revenue, in Q1 2023.
- Net cash provided by operating activities was $43.0 million, or 22.9% of revenue, compared to $1.6 million, or 1.2% of revenue, in Q1 2023.
- Non-GAAP free cash flow was $41.0 million, or 21.9% of revenue, compared to ($0.4 million), or (0.3%) of revenue, in Q1 2023.
Financial Outlook
Based on information available as of April 25, 2024, AppFolio's outlook for fiscal year 2024 follows:- Full year revenue is expected to be $766 million to $774 million.
- Full year non-GAAP operating margin as a percentage of revenue is expected to be 23% to 24%.
- Full year non-GAAP free cash flow margin as a percentage of revenue is expected to be 21% to 23%.
- Diluted weighted average shares outstanding are expected to be approximately 37 million for the full year.
Conference Call Information
As previously announced, the Company will host a conference call today, April 25, 2024, at 2:00 p.m. Pacific Time (PT), 5:00 p.m. Eastern Time (ET), to discuss the company’s first quarter 2024 financial results. A live webcast of the call will be available at: https://edge.media-server.com/mmc/p/if9b4wjx. To access the call by phone, please go to the following link: https://register.vevent.com/register/BI8ca84cdcf8fb432ca3d7cff238b20d2a, and you will be provided with dial in details. A replay of the webcast will also be available for a limited time on AppFolio’s Investor Relations website at https://ir.appfolioinc.com/news-events/events.The Company also provides announcements regarding its financial results and other matters, including SEC filings, investor events, and press releases, on its Investor Relations website at https://ir.appfolioinc.com/, as a means of disclosing material nonpublic information and for complying with AppFolio's disclosure obligations under Regulation FD.
About AppFolio, Inc.
AppFolio is a technology leader powering the future of the real estate industry. Our innovative platform and trusted partnership enable our customers to connect communities, increase operational efficiency, and grow their business. For more information about AppFolio, visit ir.appfolioinc.com.Investor Relations Contact:
Lori Barker
ir@appfolio.comUse of Non-GAAP Financial Measures
Reconciliations of current and historical non-GAAP financial measures to AppFolio’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables entitled “Statement Regarding the Use of Non-GAAP Financial Measures.”AppFolio is unable, at this time, to provide GAAP equivalent guidance measures on a forward-looking basis for non-GAAP operating margin and non-GAAP free cash flow margin because certain items that impact these measures are uncertain, out of our control, or cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements that are not statements of historical fact contained in this press release, and can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “future’” “predicts, “projects,” “target,” “seeks,” “contemplates,” “should,” “will,” “would” or similar expressions and the negatives of those expressions. In particular, forward-looking statements contained in this press release relate to future operating results and financial position, including the Company's fiscal year 2024 financial outlook, anticipated future expenses and investments, the Company's business opportunities, and the impact of the Company's strategic actions and initiatives.Forward-looking statements represent AppFolio's current beliefs and expectations based on information currently available and speak only as of the date the statement is made. Forward-looking statements are subject to numerous known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to materially differ from those expressed or implied by these forward-looking statements include those risks, uncertainties and other factors described in the section entitled “Risk Factors” in AppFolio's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 1, 2024, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in AppFolio’s most recently filed Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as well as in the Company's other filings with the SEC. You should read this press release with the understanding that the Company's actual future results may be materially different from the results expressed or implied by these forward-looking statements.
The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)March 31,
2024December 31,
2023Assets Current assets Cash and cash equivalents $ 59,214 $ 49,509 Investment securities—current 184,298 162,196 Accounts receivable, net 26,179 20,709 Prepaid expenses and other current assets 36,975 39,943 Total current assets 306,666 272,357 Property and equipment, net 27,709 28,362 Operating lease right-of-use assets 18,762 19,285 Capitalized software development costs, net 18,974 21,562 Goodwill 56,060 56,060 Other long-term assets 10,599 11,263 Total assets $ 438,770 $ 408,889 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 1,531 $ 1,141 Accrued employee expenses 29,202 35,567 Accrued expenses 13,531 21,723 Other current liabilities 11,793 11,335 Total current liabilities 56,057 69,766 Operating lease liabilities 40,469 41,114 Other liabilities 3,049 697 Total liabilities 99,575 111,577 Stockholders’ equity 339,195 297,312 Total liabilities and stockholders’ equity $ 438,770 $ 408,889 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)Three Months Ended
March 31,2024 2023 Revenue(1) $ 187,430 $ 136,100 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization)(2) 64,646 56,208 Sales and marketing(2) 24,455 29,398 Research and product development(2) 37,895 37,662 General and administrative(2) 21,132 31,691 Depreciation and amortization 5,212 7,671 Total costs and operating expenses 153,340 162,630 Income (loss) from operations 34,090 (26,530 ) Other income (loss), net — 20 Interest income, net 2,992 1,361 Income (loss) before provision for income taxes 37,082 (25,149 ) (Benefit from) provision for income taxes (1,581 ) 9,961 Net income (loss) $ 38,663 $ (35,110 ) Net income (loss) per common share: Basic $ 1.07 $ (0.99 ) Diluted $ 1.05 $ (0.99 ) Weighted average common shares outstanding Basic 36,087 35,443 Diluted 36,674 35,443 (1) The following table presents our revenue categories:
Three Months Ended
March 31,2024 2023 Core solutions $ 42,920 $ 37,169 Value Added Services 142,331 96,835 Other 2,179 2,096 Total revenue $ 187,430 $ 136,100 (2) Includes stock-based compensation expense as follows:
Three Months Ended
March 31,2024 2023 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization) $ 960 $ 768 Sales and marketing 1,510 2,417 Research and product development 5,682 5,439 General and administrative 5,322 5,279 Total stock-based compensation expense $ 13,474 $ 13,903 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)Three Months Ended
March 31,2024 2023 Cash from operating activities Net income (loss) $ 38,663 $ (35,110 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,693 6,937 Amortization of operating lease right-of-use assets 523 568 Gain on lease modification — (2,366 ) Stock-based compensation, including as amortized 13,992 14,637 Other (1,824 ) (155 ) Changes in operating assets and liabilities: Accounts receivable (5,470 ) (914 ) Prepaid expenses and other assets 8,849 (2,399 ) Accounts payable 733 (1,777 ) Accrued expenses and other liabilities (16,730 ) 22,923 Operating lease liabilities (475 ) (771 ) Net cash provided by operating activities 42,954 1,573 Cash from investing activities Purchases of available-for-sale investments (57,162 ) (1,285 ) Proceeds from sales of available-for-sale investments — 1,013 Proceeds from maturities of available-for-sale investments 36,670 37,890 Purchases of property and equipment (1,420 ) (794 ) Capitalization of software development costs (1,125 ) (1,165 ) Proceeds from sale of equity-method investment — 629 Net cash (used in) provided by investing activities (23,037 ) 36,288 Cash from financing activities Proceeds from stock option exercises 3,874 834 Tax withholding for net share settlement (14,086 ) (5,539 ) Net cash used in financing activities (10,212 ) (4,705 ) Net increase in cash, cash equivalents and restricted cash 9,705 33,156 Cash, cash equivalents and restricted cash Beginning of period 49,759 71,019 End of period $ 59,464 $ 104,175 RECONCILIATION FROM GAAP TO NON-GAAP RESULTS
(UNAUDITED)
(in thousands, except per share data)Three Months Ended
March 31,2024 2023 Costs and operating expenses: GAAP cost of revenue (exclusive of depreciation and amortization) $ 64,646 $ 56,208 Stock-based compensation expense (960 ) (768 ) Non-GAAP cost of revenue (exclusive of depreciation and amortization) $ 63,686 $ 55,440 GAAP cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue 34 % 41 % Non-GAAP cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue 34 % 41 % GAAP sales and marketing $ 24,455 $ 29,398 Stock-based compensation expense (1,510 ) (2,417 ) Non-GAAP sales and marketing $ 22,945 $ 26,981 GAAP sales and marketing as a percentage of revenue 13 % 22 % Non-GAAP sales and marketing as a percentage of revenue 12 % 20 % GAAP research and product development $ 37,895 $ 37,662 Stock-based compensation expense (5,682 ) (5,439 ) Non-GAAP research and product development $ 32,213 $ 32,223 GAAP research and product development as a percentage of revenue 20 % 28 % Non-GAAP research and product development as a percentage of revenue 17 % 24 % GAAP general and administrative $ 21,132 $ 31,691 Stock-based compensation expense (5,322 ) (5,279 ) Gain on lease modification — 2,366 CEO separation costs, net — (11,520 ) Non-GAAP general and administrative $ 15,810 $ 17,258 GAAP general and administrative as a percentage of revenue 11 % 23 % Non-GAAP general and administrative as a percentage of revenue 8 % 13 % GAAP depreciation and amortization $ 5,212 $ 7,671 Amortization of stock-based compensation capitalized in software development costs (518 ) (734 ) Amortization of purchased intangibles (119 ) (619 ) Non-GAAP depreciation and amortization $ 4,575 $ 6,318 GAAP depreciation and amortization as a percentage of revenue 3 % 6 % Non-GAAP depreciation and amortization as a percentage of revenue 2 % 5 % Three Months Ended
March 31,2024 2023 Income (loss) from operations: GAAP income (loss) from operations $ 34,090 $ (26,530 ) Stock-based compensation expense 13,474 13,903 Amortization of stock-based compensation capitalized in software development costs 518 734 Amortization of purchased intangibles 119 619 Gain on lease modification — (2,366 ) CEO separation costs, net — 11,520 Non-GAAP income (loss) from operations $ 48,201 $ (2,120 ) Operating margin: GAAP operating margin 18.2 % (19.5 )% Stock-based compensation expense as a percentage of revenue 7.1 10.2 Amortization of stock-based compensation capitalized in software development costs as a percentage of revenue 0.3 0.5 Amortization of purchased intangibles as a percentage of revenue 0.1 0.5 Gain on lease modification as a percentage of revenue — (1.7 ) CEO separation costs, net as a percentage of revenue — 8.4 Non-GAAP operating margin 25.7 % (1.6 )% Net income (loss): GAAP net income (loss) $ 38,663 $ (35,110 ) Stock-based compensation expense 13,474 13,903 Amortization of stock-based compensation capitalized in software development costs 518 734 Amortization of purchased intangibles 119 619 Gain on lease modification — (2,366 ) CEO separation costs, net — 11,520 Income tax effect of adjustments (14,379 ) 10,491 Non-GAAP net income (loss) $ 38,395 $ (209 ) Net income (loss) per share, basic: GAAP net income (loss) per share, basic $ 1.07 $ (0.99 ) Non-GAAP adjustments to net income (loss) (0.01 ) 0.98 Non-GAAP net income (loss) per share, basic $ 1.06 $ (0.01 ) Net income (loss) income per share, diluted: GAAP net income (loss) per share, diluted $ 1.05 $ (0.99 ) Non-GAAP adjustments to net income (loss) — 0.98 Non-GAAP net income (loss) per share, diluted $ 1.05 $ (0.01 ) Weighted-average shares used in GAAP and non-GAAP per share calculation Basic 36,087 35,443 Diluted 36,674 35,443 Three Months Ended
March 31,2024 2023 Free cash flow: GAAP net cash provided by operating activities $ 42,954 $ 1,573 Purchases of property and equipment (1,420 ) (794 ) Capitalized software development costs (1,125 ) (1,165 ) Severance payments for workforce reduction 566 — Non-GAAP free cash flow $ 40,975 $ (386 ) Free cash flow margin: GAAP net cash provided by operating activities as a percentage of revenue 22.9 % 1.2 % Purchases of property and equipment as a percentage of revenue (0.8 ) (0.6 ) Capitalized software development costs as a percentage of revenue (0.6 ) (0.9 ) Severance payments for workforce reduction 0.3 — Non-GAAP free cash flow margin 21.9 % (0.3 )% Statement Regarding the Use of Non-GAAP Financial Measures
We use the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
- Non-GAAP presentation of income (loss) from operations, costs and operating expenses, operating margin, net income (loss), and net income (loss) per share. These measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of stock-based compensation capitalized in software development costs, amortization of purchased intangibles, CEO separation costs, net, gain on lease modification, and the related income tax effect of these adjustments, as applicable and described below. Non-GAAP operating margin is calculated as non-GAAP operating income (loss) from operations as a percentage of revenue.
- Non-GAAP free cash flow. Non-GAAP free cash flow is defined as net cash from operating activities, less purchases of property and equipment, capitalization of software development costs and severance payments for workforce reduction. We use free cash flow to evaluate our generation of cash from operations that is available for purposes other than capital expenditures and capitalized software development costs. Additionally, we believe that information regarding free cash flow provides investors with a perspective on the cash available to fund ongoing operations. We review cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations. Free cash flow margin is calculated as free cash flow as a percentage of revenue.
We use each of these non-GAAP financial measures internally to assess and compare operating results across reporting periods, for internal budgeting and forecasting purposes, and to evaluate our financial performance. We believe these adjustments also provide useful supplemental information to investors and facilitate the analysis of our operating results and comparison of operating results across reporting periods.
In particular, we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance due to the following factors:
- Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs. We utilize stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of our stockholders while ensuring long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses, which include costs related to our workforce reduction, vary for reasons that are generally unrelated to financial and operational performance in any particular period.
- Amortization of purchased intangibles. We view amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period.
- CEO separation costs, net. We incurred one-time separation costs associated with our former Chief Executive Officer's Transition and Separation Agreement, dated March 1, 2023. We have excluded these costs, as we do not consider such amounts to be part of the ongoing operation of our business.
- Gain on lease modification. In January 2023 and June 2023, we amended our San Diego lease. We have excluded any gain related to the remeasurement of the lease liability, as we do not consider such amounts to be part of the ongoing operation of our business.
- Workforce reduction costs. We incurred one-time severance and related personnel costs associated with our workforce reduction in the third quarter of 2023. We have excluded these costs, along with the subsequent cash payments, as we do not consider such amounts to be part of the ongoing operation of our business.
- Income tax effects of adjustments. We utilize a fixed long-term projected tax rate in our computation of non-GAAP income tax effects to provide better consistency across interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a financial projection that excludes the direct impact of other non-GAAP adjustments. The projected rate, which we have determined to be 25%, considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. We periodically re-evaluate this tax rate, as necessary, for significant events, based on relevant tax law changes, and material changes in the forecasted geographic earnings mix.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and can exclude expenses that may have a material impact on our reported financial results. As such, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the tables above. We encourage investors to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.
