Summary
AppFolio's fiscal 2023 second quarter revenue reached $147.1 million, up 25.2% from the prior-year quarter. The company served about 7.7 million property management units at June 30, 2023, up from about 6.8 million a year earlier, and counted 19,145 property management customers against 17,878. Management tied the top-line gain to heavier usage of payment, tenant screening, and risk mitigation services, plus 13% growth in units under management. Value Added Services again did most of the work, while Core solutions and Other revenue moved differently.
Profitability improved sharply on a GAAP basis in the quarter. Loss from operations was $0.7 million, or -0.5% of revenue, compared with a loss from operations of $29.9 million, or -25.5% of revenue, in the prior-year quarter. Net loss narrowed to $18.9 million from $30.0 million, and diluted loss per share narrowed to $0.53 from $0.86. On a non-GAAP basis, income from operations was $9.4 million, or 6.4% of revenue, against $1.2 million, or 1.0% of revenue, a year earlier. Non-GAAP net income was $8.5 million, or $0.23 per diluted share, against $1.1 million, or $0.03 per diluted share.
Year-to-date figures show a different pattern. For the six months ended June 30, 2023, revenue was $283.2 million, up 27.1%. Operating loss narrowed to $27.2 million from $44.6 million. Net loss widened to $54.0 million from $44.3 million, and diluted loss per share widened to $1.52 from $1.27. The year-to-date operating loss narrowed by $17.4 million while the year-to-date net loss widened by $9.75 million.
Cash flow was the weak spot. Operating cash flow was negative $9.23 million in the second quarter, down 267.1% from positive $5.52 million in the prior-year quarter. For the first six months, operating cash flow was negative $7.66 million, down 333.4% from positive $3.28 million. Capital expenditures were $1.38 million, down 57.9% from $3.27 million. Deferred revenue was $1.10 million, down 64.2% from $3.08 million, and remaining performance obligations were $24.0 million.
Non-GAAP free cash flow, a separate measure from operating cash flow, was $6.2 million, or 4.2% of revenue, against $(1.5) million, or (1.2)% of revenue, in the prior-year quarter. MD&A attributes the first-half decline in operating cash flow mainly to separation payments tied to the former CEO's transition agreement, partly offset by working capital changes.
For the full fiscal year 2023, AppFolio guided its top line to a range of $592 million to $598 million, with a non-GAAP operating margin of 5.5% to 6.5% and a non-GAAP free cash flow margin of 6% to 7%. Weighted average shares outstanding are expected at approximately 36 million for the full year. No quarterly guidance was given. Management pointed to AI-powered products such as AppFolio Realm, an entry into affordable housing, new AppFolio Stack partners, and expansion of the payments platform. The company also said it will stop waiving the eCheck (ACH) transaction fee in the third quarter of 2023 and expects payment services revenue to rise for the rest of the year.
Execution risks remain. AppFolio expects research and product development expense to increase as a percentage of revenue for the full year as it invests in product capabilities. Cost of revenue, sales and marketing, general and administrative, and depreciation and amortization are each expected to fall as a percentage of revenue for the full year, according to MD&A. The company has a $100.0 million share repurchase authorization and has bought back $4.2 million of Class A common stock to date.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $147.1M | $136.1M | +8.1% | $117.5M | +25.2% |
| Research & development | $37.3M | $37.7M | -1.1% | $26.7M | +39.6% |
| Sales & marketing | $27.0M | $29.4M | -8.2% | $27.0M | +0.0% |
| General & administrative | $18.8M | $31.7M | -40.6% | $37.9M | -50.4% |
| Total operating expenses | $147.8M | $162.6M | -9.1% | $147.4M | +0.3% |
| Operating income (loss) | -$679.0K | -$26.5M | +97.4% | -$29.9M | +97.7% |
| Operating margin | -0.5% | -19.5% | +19.0 pp | -25.5% | +25.0 pp |
| Net income (loss) | -$18.9M | -$35.1M | +46.2% | -$30.0M | +36.9% |
| Net margin | -12.8% | -25.8% | +13.0 pp | -25.5% | +12.7 pp |
| Diluted EPS | -$0.53 | -$0.99 | +$0.46 | -$0.86 | +$0.33 |
Risks
The MD&A reports an effective tax rate of 2,637% for the quarter ended June 30, 2023, primarily due to a change in valuation allowance against deferred tax assets and higher non-deductible officers' compensation. Net loss widened to $54.0 million year to date from $44.3 million even as operating loss narrowed.
Operating cash flow was -$9.23 million for the quarter and -$7.66 million year to date, down 267.1% and 333.4% respectively from positive prior-year periods. The MD&A attributes the decrease primarily to payment of separation costs related to the former Chief Executive Officer's Separation Agreement.
MD&A cites increased competition for talent and evolving compensation practices. The quarter included separation costs for the former CEO, and stock-based compensation in sales and marketing decreased 78% for the quarter due to reversal of expense for unvested equity awards from changes in the leadership team.
Research and product development expense increased 40% for the quarter and 47% year to date, driven by personnel-related costs from headcount growth. Management expects research and product development expenses to increase as a percentage of revenue for the year ending December 31, 2023.
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 Q2 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.