Summary
AppFolio's first quarter fiscal 2023 revenue rose 29.3% to $136.1 million. This growth came from more units under management, which increased to about 7.5 million from about 6.6 million a year earlier. That is roughly 14% unit growth. Property management customers also grew to 18,834 from 17,550. The top line accelerated, but profitability moved the other way. The company sells cloud business management software to the real estate industry, and its up-market strategy appears to be adding larger customers.
GAAP loss from operations widened to $26.53 million. Operating margin fell 5.6 percentage points to -19.5%. Net loss widened to $35.11 million, and diluted loss per share was -$0.99. These figures include significant non-cash and one-time items. Non-GAAP loss from operations was $2.1 million, or 1.6% of revenue, compared with a non-GAAP loss from operations of $5.6 million, or 5.3% of revenue, in the prior-year quarter. Non-GAAP net loss was $209,000, and non-GAAP loss per share was -$0.01. The gap between GAAP and non-GAAP results reflects stock-based compensation and separation costs related to the former CEO. A provision for income taxes also contributed to the net loss.
Cash generation improved. Operating cash flow was $1.57 million, up 170.1% from the prior-year quarter. Capital expenditures were $0.79 million, down 56.6%. Non-GAAP free cash flow was $(0.4) million, or (0.3)% of revenue, compared with $(7.6) million, or (7.2)% of revenue, in the prior-year quarter. Deferred revenue was $1.00 million, down 72.9%, and remaining performance obligations were $20.00 million. The deferred revenue decline is small in absolute dollars, but it is a metric worth watching.
For full fiscal year 2023, AppFolio expects revenue of $570 million to $580 million. Full-year non-GAAP operating margin is expected to be 1% to 2%. Full-year non-GAAP free cash flow margin is expected to be 2.5% to 3.5%. Weighted average shares outstanding are expected to be approximately 36 million for the full year. The guidance is for the full fiscal year, not the next quarter. The outlook implies the company plans to balance growth with cost discipline. The MD&A notes expected decreases in cost of revenue, sales and marketing, general and administrative, and depreciation and amortization as a percentage of revenue for the year ending December 31, 2023. It also expects research and product development to increase as a percentage of revenue.
The quarter showed widening GAAP losses even as revenue grew. Stock-based compensation and one-time separation costs weighed on GAAP results. Competition for talent remains a risk, and the company relies on third-party service providers for Value Added Services. The mix of Value Added Services can affect cost of revenue as a percentage of revenue. The effective tax rate differed from the U.S. federal statutory rate due to a valuation allowance, non-deductible officer compensation, and state income taxes. Management believes existing cash and investments will meet working capital and capital expenditure requirements for at least the next twelve months. Forward-looking statements carry risks described in the annual report. The company also has a share repurchase program authorized up to $100.0 million, with $4.2 million repurchased to date.
The business is growing units and revenue at a healthy clip, and non-GAAP profitability improved from the prior-year quarter. However, GAAP losses widened, and the full-year outlook calls for modest non-GAAP operating margin and free cash flow margin. The company's revenue growth remains strong, but the GAAP loss widened because operating expenses grew faster than revenue. The quarter's non-GAAP results suggest underlying profitability is improving, but GAAP profitability remains the key challenge. Execution on cost efficiencies and up-market growth will determine whether the company can close the gap between revenue growth and GAAP profitability.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $136.1M | $124.1M | +9.7% | $105.3M | +29.3% |
| Research & development | $37.7M | $31.2M | +20.9% | $24.3M | +54.9% |
| Sales & marketing | $29.4M | $29.8M | -1.5% | $24.9M | +18.0% |
| General & administrative | $31.7M | $24.5M | +29.2% | $19.0M | +67.1% |
| Total operating expenses | $162.6M | $144.0M | +12.9% | $120.0M | +35.6% |
| Operating income (loss) | -$26.5M | -$20.0M | -33.0% | -$14.7M | -80.9% |
| Operating margin | -19.5% | -16.1% | -3.4 pp | -13.9% | -5.6 pp |
| Net income (loss) | -$35.1M | -$19.7M | -78.2% | -$14.3M | -145.7% |
| Net margin | -25.8% | -15.9% | -9.9 pp | -13.6% | -12.2 pp |
| Diluted EPS | -$0.99 | -$0.56 | -$0.43 | -$0.41 | -$0.58 |
Risks
Operating loss widened to $26.53 million in FY2023 Q1 from $14.67 million in FY2022 Q1, and net loss widened to $35.11 million from $14.29 million, as operating margin was down 5.6 percentage points to -19.5% from -13.9%. MD&A states research and product development expense is expected to increase as a percentage of revenue for the year ending December 31, 2023.
MD&A states the company faces increased competition for talent and is evolving compensation and employee reward practices. Personnel-related costs rose across cost of revenue, sales and marketing, research and product development, and general and administrative, with research and product development personnel costs up $12.8 million for the three months ended March 31, 2023 compared with the prior-year period.
General and administrative expense increased 67% for the three months ended March 31, 2023, primarily due to an increase in personnel-related costs of $15.6 million driven primarily by separation costs associated with our former Chief Executive Officer's Separation Agreement.
SaaS KPIs
All quarters →Property management customers
Non-GAAP operating margin
Non-GAAP Free Cash Flow Margin
Property Management Units Under Management
Non-GAAP free cash flow
Summary, forecast, risks and KPIs are extracted from APPFOLIO INC's SEC filings for Q1 FY2023 (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.