AppFolio, Inc. reported its quarterly financial results for the period ended September 30, 2024. The company’s revenue increased by 15% year-over-year to $123.1 million, driven by growth in its property management and accounting services. Net income was $14.1 million, or $0.24 per diluted share, compared to a net loss of $2.1 million, or $0.04 per diluted share, in the same period last year. The company’s cash and cash equivalents increased to $143.1 million, and its total debt decreased to $25.1 million. AppFolio’s management attributed the strong results to its continued focus on innovation, customer acquisition, and retention. The company also provided guidance for the full year 2024, expecting revenue to be in the range of $470 million to $480 million, and net income to be in the range of $45 million to $50 million.
Overview
AppFolio is a technology company that provides software solutions to property management companies. The company’s products help property managers digitally transform their businesses, streamline operations, and deliver a better experience for their customers, which include property owners, rental prospects, residents, and service providers.
AppFolio’s revenue comes primarily from two sources: subscription fees for its core property management software, and usage-based fees for its value-added services like payments processing, tenant screening, and risk mitigation. The company has seen strong growth in both its core solutions and value-added services, driven by an increase in the number of property management units under its customers’ management as well as greater adoption and utilization of its service offerings.
Financial Performance
For the three and nine months ended September 30, 2024, AppFolio reported total revenue of $205.7 million and $590.5 million, respectively. This represents a 24% and 32% increase compared to the same periods in the prior year. The growth was primarily attributable to increased usage of the company’s payments, tenant screening, and risk mitigation services, as well as a 9% increase in the number of property management units under management.
AppFolio’s cost of revenue (excluding depreciation and amortization) increased by 14% and 16% for the three and nine month periods, respectively, compared to the prior year. This was driven by higher expenditures related to third-party service providers for delivering the company’s value-added services, partially offset by decreases in personnel-related costs.
Sales and marketing expenses decreased by 14% and 10% for the three and nine month periods, respectively, due to reductions in personnel-related costs, including from the workforce reduction in the third quarter of 2023. Research and product development expenses were relatively flat, increasing slightly by 1% for the nine-month period. General and administrative expenses decreased by 12% and 16% for the three and nine month periods, respectively, primarily due to reductions in personnel-related costs.
Depreciation and amortization expense decreased by 43% and 36% for the three and nine month periods, respectively, due to lower amortization of capitalized software development and intangible assets.
Interest income, net increased significantly, by 124% and 127% for the three and nine month periods, respectively, due to higher interest rates and increased investment in available-for-sale securities.
AppFolio’s effective tax rate for the three and nine month periods ended September 30, 2024 was 29.1% and 17.7%, respectively, compared to (1,696.5)% and (20.2)% in the prior year periods. The changes were primarily due to the substantial increase in pre-tax income and changes in discrete tax benefits year-over-year.
Liquidity and Capital Resources
As of September 30, 2024, AppFolio had $331.4 million in cash, cash equivalents, and investment securities. The company believes its existing cash and cash flows from operations will be sufficient to meet its working capital and capital expenditure requirements for at least the next twelve months.
Cash provided by operating activities increased significantly to $151.6 million for the nine months ended September 30, 2024, compared to $29.1 million in the prior year period, primarily due to higher cash collections from customers. Cash used in investing activities increased to $107.5 million, compared to $22.4 million in the prior year, mainly due to higher purchases of available-for-sale investment securities. Cash used in financing activities was $31.2 million, compared to $17.6 million in the prior year, which included $4.2 million in share repurchases under the company’s authorized $100 million program.
Strengths and Weaknesses
AppFolio’s key strengths include:
Potential weaknesses or risks include:
Outlook
AppFolio expects total revenue for the full year 2024 to increase compared to 2023, driven by continued growth in both its core solutions and value-added services. The company anticipates cost of revenue, sales and marketing, research and development, and general and administrative expenses will all decrease as a percentage of revenue, as it continues to leverage operational efficiencies.
The company’s recent acquisition of Move EZ, a concierge platform for moving and home services, is expected to further expand AppFolio’s offerings and enhance the customer experience for its property management clients. Overall, the company appears well-positioned to capitalize on the ongoing digital transformation in the real estate industry and deliver strong financial performance in the coming year.