Summary
AppFolio closed fiscal 2021 with fourth quarter revenue of $95.6 million, up 32.0% from the prior-year quarter. Units under management reached 6.35 million at December 31, 2021, up from 5.36 million a year earlier. Full fiscal year revenue was $359.4 million, up 15.9%. Growth came from both sides of the house. Core solutions revenue rose on customer and unit additions, and usage-based Value Added Services tied to payments, screening, and risk mitigation did most of the heavy lifting. The average number of property management units under management grew 17% during the year, and average property management customers grew 9%. The gap between the 32.0% quarterly rate and the 15.9% annual rate reflects the MyCase divestiture in September 2020, which left 2021 without that revenue stream.
Profitability went the other way. The quarter produced an operating loss of $7.34 million, wider than the prior-year quarter, and the operating margin was -7.7% against -3.8% a year earlier. The quarterly net loss was $1.33 million. The full year tells the bigger story: an operating loss of $11.88 million versus operating income in 2020, a fiscal year operating margin of -3.3% against 3.2%, and net income of $1.03 million versus $158.40 million. Diluted earnings per share for the fiscal year were $0.03 versus $4.44. The 2020 profit included a large one-time gain on the MyCase sale, so the comparison flatters the prior year. Even so, the cost line kept climbing. Sales and marketing, research and product development, and general and administrative spending all rose faster than revenue during the year, driven by personnel costs and third-party delivery costs.
Cash generation held up better in the fourth quarter. Operating cash flow was $8.93 million, up 189.7%. The fiscal year was weaker: operating cash flow of $35.39 million, down 26.7%. Capital expenditures, reported as purchases of property and equipment, rose 18.1% in the quarter to $2.94 million. The fiscal year figure fell 57.4% to $8.10 million, largely because 2020 carried the headquarters build-out in Santa Barbara. Deferred revenue, current portion only, stood at $2.51 million on December 31, 2021, up 11.1%.
Guidance covers the full fiscal year 2022, not the next quarter. The company guided to a revenue range and to diluted weighted average shares of approximately 36.5 million for the full year. It gave no margin target. That matters after a year in which the operating line swung to a loss, and it leaves investors to judge how much of the spending increase gets absorbed by growth. Management said it would provide updated financial guidance later.
The risk profile is concentrated. A significant majority of Value Added Services revenue comes from electronic payments, tenant screening, and risk mitigation, and those services carry the heaviest third-party costs. Management expects cost of revenue to increase as a percentage of revenue in fiscal year 2022 because third-party payments tied to Value Added Services should grow faster than total revenue. Seasonality compounds the issue. Tenant screening activity peaks in the second quarter and risk mitigation demand peaks in the third, which normally makes the fourth quarter the softest period for usage-based revenue. On capital allocation, the board has authorized repurchases of up to $100.0 million of Class A common stock, and $4.2 million has been repurchased under the program.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $95.6M | $95.8M | -0.2% | $72.4M | +32.0% |
| Gross profit | $56.5M | $57.1M | -1.0% | $42.5M | +32.9% |
| Gross margin | 59.1% | 59.6% | -0.5 pp | 58.7% | +0.4 pp |
| Research & development | $19.6M | $16.5M | +18.7% | $11.7M | +66.9% |
| Sales & marketing | $19.9M | $19.4M | +3.0% | $15.3M | +30.1% |
| General & administrative | $16.3M | $13.4M | +21.7% | $11.2M | +45.9% |
| Total operating expenses | $102.9M | $95.8M | +7.4% | $75.2M | +36.9% |
| Operating income (loss) | -$7.3M | -$13.0K | -56376.9% | -$2.8M | -166.8% |
| Operating margin | -7.7% | -0.0% | -7.7 pp | -3.8% | -3.9 pp |
| Net income (loss) | -$1.3M | -$141.0K | -844.0% | -$513.0K | -159.5% |
| Net margin | -1.4% | -0.1% | -1.2 pp | -0.7% | -0.7 pp |
| Diluted EPS | -$0.04 | $0.00 | -$0.04 | -$0.01 | -$0.03 |
Risks
All revenue is currently generated from real estate industry customers, so declines in the rental market, customer consolidations or bankruptcies, or new regulations affecting real estate could reduce renewals and demand. MD&A reports property management units under management grew to 6.35 million at December 31, 2021 from 5.36 million at December 31, 2020, but the concentration remains.
The tenant screening business is subject to FCRA, Fair Housing Act and related regulations; the company settled with the FTC in January 2021, paid a fine and agreed to ongoing compliance and reporting obligations. Failure to comply could lead to material penalties or enjoin screening services, and per-occurrence liability in class actions could be material given transaction volume.
The company expects substantial investments in research and product development, sales and marketing, and infrastructure, and MD&A states cost of revenue is expected to increase as a percentage of revenue in 2022. For FY2021 year to date, operating income swung to a loss and net income decreased 99.4%, and operating margin declined 6.5 percentage points versus prior year to date.
Electronic payment services expose the company to liability for disputed or fraudulent transactions; if customers or their accounts cannot cover returned transactions, the company bears the ultimate risk of loss. This is a significant part of Value Added Services revenue.
Revenue from insurance-related services depends on property management customers requiring insurance coverage for units. If customers stop requiring coverage, premiums decline, or insureds have greater-than-expected losses, demand and revenue from these products could be harmed.
Certain functionality depends on third-party partners for cloud computing, texting, emailing, electronic payments, tenant screening and insurance offerings. If partners cease providing products or integrations, solutions and demand could be adversely impacted.
Growth depends on hiring and retaining highly skilled personnel, especially software engineers and sales and marketing staff, and competition is intense. The Santa Barbara headquarters location and reliance on equity awards may make recruiting harder, and MD&A shows personnel-related costs increased across sales and marketing, research and product development, and general and administrative for FY2021.
Expansion into new markets and industries may involve longer sales cycles, new regulatory regimes, and increased litigation or reputational risk. If successful expansion does not occur, revenue may grow slower than expected or decline.
The cloud-based real estate software market is intensely competitive, with established vendors with greater resources and smaller point-solution entrants. Competitors may develop comparable functionality, causing customer loss, slower new customer growth, or price decreases.
The business depends on existing customers renewing subscriptions and expanding use of Value Added Services. If renewals or Value Added Services adoption decline, revenue may grow slower or decline, and the company may incur higher sales and marketing or research and product development costs without corresponding revenue.
Class B common stock has 10 votes per share, and as of December 31, 2021 holders of Class B, including executives, directors and principal stockholders, held approximately 89% of combined voting power. This concentrated control limits other stockholders' ability to influence corporate matters and may deter change-in-control transactions.
The Share Repurchase Program could diminish cash reserves and impact the ability to finance growth, complete acquisitions, or execute the strategic plan. Repurchases or termination or suspension of the program could increase volatility or decrease the trading price; MD&A notes $4.2 million repurchased under the $100.0 million authorization.
SaaS KPIs
All quarters →Property Management Units Under Management
Summary, forecast, risks and KPIs are extracted from APPFOLIO INC's SEC filings for Q4 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.