APPFOLIO INC Q3 FY2024 earnings

AppFolio reported revenue of $205.7 million for the quarter ended September 30, 2024, up 24.4% from the prior-year quarter. Value Added Services carried the growth, rising 28% to $157.7 million as residents and property managers transacted more business online. Core solutions revenue climbed 16% to $46.0 million, while Other revenue, which covers legacy products sold outside the property management platform, slipped 21% to $2.0 million. Property management units under management reached 8.5 million, up 9% year over year, and the customer count ended at 20,403.

Profitability improved sharply. Operating income was $42.6 million, or 20.7% of revenue, against an operating loss of $0.07 million in the prior-year quarter. Through nine months, revenue of $590.5 million rose 31.6%, and operating income of $112.7 million produced a 19.1% operating margin. Net income for the quarter was $33.0 million, up 24.8%, and diluted earnings per share were $0.90, up 25.0% year over year. Nine-month net income reached $101.3 million and diluted earnings per share were $2.76. On the company's non-GAAP basis, operating income was $59 million, or 28.7% of revenue, compared with $27 million, or 16.1% of revenue. Management credited leverage from headcount efficiencies after last year's workforce reduction.

Expense growth stayed modest. Sales and marketing expense fell 14% and general and administrative expense dropped 12%. Research and product development was 2% lower, and depreciation and amortization also declined as capitalized software and intangible balances amortized. Cost of revenue rose 14%, driven by higher third-party service costs supporting payments, tenant screening and risk mitigation. Every one of those lines moved more slowly than revenue, which is what turned the operating margin positive.

Cash generation was strong. Operating cash flow was $57.8 million for the quarter, up 57.2% from the prior-year quarter, and $151.6 million for the nine months, up 420.9% versus the same period a year earlier. Capital expenditures were $0.4 million, down 90.3%. Non-GAAP free cash flow, a separate measure that deducts property purchases, capitalized software and certain separation and severance payments, was $56 million, or 27.1% of revenue, compared with $34 million, or 20.3% of revenue. Cash, cash equivalents and investment securities totaled $331.4 million at September 30, 2024. The board has authorized repurchases of up to $100.0 million of Class A common stock, and $4.2 million has been bought back under the program.

Two corporate announcements came with the results. AppFolio acquired LiveEasy, a concierge platform for moving and home services that will be integrated into FolioSpace, the company's next-generation resident application. CFO Fay Sien Goon departs on October 25, 2024, and Tim Eaton, previously chief of staff to the CEO, becomes interim CFO while a successor is sought. Guidance for the full fiscal year 2024, issued as of October 24, 2024, covers a non-GAAP operating margin of 24.5% to 25.5% and a non-GAAP free cash flow margin of 22% to 24%, with diluted weighted average shares of about 37 million for the full year. Full-year revenue is expected to increase over the prior year. The disclosed risks center on the FolioSpace launch and the LiveEasy integration, including possible negative effects from the announcements on operations or the share price, and unknown liabilities tied to the acquisition.