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AppFolio, Inc. Announces Third Quarter Financial Results
ソース: Nasdaq GlobeNewswire / 26 10 2023 15:05:01 America/Chicago
SANTA BARBARA, Calif., Oct. 26, 2023 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ: APPF) ("AppFolio" or the "Company"), a cloud-based technology platform built for the real estate industry, today announced its financial results for the third quarter ended September 30, 2023.
"AppFolio's third quarter profitable revenue growth reflects our commitment to delivering industry leading innovation, while being disciplined in our execution," said Shane Trigg, President and CEO, AppFolio. "We continue to be focused on creating exceptional value that powers the future of the real estate industry and sets our customers apart from the rest."
Financial Highlights
- Revenue: Total revenue was $165.4 million in Q3 2023, a 32% increase from $125.1 million in the Q3 2022.
- Units Served: Total units on the AppFolio Property Manager platform increased to approximately 7.8 million in Q3 2023 from approximately 7.1 million at the end of Q3 2022.
- Income (Loss) from Operations: GAAP loss from operations in Q3 2023 was ($0.1 million), or (0%) of revenue, compared to a loss from operations of ($7.8 million), or (6.3%) of revenue, in the same quarter of 2022. Non-GAAP income from operations in Q3 2023 was $26.7 million, or 16.1% of revenue, compared to $4.7 million, or 3.7% of revenue, in Q3 2022.
- Cash Flow: Non-GAAP free cash flow was $33.6 million, or 20.3% of revenue, in Q3 2023, compared to $11.9 million, or 9.5% of revenue, in the same quarter of 2022.
Financial Outlook
Based on information available as of October 26, 2023, AppFolio's outlook for fiscal year 2023 follows:- Full year revenue is expected to be in the range of $608 million to $612 million.
- Full year non-GAAP operating margin as a percentage of revenue is expected to be in the range of 10.5% to 11.0%.
- Full year non-GAAP free cash flow margin as a percentage of revenue is expected to be in the range of 10.5% to 11.5%.
- Weighted average shares outstanding are expected to be approximately 36 million for the full year.
Conference Call Information
As previously announced, the Company will host a conference call today, October 26, 2023, at 2:00 p.m. Pacific Time (PT), 5:00 p.m. Eastern Time (ET), to discuss the company’s third quarter 2023 financial results. A live webcast of the call will be available at: https://edge.media-server.com/mmc/p/y8bj2sxd. To access the call by phone, please go to the following link: https://register.vevent.com/register/BIf07eb38911d14309a2004ff019fac57f, 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 cloud-based technology platform built for the real estate industry. Our solutions enable our customers to digitally transform their businesses, address critical business operations and deliver a better customer experience. For more information about AppFolio, visit ir.appfolioinc.com.Investor Relations Contact:
Lori Barker
ir@appfolio.comUse of Non-GAAP Financial Measures
Reconciliations of 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 titled “Statement Regarding the Use of Non-GAAP Financial Measures.”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,” “predicts, “projects,” “seeks,” “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 2023 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 assumptions based on information currently available. Forward-looking statements involve 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. Some of the risks and uncertainties that may cause the Company's actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in AppFolio's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 9, 2023, 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.
Except as required by applicable law or the rules of the NASDAQ Global Market, AppFolio assumes no obligation to update any forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)September 30,
2023December 31,
2022Assets Current assets Cash and cash equivalents $ 59,937 $ 70,769 Investment securities—current 131,589 89,297 Accounts receivable, net 20,359 16,503 Prepaid expenses and other current assets 27,992 24,899 Total current assets 239,877 201,468 Investment securities—noncurrent — 25,161 Property and equipment, net 27,132 26,110 Operating lease right-of-use assets 19,799 23,485 Capitalized software development costs, net 24,021 35,315 Goodwill 56,060 56,060 Intangible assets, net 2,976 4,833 Other long-term assets 8,735 8,785 Total assets $ 378,600 $ 381,217 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 1,350 $ 2,473 Accrued employee expenses 42,093 34,376 Accrued expenses 19,979 15,601 Other current liabilities 10,725 8,893 Total current liabilities 74,147 61,343 Operating lease liabilities 41,108 50,237 Other liabilities 689 4,091 Stockholders’ equity 262,656 265,546 Total liabilities and stockholders’ equity $ 378,600 $ 381,217 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Revenue(1) $ 165,440 $ 125,079 $ 448,615 $ 347,825 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization)(2) 62,739 50,707 176,801 141,484 Sales and marketing(2) 29,701 25,644 86,101 77,558 Research and product development(2) 41,592 28,959 116,517 79,966 General and administrative(2) 23,907 19,347 74,417 76,258 Depreciation and amortization 7,568 8,241 22,055 24,977 Total costs and operating expenses 165,507 132,898 475,891 400,243 Loss from operations (67 ) (7,819 ) (27,276 ) (52,418 ) Other (loss) income, net (249 ) 4,221 (283 ) 4,256 Interest income, net 1,788 374 4,627 632 Income (loss) before provision for income taxes 1,472 (3,224 ) (22,932 ) (47,530 ) (Benefit from) provision for income taxes (24,973 ) 938 4,634 889 Net income (loss) $ 26,445 $ (4,162 ) $ (27,566 ) $ (48,419 ) Net income (loss) per common share Basic $ 0.74 $ (0.12 ) $ (0.78 ) $ (1.39 ) Diluted $ 0.72 $ (0.12 ) $ (0.78 ) $ (1.39 ) Weighted average common shares outstanding Basic 35,691 35,043 35,567 34,936 Diluted 36,482 35,043 35,567 34,936 (1) The following table presents our revenue categories:
Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Core solutions $ 39,756 $ 33,940 $ 115,440 $ 97,163 Value Added Services 123,188 88,399 326,108 241,349 Other 2,496 2,740 7,067 9,313 Total revenue $ 165,440 $ 125,079 $ 448,615 $ 347,825 (2) Includes stock-based compensation expense as follows:
Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization) $ 1,149 $ 789 $ 2,905 $ 1,873 Sales and marketing 2,041 2,023 4,902 5,496 Research and product development 6,064 4,330 15,851 11,160 General and administrative 6,003 3,688 16,274 9,680 Total stock-based compensation expense $ 15,257 $ 10,830 $ 39,932 $ 28,209 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Cash from operating activities Net income (loss) $ 26,445 $ (4,162 ) $ (27,566 ) $ (48,419 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 6,980 7,658 20,115 23,295 Amortization of operating lease right-of-use assets 509 689 1,618 2,498 Gain on lease modification — — (4,281 ) — Impairment, net — — — 19,792 Deferred income taxes (5 ) 158 4 (1,392 ) Stock-based compensation, including as amortized 15,845 11,413 41,872 29,891 Gain on sale of business — (4,156 ) — (4,156 ) Other (801 ) (92 ) (1,518 ) (86 ) Changes in operating assets and liabilities: Accounts receivable (327 ) 345 (3,857 ) (2,579 ) Prepaid expenses and other current assets 1,666 (507 ) (763 ) (3,159 ) Other assets (312 ) (321 ) 51 (1,629 ) Accounts payable (496 ) 214 (1,485 ) 231 Accrued employee expenses 10,534 2,395 7,815 (822 ) Accrued expenses 2,237 809 4,407 3,991 Taxes payable (28,112 ) (188 ) (2,960 ) (136 ) Operating lease liabilities 1,558 (437 ) (3,080 ) (1,748 ) Other liabilities 1,036 2,185 (1,272 ) 3,712 Net cash provided by operating activities 36,757 16,003 29,100 19,284 Cash from investing activities Purchases of available-for-sale investments (35,322 ) (25,494 ) (108,919 ) (70,394 ) Proceeds from sales of available-for-sale investments — — 1,013 — Proceeds from maturities of available-for-sale investments 44,635 33,100 94,252 76,598 Purchases of property and equipment (3,761 ) (844 ) (5,932 ) (5,943 ) Capitalization of software development costs (1,243 ) (3,275 ) (3,394 ) (10,468 ) Proceeds from sale of business, net of cash divested — 5,124 — 5,124 Proceeds from sale of equity-method investment — — 629 — Net cash provided by (used in) investing activities 4,309 8,611 (22,351 ) (5,083 ) Cash from financing activities Proceeds from stock option exercises 683 1,976 2,185 2,579 Tax withholding for net share settlement (6,510 ) (1,984 ) (19,766 ) (7,581 ) Net cash used in financing activities (5,827 ) (8 ) (17,581 ) (5,002 ) Net increase (decrease) in cash and cash equivalents and restricted cash 35,239 24,606 (10,832 ) 9,199 Cash, cash equivalents and restricted cash Beginning of period 24,948 42,876 71,019 58,283 End of period $ 60,187 $ 67,482 $ 60,187 $ 67,482 RECONCILIATION FROM GAAP TO NON-GAAP RESULTS (UNAUDITED) (in thousands, except per share data) Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Costs and operating expenses: GAAP cost of revenue (exclusive of depreciation and amortization) $ 62,739 $ 50,707 $ 176,801 $ 141,484 Less: Stock-based compensation expense 1,149 789 2,905 1,873 Less: Workforce reduction costs 2,135 — 2,135 — Non-GAAP cost of revenue (exclusive of depreciation and amortization) $ 59,455 $ 49,918 $ 171,761 $ 139,611 GAAP cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue 38 % 41 % 39 % 41 % Non-GAAP cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue 36 % 40 % 38 % 40 % GAAP sales and marketing $ 29,701 $ 25,644 $ 86,101 $ 77,558 Less: Stock-based compensation expense 2,041 2,023 4,902 5,496 Less: Workforce reduction costs 3,401 — 3,401 — Non-GAAP sales and marketing $ 24,259 $ 23,621 $ 77,798 $ 72,062 GAAP sales and marketing as a percentage of revenue 18 % 21 % 19 % 22 % Non-GAAP sales and marketing as a percentage of revenue 15 % 19 % 17 % 21 % GAAP research and product development $ 41,592 $ 28,959 $ 116,517 $ 79,966 Less: Stock-based compensation expense 6,064 4,330 15,851 11,160 Less: Workforce reduction costs 2,635 — 2,635 — Non-GAAP research and product development $ 32,893 $ 24,629 $ 98,031 $ 68,806 GAAP research and product development as a percentage of revenue 25 % 23 % 26 % 23 % Non-GAAP research and product development as a percentage of revenue 20 % 20 % 22 % 20 % GAAP general and administrative $ 23,907 $ 19,347 $ 74,417 $ 76,258 Less: Stock-based compensation expense 6,003 3,688 16,274 9,680 Less: Impairment, net — — — 19,792 Less: Gain on lease modification — — (4,281 ) — Less: CEO separation costs, net — — 11,520 — Less: Workforce reduction costs 2,106 — 2,106 — Non-GAAP general and administrative $ 15,798 $ 15,659 $ 48,798 $ 46,786 GAAP general and administrative as a percentage of revenue 14 % 15 % 17 % 22 % Non-GAAP general and administrative as a percentage of revenue 10 % 13 % 11 % 13 % GAAP depreciation and amortization $ 7,568 $ 8,241 $ 22,055 $ 24,977 Less: Amortization of stock-based compensation capitalized in software development costs 589 584 1,857 1,682 Less: Amortization of purchased intangibles 617 1,093 1,940 3,396 Non-GAAP depreciation and amortization $ 6,362 $ 6,564 $ 18,258 $ 19,899 GAAP depreciation and amortization as a percentage of revenue 5 % 7 % 5 % 7 % Non-GAAP depreciation and amortization as a percentage of revenue 4 % 5 % 4 % 6 % Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Income (loss) from operations: GAAP loss from operations $ (67 ) $ (7,819 ) $ (27,276 ) $ (52,418 ) Less: Stock-based compensation expense 15,257 10,830 39,932 28,209 Less: Amortization of stock-based compensation capitalized in software development costs 589 584 1,857 1,682 Less: Amortization of purchased intangibles 617 1,093 1,940 3,396 Less: Impairment, net — — — 19,792 Less: Gain on lease modification — — (4,281 ) — Less: CEO separation costs, net — — 11,520 — Less: Workforce reduction costs 10,278 — 10,278 — Non-GAAP income from operations $ 26,674 $ 4,688 $ 33,970 $ 661 Operating margin: GAAP operating margin — % (6.3 )% (6.1 )% (15.1 )% Stock-based compensation expense as a percentage of revenue 9.2 8.7 8.9 8.1 Amortization of stock-based compensation capitalized in software development costs as a percentage of revenue 0.4 0.5 0.4 0.5 Amortization of purchased intangibles as a percentage of revenue 0.4 0.9 0.4 1.0 Impairment, net as a percentage of revenue — — — 5.7 Gain on lease modification as a percentage of revenue — — (1.0 ) — CEO separation costs, net as a percentage of revenue — — 2.6 — Less: Workforce reduction costs 6.1 — 2.4 — Non-GAAP operating margin 16.1 % 3.7 % 7.6 % 0.2 % Net income (loss): GAAP net income (loss) $ 26,445 $ (4,162 ) $ (27,566 ) $ (48,419 ) Less: Stock-based compensation expense 15,257 10,830 39,932 28,209 Less: Amortization of stock-based compensation capitalized in software development costs 589 584 1,857 1,682 Less: Amortization of purchased intangibles 617 1,093 1,940 3,396 Less: Impairment, net — — — 19,792 Less: Gain on lease modification — — (4,281 ) — Less: CEO separation costs, net — — 11,520 — Less: Workforce reduction costs 10,278 — 10,278 — Less: Gain on sale of business — (4,156 ) — (4,156 ) Less: Income tax effect of adjustments 31,642 234 3,859 (724 ) Non-GAAP net income $ 21,544 $ 3,955 $ 29,821 $ 1,228 Net income (loss) per share, basic: GAAP net income (loss) per share, basic $ 0.74 $ (0.12 ) $ (0.78 ) $ (1.39 ) Non-GAAP adjustments to net income (loss) (0.14 ) 0.23 1.62 1.42 Non-GAAP net income per share, basic $ 0.60 $ 0.11 $ 0.84 $ 0.03 Net income (loss) income per share, diluted: GAAP net income (loss) per share, diluted $ 0.72 $ (0.12 ) $ (0.78 ) $ (1.39 ) Non-GAAP adjustments to net income (loss) (0.13 ) 0.23 1.60 1.39 Non-GAAP net income per share, diluted $ 0.59 $ 0.11 $ 0.82 $ — Weighted-average shares used in GAAP per share calculation Basic 35,691 35,043 35,567 34,936 Diluted 36,482 35,043 35,567 34,936 Weighted-average shares used in non-GAAP per share calculation Basic 35,691 35,043 35,567 34,936 Diluted 36,482 35,710 36,345 35,695 Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Free cash flow: GAAP net cash provided by operating activities $ 36,757 $ 16,003 $ 29,100 $ 19,284 Purchases of property and equipment (3,761 ) (844 ) (5,932 ) (5,943 ) Capitalized software development costs (1,243 ) (3,275 ) (3,394 ) (10,468 ) CEO separation costs payment — — 14,926 — Partial lease termination payment — — 2,851 — Severance payments for workforce reduction 1,801 — 1,801 — Non-GAAP free cash flow $ 33,554 $ 11,884 $ 39,352 $ 2,873 Free cash flow margin: GAAP net cash provided by operating activities as a percentage of revenue 22.2 % 12.8 % 6.5 % 5.5 % Purchases of property and equipment as a percentage of revenue (2.3 ) (0.7 ) (1.3 ) (1.7 ) Capitalized software development costs as a percentage of revenue (0.8 ) (2.6 ) (0.8 ) (3.0 ) CEO separation costs payment — — 3.4 — Partial lease termination payment — — 0.6 — Severance payments for workforce reduction 1.2 — 0.4 — Non-GAAP free cash flow margin 20.3 % 9.5 % 8.8 % 0.8 %
Statement Regarding the Use of Non-GAAP Financial MeasuresWe disclose the following non-GAAP financial measures in this press release: non-GAAP income (loss) from operations, non-GAAP operating expenses (cost of revenue (exclusive of depreciation and amortization), sales and marketing, research and product development, general and administrative, and depreciation and amortization), non-GAAP net income (loss), non-GAAP net income (loss) per share, and free cash flow.
- Non-GAAP presentation of income (loss) from operations, operating expenses, 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, impairment, CEO separation costs, net, gain on lease modification, workforce reduction costs and the related income tax effect of these adjustments, as applicable and described below.
- Free cash flow. Free cash flow is defined as net cash from operating activities, less purchases of property and equipment, capitalization of software development costs, payments for separation costs, lease termination payments 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, because 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.
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.
- Impairment. We believe that impairment charges do not reflect future operating expenses, and are generally unrelated to financial and operational performance in 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 ("Separation Agreement"). 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 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.
