Summary
AppFolio reported revenue of $78.9 million for the quarter ended March 31, 2021, up 8.9% from $72.5 million in the prior-year quarter. The mix shifted sharply. Core solutions revenue slipped 3% to $24.2 million. Value+ services revenue rose 17% to $51.5 million. Other revenue came in at $3.2 million, down from $3.5 million. Inside the real estate vertical alone, revenue was $78.9 million against $64.9 million a year earlier, a 22% increase. That split into core solutions of $24.2 million, up 18%, and Value+ services of $51.5 million, up 26%. The remainder came from the legacy legal vertical, which the company left behind when it sold MyCase in September 2020.
Customer counts kept climbing. Property manager customers totaled 16,178 at March 31, 2021, against 14,729 a year earlier and 15,724 at December 31, 2020. Units under management reached 5.62 million, up from 4.80 million a year earlier and 5.36 million at the end of December. Average units under management grew 16% and the average customer count grew 10% over the year. Management credits the Value+ gain to wider use of electronic payment services, tenant screening and insurance. It also notes that residents, property managers and owners transacted more business online during the comparative period, which it links in part to the pandemic.
Costs grew faster than sales. Total costs and operating expenses were $84.6 million, against $69.7 million in the prior-year quarter. Cost of revenue rose 15% to $33.3 million and reached 42.2% of revenue, up from 39.9%, which management ties to the mix of Value+ services and the differing third-party costs behind them. General and administrative expense rose 56% to $13.4 million. Research and product development rose 28% to $14.4 million. Sales and marketing rose 12% to $16.2 million. Depreciation and amortization rose 15% to $7.4 million. A $1.2 million accrual for long-term executive cash incentive plans and a $2.9 million increase in other personnel costs drove much of the general and administrative jump. The company reported an operating loss of $5.7 million, against operating income of $2.8 million a year earlier. Operating margin went from 3.9% to -7.2%, a decline of 11.1 percentage points.
Net income was $479,000, down 75.8% from $1.98 million, and diluted EPS was $0.01 against $0.06. A $5.5 million income tax benefit, compared with $0.4 million of income tax expense a year earlier, kept the bottom line in the black. The company attributes that benefit to stock-based compensation and research and development tax credits measured against forecast pre-tax results at the 21% federal statutory rate. Cash generation reversed. Operating cash flow was -$4.4 million, down from $3.1 million. Capital expenditures were $0.9 million, down 88.3% from $8.0 million. Deferred revenue, current portion only, fell 45.3% to $3.1 million from $5.7 million. Cash, cash equivalents and investment securities totaled $159.9 million at March 31, 2021.
The outlook covers the full fiscal year 2021, not the next quarter. It consists of a revenue range and an expected diluted weighted average share count, with no quarterly targets. The company also said Chief Financial Officer Ida Kane will leave; she stays until a mutually determined date while a search for her successor runs. Risk disclosure centers on the pandemic. Employees have worked remotely since March 2020 and are expected to return slowly through 2021, with the option to stay remote for the rest of the year. Management warns that another stretch of full remote work could hurt productivity and impede strategic objectives. The liquidity discussion notes a share repurchase program authorized at up to $100.0 million, of which $4.2 million has been used. Operating cash flow included a $4.3 million settlement tied to the FTC investigation, and management repeats that spending on hiring and product development runs ahead of the revenue those investments are meant to produce.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $78.9M | $72.4M | +9.0% | $72.5M | +8.9% |
| Gross profit | $45.6M | $42.5M | +7.3% | $43.5M | +4.8% |
| Gross margin | 57.8% | 58.7% | -0.9 pp | 60.0% | -2.2 pp |
| Research & development | $14.4M | $11.7M | +22.6% | $11.2M | +28.3% |
| Sales & marketing | $16.2M | $15.3M | +5.6% | $14.5M | +11.5% |
| General & administrative | $13.4M | $11.2M | +19.5% | $8.6M | +55.9% |
| Total operating expenses | $84.6M | $75.2M | +12.5% | $69.7M | +21.4% |
| Operating income (loss) | -$5.7M | -$2.8M | -106.0% | $2.8M | -300.3% |
| Operating margin | -7.2% | -3.8% | -3.4 pp | 3.9% | -11.1 pp |
| Net income (loss) | $479.0K | -$513.0K | +193.4% | $2.0M | -75.8% |
| Net margin | 0.6% | -0.7% | +1.3 pp | 2.7% | -2.1 pp |
| Diluted EPS | $0.01 | -$0.01 | +$0.02 | $0.06 | -$0.05 |
Risks
The COVID-19 pandemic has disrupted customer demand and operations, and the company expects employees to remain remote through 2021. The real estate vertical could be disproportionately harmed by unemployment, regulation and financial uncertainty from the pandemic.
The current quarter swung to an operating loss of $5.67M and operating margin fell to -7.2%, down from 3.9% in the prior-year quarter, as total costs and operating expenses rose to 107.2% of revenue. Management expects substantial investments and may not sustain profitability.
All revenue is presently from the real estate vertical. In the current quarter core solutions revenue decreased 3% to $24.2M while Value+ services revenue increased 17% to $51.5M, so a real estate downturn or lower renewal or Value+ adoption would materially hurt results.
The tenant screening business is subject to FCRA enforcement, and the company paid $4.25M to settle the FTC Investigation in January 2021. Per-occurrence penalties and class actions could have a material impact.
Growth strategy depends on increasing sales to larger real estate customers, including APM PLUS. These sales may bring longer cycles, less predictability, greater competition and higher financial and reputational risk.
The company depends on highly skilled personnel and faces intense competition for software engineers, challenges attracting talent to Santa Barbara, and equity award value volatility. Remote work during the pandemic may further strain culture and retention.
Electronic payment services expose the company to fraud, disputed transactions and loss if it cannot collect returned amounts. Adoption of blockchain or distributed ledger technologies could reduce payment volumes and increase costs.
The company underwrites legal liability to landlord insurance and maintains reserves; if property management customers stop requiring proof of insurance, premiums decline, or claims exceed reserves, revenue and operating results could be harmed. State insurance regulation could also limit growth and add costs.
Electronic payment and tenant screening services rely on third-party providers. Their failure to provide accurate and timely information, fulfill contractual obligations, or renew contracts could harm reputation, disrupt business and adversely affect operating results.
The company has acquired and may continue to acquire companies or technologies, but it has limited acquisition experience. Integration may fail, financing may dilute stockholders or incur debt, and impairment charges may result if acquisitions do not yield expected returns.
Quarterly results, including revenue, costs, expenses and operating margins, may fluctuate significantly, and period-to-period comparisons may not be meaningful. Management's long-term focus may conflict with short-term investor expectations and make forecasting difficult.
Class B holders, including executive officers, directors and principal stockholders, held approximately 89% of combined voting power as of March 31, 2021. This concentrated control limits Class A stockholders' influence and may delay or deter a change-in-control transaction.
SaaS KPIs
All quarters →Property manager units under management
Property manager customers
Summary, forecast, risks and KPIs are extracted from APPFOLIO INC's SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.