Q3 2019 Earnings Call

Thank you for joining us today welcome to the <unk> <unk> third quarter 2019 financial results Conference call.

I would now like to turn the call overtime Erica Abrams. Thank you.

I'm joined today by Jason Randall and indicate that folio discuss these results.

This call is simultaneously being webcast on the Investor Relations section of our web site.

Www Dot Appfolio Inc. dot com.

Before we get started I would like to call everyone's attention to our safe Harbor policy. Please note that certain statements made on this call will be forward looking statements, which are subject to considerable risks and uncertainties. Actual results performance may be materially different from any results performance expressed or implied by the forward looking statements.

Forward looking statements may relate to future plans and financial conditions results of operations business forecasting planned strategic plans and objectives and product development plan.

Please see our filings with the FCC for greater detail about risks and uncertainties.

We're looking statements are based on assumptions as of today and we assume no obligation to update any forward looking statements. After today, even if new information becomes available in the future with that I'll turn the call over to eat up Yeah. Please go ahead.

Thank you Erica and welcome to everyone joining us on the call today portfolios third quarter 2019 financial results.

Total revenue for the quarter increased by 36% over the same period one year ago.

$67.9 million.

GAAP net income was $5 million or 14 cents per diluted share, which includes a 1.3 million dollar income tax benefit related to research and development tax credits.

For those of you who track non-GAAP results. Our Form 10-Q that was filed today includes more detailed information that you might find helpful. In calculating non-GAAP results, including stock based compensation expense.

The third quarter of 2019 continues to reflect our investments ahead of potential revenue in several growth areas that we believe will positively impact long term shareholder value, including Appfolio property manager plus or offering that serves larger more complex real estate property manager customers.

Appfolio investment management, which serves real estate investment managers.

Lisa out fully as a leasing assistant which we developed from the technology acquired to the dynasty acquisition and is now offered as a value plus service.

In a folio utility management, which we developed from technology acquired through the Weigle Wise acquisition and it's also now offered as a value plus service.

Core solutions revenue in the third quarter was $22.5 million, a 26% increase year over year, primarily due to a 19% increase in property manager units under management, and an 11% increase and the number of property manager customers.

We closed the third quarter with 14034 property manager customers managing 4.41 million units.

Gross and net new units under management per customer reflects our ongoing focus m. success, serving property managers with larger and more complex portfolios.

As a reminder, customers that are not subscribing to our core solutions, including for example, Standalone dynasty and legalized customers are not included in our customer and unit count.

And our legal vertical customer count increased 6% year over year to 10781.

Third quarter value plus services revenue was $41.6 million east, 35% increase year over year.

Revenue from each of our value plus services increased year over year.

The majority of growth in this area continues to be driven by increased usage of our electronic payments screening and insurance services by a larger base of property manager customers and a higher number of units under management.

Other revenue was $3.8 million in the third quarter, primarily related to an increase in revenue generated from customers subscriptions for the Standalone. We go wise platform and dynasty technology services.

In addition, we experienced an increase in website setup fees associated with our property manager customers upgrading to a new website hosting platform.

Turning to expenses total costs, an operating expenses for the third quarter increased 43% year over year compared to an overall, 36% increase in total revenue.

Our year over year, increasing costs is primarily related to a 41% growth in headcount to support our growth areas and an expanding be of both new and existing customers.

Moving to our balance sheet, we close the third quarter with approximately $45.2 million in cash cash equivalents and investment securities.

And $49.1 million of debt.

We generated $11.6 million from operating activities.

He is $1.7 million to purchase property and equipment and invested $6.2 million in additional product innovation via capitalized software.

We did not initiate any stock repurchases during the third quarter.

I would like to remind investors that we experienced some seasonality in our property management business during the fourth quarter of the calendar years.

In prior years, we have noted that there is a tendency for fewer people to move during the quarter, resulting in less screening and payment services revenue attributable to rental applications for new tenants.

We expect this seasonality to continue to exist in 2019.

Given our performance in the quarter, we're raising our outlook for the full year 2019, we now expect revenue to be in the range of $254.5 million to 255.5, which represents year over year revenue growth of over 34.

4% at the midpoint.

We continue to expect our weighted average diluted share count for the year to be approximately 36 million.

That concludes my prepared remarks as a reminder, investors are invited to support to submit questions via investor Queuing. They form located on the Investor overview section of our website.

With that I'll turn the call over to Jason for some additional comments.

Thanks, Ido and thanks to everyone for joining us today's report or third quarter 2019 financial results.

In the third quarter, we furthered our mission revolutionizing vertical industry businesses in both the real estate and legal verticals that we serve today.

We remain focused on our long term strategy are providing innovative software solutions for our customers and their stakeholders delivering outstanding customer experiences and supporting a thriving corporate culture.

We believe that this focus results and sustainable growth over the long term.

In our real estate vertical we continued our investment innovation, notably in connection with the expansion of our core functionality and the development of new opportunities in our value plus service offerings.

Technology platforms form the foundation for systems of record engagement and intelligence that continue to evolve and deepen our customer relationships.

We are our customers trusted partner innovation and look for opportunities to further strengthen our partnership through connection points.

From onsite property visits to attend its industry events and most recently our seventh annual how folio property manager customer conference held here in Santa Barbara.

At this year's conference we hosted over 800 attendees from a variety of market segment.

Including residential commercial student housing community Association in real estate investment management.

The conference offered customers a chance to get even more from their investments in that folio property manager Appfolio property manager plus and up fully all investment management through three days of industry in technology workshops educational sessions hands on experiences.

One on one time with our team and plenty of networking.

The sessions included topics such as how we are using our tools and technologies, including artificial intelligence to further automate processes and increase efficiency across our customers businesses.

Turning to our technology, we expanded the capabilities of at Folio property manager plus in the third quarter.

As we added audit functionality with user action logs for better management oversight across the platform.

Our Configurable workflows functionality grew to include additional levels of configuration in automation for customers that manage complex repeatable processes across distributed portfolios.

Automation artificial intelligence and data driven insights help maximize the properties performance freeing staff members to deliver high touch customer experiences.

We continue to leverage artificial intelligence as a transformational technology for the real estate industry.

Today, we're incorporating AI.

Automate routine tasks and deliver business efficiencies for our customers.

For the folios AI leasing assistant Lisa which was built on technology acquired in the dynasty acquisition earlier this year.

Automates, the leasing experienced by leveraging conversational AI to schedule appointments streamline communication and deliver performance insights.

Tony Curie director of Bear property management, and the bare real estate group and that folio property manager plus customer, who recently started using our leasing assistance says.

We have doubled the volume of leads that we are getting and have increased applications and showings for our leasing agents now instead of our team performing administrative work at their desk.

They are at the point of sale shaking hands building relationships getting signatures, which is where their talent should be used.

Using appfolio air leasing assistant in conjunction with that polio is property management software enables our customers to provide a streamlined high touch and high tech leasing experience.

We also released in the third quarter AI powered smart bill entry to automatically process invoices with ease and speed.

Smart Bill entry reads, PDF invoices and identifies key information.

Then automatically enters that information into Apple Leo property managers accounts payables workflow.

Instead of manually transcribing every field of every bill user simply review and approved saving our customers accounts payable teams a significant amount of time processing invoices.

Additionally, we extended our features and functionality designed for larger community Association management portfolios.

With enhancements to board member tracking in management, we enable community Association managers to further streamline their processes and boost efficiencies by providing additional automation and enhance board communication for our customers.

Our recently launched a fully all investment management software solution expands the reach of our offerings in the real estate vertical.

And we continue to add to its capabilities in the third quarter.

Folio investment management is designed to empower real estate investment managers with a modern solution, that's three mines fund and syndication management.

We've built functionality that allows general partners to share investment performance with their investors in seconds via the at Folio Investor portal.

We also expanded distribution functionality to include waterfall calculations, a task that was previously complex and labor intensive.

Turning now to our legal vertical we continue to deliver new functionality designed to help law firms improved business performance and provide in modern client experience.

We recently released E signature to streamline the client signature collection workflow and automated payment plans to enable law firms to collect more of their outstanding balances.

And that fully or we know that a strong culture attract talented team members, which in turn allows us to bring the best technology innovation and service to our customers.

During the quarter I fully was recognized was several awards highlighting our commitment to these principles for multi product and culture standpoint.

For the second you're in a row, we received certification as a great place to work by great place to work and leading authority on workplace culture.

A fully was also ranked number 14 on the fortune best workplaces for women list in the small and medium workplace category.

And that folio property manager plus was recognized as a finalist for 2019 best SAS newcomer.

In summary, we remain focused on the long term strategy to delight, our customers build the happy and engage team and deliver innovative technology solutions that drive long term growth in our business.

Thank you all for joining us today I will now I'll turn the call back to the operator. Please go ahead.

Thank you for participating in todays at Folio third quarter 2019 financial results Conference call. This call will be available for replay beginning at 745 eastern today through 11 59 P.M. Eastern on November 2nd 2019.

In France I'd number for replay is 8056 038.

During the conference I'd number for replay.

056 038.

Number two DAF for the replay is 800 5858367, you can now disconnect.