Summary
AppFolio reported third-quarter revenue of $95.81 million, up 13.9% from the prior-year quarter. The top line came with steady customer and unit growth. Property manager customers reached 16,844 at September 30, 2021, and property manager units under management reached 6.04 million. A year earlier, the figures were 15,352 customers and 5.12 million units. Average property management units under management grew 18% in the quarter and 17% year to date, while the average number of property management customers grew 10% in each period. Management said revenue growth came mainly from more property management customers and units using its software and services. The prior-year period included the legacy legal vertical, which the company divested in September 2020. The company said electronic payment services saw increased demand as residents, property managers, owners, and customers transacted more business online. Tenant screening and insurance services usage also rose in line with unit growth.
Profitability swung to a loss. Operating loss was $13,000 in the quarter, down 100.4% from the prior-year quarter. Operating margin was -0.0%, down 4.0 percentage points from the prior-year quarter. Net loss was $141,000, down 100.1% from the prior-year quarter. Diluted EPS was $0.00, down 100.0% from the prior-year quarter. The year-ago comparison is difficult because that period included a large gain tied to the MyCase sale. The current quarter's loss also reflects higher spending on personnel, advertising, and product development. The company said the loss reflected increased costs to service higher revenue and investments in headcount. General and administrative costs included a long-term executive cash incentive plan and an insurance recovery related to the FTC settlement.
Cash generation weakened. Operating cash flow was $15.80 million in the quarter, down 11.4% from the prior-year quarter. For the first nine months, operating cash flow was $26.46 million, down 41.5%. Capital expenditures were $2.36 million in the quarter, up 5.2% from the prior-year quarter. Year-to-date capital expenditures were $5.17 million, down 68.8%. Deferred revenue was $2.74 million at September 30, 2021, up 11.4% from a year earlier. On a year-to-date basis, revenue was $263.77 million, up 11.0%. Year-to-date operating loss was $4.54 million, down 136.2%. Year-to-date net income was $2.36 million, down 98.5%. The company attributed the year-to-date operating cash flow decline to income taxes paid tied to the MyCase transaction, an increase in prepaid expenses, and a decrease in accrued expenses.
Management's full-year 2021 outlook covers revenue and diluted weighted average shares for the full fiscal year, not the next quarter. The company continues to invest heavily in research and product development, sales and marketing, and infrastructure. It warned that these investments often occur before revenue benefits arrive, which can interrupt operating margin improvement over the long term. AppFolio also flagged COVID-19 risks. It has pushed its return to office into 2022 and will continue to let employees work remotely until further notice. If the pandemic forces full remote work again, employee productivity could suffer and strategic objectives could be delayed. The 10-Q points to risk factors and forward-looking uncertainties as well. AppFolio ended the period with a large cash and investment securities balance, and management believes existing liquidity will cover working capital and capital expenditure needs for at least the next twelve months. The company said future capital requirements will depend on market acceptance, customer growth, adoption of Value+ services, new product introductions, and the impact of COVID-19 on the customers it serves.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $95.8M | $89.0M | +7.6% | $84.1M | +13.9% |
| Gross profit | $57.1M | $56.2M | +1.5% | $51.3M | +11.2% |
| Gross margin | 59.6% | 63.1% | -3.6 pp | 61.0% | -1.5 pp |
| Research & development | $16.5M | $15.5M | +6.4% | $13.5M | +22.6% |
| Sales & marketing | $19.4M | $17.7M | +9.3% | $14.9M | +30.0% |
| General & administrative | $13.4M | $14.2M | -5.6% | $12.9M | +3.5% |
| Total operating expenses | $95.8M | $87.9M | +9.0% | $80.7M | +18.7% |
| Operating income (loss) | -$13.0K | $1.1M | -101.1% | $3.4M | -100.4% |
| Operating margin | -0.0% | 1.3% | -1.3 pp | 4.0% | -4.0 pp |
| Net income (loss) | -$141.0K | $2.0M | -107.0% | $137.7M | -100.1% |
| Net margin | -0.1% | 2.3% | -2.4 pp | 163.7% | -163.9 pp |
| Diluted EPS | $0.00 | $0.06 | -$0.06 | $3.86 | -$3.86 |
Risks
The filing states COVID-19 has had and could continue to have a material adverse impact on operations, customers, and markets. It highlights that return to office has been pushed into 2022 and remote work continues, which could harm employee productivity and company culture.
AppFolio expects to make substantial investments across R&D, sales and marketing, customer service, infrastructure, and acquisitions, and may not sustain profitability. Reported operating income swung to a loss in FY2021 Q3, down 100.4% versus the prior-year quarter, and operating margin fell to -0.0% from 4.0%.
All revenue is presently generated from sales to customers and users in the real estate vertical. Adverse trends in that vertical, including consolidations, bankruptcies, rental-market conditions, or COVID-19 impacts, could reduce renewals and Value+ services usage.
The business depends on existing customers renewing core subscriptions and expanding their use of Value+ services. Failure to do so, or costly investments in Value+ services that are not broadly adopted, could slow revenue growth or reduce operating margins.
Tenant screening services are subject to complex FCRA and Fair Housing Act requirements and per-occurrence penalties. The company settled an FTC investigation for $4.3 million and is subject to ongoing compliance and reporting requirements, with further penalties possible if it fails to comply.
Growth strategy depends in part on increasing sales to larger customers within the real estate vertical, including APM PLUS. The filing warns this may involve longer sales cycles, less predictability, greater competition, and increased financial and reputational risk.
The legal liability to landlord insurance business is underwritten by a wholly owned subsidiary and subject to state insurance regulation. If property management customers stop requiring proof of insurance, premiums decline, or insured losses exceed reserves, operating results could be harmed.
Electronic payment services expose the company to money transmission and anti-money laundering rules, fraud and disputed transaction liability, and potential disruption from blockchain or other financial technologies. Compliance and fraud losses could increase costs or reduce payment services revenue.
The company depends on highly skilled personnel, especially software engineers, and faces intense competition and upward compensation pressure. Its Santa Barbara headquarters location and the perceived value or volatility of equity awards may make hiring and retention more difficult.
The company stores and transmits sensitive customer, personal, and proprietary data, and its growing user base and brand make it a greater target for malicious activity. Breaches at the company or its third-party service providers could lead to liability, fines, reputational harm, and customer loss.
The market for cloud-based business management software is highly competitive, with larger vertical and horizontal providers plus point-solution vendors. Competitors may respond faster to new technologies, develop comparable functionality, pressure pricing, or benefit from consolidation.
The company has limited experience acquiring businesses and may not effectively integrate acquired assets, technologies, personnel, or operations. Acquisitions could require dilutive equity or debt financing, impose restrictions, or result in impairment charges if expected returns are not achieved.
As of September 30, 2021, holders of Class B common stock, including executive officers, directors, and principal stockholders, collectively held approximately 89% of combined voting power. This concentrated control may delay, deter, or prevent a change-in-control transaction and may make interests differ from holders of Class A common stock.
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 Q3 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.