Q4 2019 Earnings Call

For joining us today welcome to Appfolio first <unk> fourth quarter in fiscal year 2019 financial results Conference call I would now like to turn the call over to Erica Abrams. Thank you.

Thank you Christine.

Good afternoon, ladies and gentlemen.

Thank you for joining us today, it's a report absolutely fourth quarter fiscal year 2019 financial result.

I'm joined today by Jason Randall and eat asking about folio to discuss these result.

This call is being sent simultaneously webcast on the Investor Relations section of our website at Www Dot Appfolio Inc. dotcom.

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 or performance baby materially different from any results or performance expressed or implied by the forward looking statements.

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

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

Forward looking statements are based on assumptions as of today and we assume no obligation to further.

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 either. Please go ahead. Thank you Erica and welcome to everyone. Joining us on the call today, BREP folios fourth quarter and fiscal year 2019 financial results.

We had a strong fiscal year 2019 with full year revenue of $256 million is 35% increase year over year.

GAAP net income was $36.3 million or one dollar two cents per diluted share compared to $20 million or 56 cents per diluted share reported in fiscal 2018.

Fiscal year 2019 net income results include a 31.5 million dollar tax benefit primarily related to the release of our valuation allowance against deferred tax assets.

Also included in fiscal year, 2019 results or $7.3 million of noncash charges related to stock based compensation.

For those of you who track non-GAAP results. Our form 10-K was filed today and includes more detailed financial data points that you might find helpful. In calculating any relevant non-GAAP results on your own.

We ended fiscal year 2019, with 14385 real estate property manager customers, managing an aggregate of 4.64 million units and their portfolios compared to 13046 customers and 3.9 million units under management reported.

One year ago.

The year over year increase in the average size of net new customer acquired is the result of our continued efforts and success acquiring customers with higher unit counts under management.

As a reminder, we define a real estate property manager customer base as the number of customers subscribing to our core solution.

These customers are using a folio property manager or folio property manager plus to manage and grow their businesses.

In the legal vertical we closed the year with 10971 customers up from 10279, one year ago.

As of December 31st 2019, our annual dollar base net expansion was 118% for property manager customers and 121% for a law from customers.

This compares to 116% and 113% respectively in fiscal year 2018 I.

I encourage you to read our 8-K filing today for more information on how we calculate annual dollar based net expansion.

Turning to our most recent quarter total revenue for the fourth quarter increased 34% over the same period, one year ago, the $67.4 million.

GAAP net income was $4.4 million or 12 cents per diluted share, which includes a 4.6 million dollar income tax benefit.

Core solutions revenue in the fourth quarter was $23.6 million, a 22% increase year over year, primarily due to a 19% increase in property manager units under management and a 10% increase in the number of property manager customers.

Fourth quarter value plus services revenue was 36 or excuse me $39.6 million, a 37% 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.

Well as a higher number of units under management.

Other revenue was $4.1 million in the fourth quarter, primarily related to revenue generated from customers subscriptions for Standalone services, we offer as well as fees associated with our property manager customers upgrading to a new website hosting as we discussed last quarter.

Turning to expenses total costs and operating expenses for the fourth quarter increased 41% year over year compared to an overall, 34% increase in total revenue.

The year over year increase in cost is primarily related to a 38% growth in headcount to support growth areas that we believe will positively impact long term shareholder value.

These include investments in our Appfolio property manager plus offering that serves larger more complex real estate property manager customers.

Enough Folio investment management, which serves real estate investment managers, Jason will speak more to our additional investment areas shortly.

Moving to our balance sheet, we closed the quarter with approximately $50.8 million in cash cash equivalents and investment securities and $48.8 million of debt.

During the fourth quarter of 2019, we signed new long term leases, but the majority of our existing Santa Barbara campus in connection with the change in ownership of the building.

At year end, we have approximately $31 million recorded in assets and $36 million in lease liabilities on our balance sheets related to these leases.

For the fiscal year, we generated $38.9 million from operating activities.

Our primary uses of cash were $54 million for the acquisition of dynasty.

Many $1 million in capitalized software development costs and $8.1 million for the purchase of property and equipment in connection with our expanding offices and employee base.

We did not initiate any stock repurchases during fiscal year 2019 against our authorized share repurchase program of $100 million.

As we look to fiscal 2020, we remain enthusiastic about our business our investments and growth drivers over the long term.

For full year fiscal 2020, we expect revenue to be in the range of $312 million to $320 million, which represents growth in the range of 22% to 25%.

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

That concludes my prepared remarks with that I'll turn the call over to Jason for additional comments.

Thanks, Doug. Thank you for joining us today, its report or fourth quarter in fiscal year 2019 financial results.

Financial results in 2019 reflects our continued focus and success with revolutionizing vertical industry businesses.

Hi, providing great software and service to our customers.

We attribute our progress towards steadfast focus on innovating for our customers and their stakeholders.

Delivering an exceptional customer experience and enabling a thriving company culture, all while focusing on long term sustainable growth in our business.

And our real estate vertical we took important steps to advance our business both through acquisition and internal development that continue to position Appfolio for long term success.

We made important improvements in that four wheel property manager with clubs Mplus appear of our award winning software design for managing larger businesses with more complex needs.

Our focus here was to continue to improve business efficiency help mitigate risk and provide deeper business insights to our customers at scale.

We extended innovative capabilities, such as Configurable workflows to provide more flexibility in automation for customers, who manage large disburse teams with more complex property portfolios.

We also providing customers with an auditing center for greater management oversight of employees actions across the platform.

The result of work continued focus on improving functionality of the PM plus is growing adoption and favorable reviews and feedback from customers and prospects.

As many of you know in early 2019, we acquired dynasty marketplace and quickly released Appfolio leasing assistant Lisa has a value plus service offering.

From here, we continue to incorporate technology into our products to improve our customers businesses.

We developed and really smart build entry a feature now included in our core Appfolio property manager offerings.

This feature harnesses the power AI by freeing up hours of invoice century through automation.

We believe the artificial intelligence is a powerful technology that will enable us to further revolutionize the real estate industry well into the future.

Also in early 2019, we launched Appfolio utility management value plus offering that provides larger portfolio owners and managers. The information may need to more cost efficiently manage water energy gas and oil use.

This technology was based on the weaker wise acquisition in September 2018.

In other product areas, we continued our investment in serving larger community Association managers with improvements to features such as board member tracking and management and enable community Association managers to further streamline processes and boost efficiencies through automation and enhance board communication.

In early 2019, we launched Appfolio investment management, an offering design for real estate investment managers.

<unk> investment manager management and power is real estate investment managers with a modern solution to better serve their investors by streamlining fundraising reporting and communication.

This offering is designed to provide increased transparency and personalized self service experience for real estate investors, while providing flexible tools for investment managers.

In Q4, 2019, we enhanced reporting capabilities for customers by automatically calculating key performance metrics.

Along with providing new ways for investors to visualize to performance other investments in the Appfolio investor portal.

Brook, Hermine controller at Pacific apartment homes, and that folio property manager customer and an early adopter about pulling our investment management recently said since using up fully on investment management, our investors have been ecstatic to have older information in one place where they can log in to see every single investment and click into individual distributions.

We will continue to invest in innovation that extends our ability to serve growing segments of the real estate market.

Turning to our legal vertical throughout 2019, we remain focused on helping law firms improved business performance and better serve the modern legal client.

Did that and we added capabilities that allow customers to measure marketing performance and introduce business management dashboards that provide case and financial insights to help firms make better decisions.

We also continued to add new features to improve the efficiency of managing cases, including E signature and text messaging.

And finally to enable law firms to collect more of their outstanding balances. We continue to enhance the payments offering with addition of new payment methods and automated payment plans.

During 2019, Apple we will continue to gain industry recognition for carriage company culture growth in innovative technology.

In the fourth quarter Folio was honored for our strong culture with a glass door employees Choice Award recognizing the 100 best places to work in 2020, an award that rely solely on input of current and former employees.

And that fully a we believe that focusing on the employee experience in building a strong culture that fosters innovative innovation result, excellent customer experience.

As you May know from our press release, an 8-K filed today clashed houser will retire as chief strategist route folio effective may Onest and continue on a fully as board of directors.

Plows and John Walker co founded Appfolio in 2006 and have been influential leaders and strategists within Appfolio.

Plus it's been a driving force in the development of our Companys vision strategy and culture is contributions are deeply embedded throughout the portfolio.

As he didn't as active work years I expect class will work closely with our business to transition into retirement and continue as a patch passionate and active member about polio is board.

We are excited for close to begin this next chapter in Thislife and thank him for his vision and leadership about polio.

In summary, we remain focused on areas and they have a long term sustainable growth for our business.

We expect to accomplish this by delivering innovative technology solutions that create modern unexceptional experiences for our customers all fueled by an engaged unhappy team.

Thank you for joining us in that concludes our call for today.

Thank you for participating in todays at Folio fourth quarter 2019 financial results Conference call. This call will be available for replay beginning at 730 PM Eastern today to 11 59 P.M. Eastern on March five 2020, the conference I'd for replay is five eight.

Nine nine Fivenine again conference I'd number for replay is 5869959 the member to dial for replay is one 805 80 58367. This concludes today's call you may now disconnect.

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Thank you for calling me out the name of the conference you're calling to join please.

I would like to Jim for full year earnings call.

I'm not seeing anything for them what time is called supposed to start.

All looks like it already ended the call.

Was 35 minutes ago, Inc.

Okay, Yeah, because I'm not seeing anything from them right now.

Yeah, it's in my mistake, yes.

Police ended 35 minutes ago. Thank you very much I'm sorry, once again.

Now that I have a good day.

You too.