Q1 2021 Appfolio Inc Earnings Call

Good day, and thank you free standing by and welcome to the AB fold you, Inc. First quarter 2021 financial results Conference call.

At this time all participants are in a listen only email a day.

Be advised that today's conference is being recorded.

And if you require any further assistance just press star zero and.

I'll now hand, it over to the East per center Ms. Erica Abrams you may begin your conference.

Thank you Maria good afternoon, ladies and gentlemen, and thank you for joining US today as we report absolutely and its first quarter of 2000, and 'twenty, one and financial results.

With me on the call today are Jason Randall, absolutely and as President and CEO, and EDA, Kane and probably as Chief Financial Officer.

This call is simultaneously being webcast on the Investor Relations section of our website at Www Dot at Folio, Inc. Dot com before.

Before we get started I would like to remind everyone of absolutely and the safe Harbor policy.

And that's made during this conference call and webcast contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.

Any statement that refers to expectations projections or other characterizations of future events, including financial projections or future market conditions is a forward looking statement.

And folios actual future results could differ materially from those expressed in such forward looking statements for any reason, including those listed in our SEC filings and.

<unk> assumes no obligation to update any such forward looking statements, except as required by law.

Please see our filings with the SEC, including our form 10-Q, which was filed earlier today for greater detail about risks and uncertainties with that I will turn the call over to either Kane CFO yeah.

Please go ahead.

Thank you Erica and welcome to everyone joining us.

First quarter of fiscal year 2021 financial results.

For the quarter, we reported total revenue from $78 $9 million.

GAAP net income was $479000 or one cent per diluted share.

This includes an income tax benefit of $5 $5 million.

Also included in GAAP net income is $2.8 million in non cash charges related to stock based compensation.

And as Eric mentioned, our form 10-Q was filed today and includes more details on our results.

On the call today to enhance clarity and comparability I will discuss the results of our continuing real estate business, excluding the impact of the mine operations for comparable periods historically.

To that and revenue from our continuing business for the first quarter of 2021 was $78 $9 million, which represents an increase of 22% over revenue of $64 $9 million over the same period and the prior year.

You know, we provide innovative software services and data analytics to customers and the real estate industry.

Our solutions are used by property managers, and we referred to as customers and our public filings and also by numerous other constituencies and the property management business ecosystem.

And these other constituencies include property owners rental prospects, and then and service providers and we collectively refer to as users and our public filings.

We generate revenue from our customers and from these users and our software and services aimed to serve the small business ecosystem.

Core solutions revenue derived from subscriptions to our customers and our continuing business and the first quarter of fiscal 2020, one was $24 $2 million and increase of 18% over $25 million for the year ago period.

Plus services revenue from our continuing business was $51 $5 million in the first quarter of 2020, one and increase of 26% over $49 million for the same year ago period.

The increase in revenue year over year was primarily attributed to a 10% growth and the average number of property manager customers using our software and.

And a 16% growth and the average number of units under management.

During the first quarter of 2021 we continued to experience increased demand for our electronic payment services as residents property managers and owners and customers transacted more business online.

We also experienced growth and several other value plus service offerings, primarily those related to the rental process.

A significant majority of our value plus services revenue comes directly and indirectly from the use of our electronic payment services tenant screening services and the insurance services, we make available to customers and other constituencies in the property management ecosystem.

At March 31, 2021, we had over 16001 hundred real estate property management customers with 562 million units and their portfolio.

We continue to focus on growing our customer and user and user base and expanding their adoption and utilization of value plus services, which are designed to enhance automate and streamline processes and workflows that are essential to our customers' businesses.

Yeah.

Turning now to spending.

Total costs and operating expenses and the first quarter of 2021 were $84 $3 million and included a 1.4 million dollar accrual related to long term executive cash incentive plans for certain executives.

Our SEC filings or additional information regarding the long term cash executive cash incentive plans and related accrual.

Included.

Including this accrual we saw an overall increase and cost and operating expenses from our continuing business of 34% in the first quarter of 2021.

Compared to the prior year.

The 34% increase and costs year over year from $62 8 million to $84 $3 million from our continuing business are mainly attributable to the 26% growth and our value plus services revenue and the third party cost incurred to support them as well as growth and personnel costs.

And with head count, increasing 18% year over year.

As we mentioned and our last earnings call. We hope to begin slowly transitioning back to in person works during the remainder of fiscal year 2020. One. However employees currently have the option to work remotely for at least the rest of the year and our return to work plan and contingent on public health guidance.

Last month, we signed a new lease agreement for office space and San Diego.

We are and the early stages of preparing that space for our employees and expect that office space to come online and fiscal year 2020 two.

Moving to the balance sheet at March 31, 2021, our principle sources of liquidity were cash cash equivalents and investment securities, which had an aggregate balance of almost $160 million.

During the quarter, we used $4 $4 million for operating activities. In addition, we used $6 $1 million for capitalized software development and connection with continued investment and our technology and service offering and.

And $900000 for capital expenditures.

Furthermore, we spent $4 million related to tax withholdings for RF, you net share settlement.

Before I move to the outlook for the remainder of 2020, one and I would like to address my upcoming departure.

And from the press release, and recently informed Jason and the board of directors and I will be leaving the company.

The personal decision was difficult for me given how positive I feel about our folio and I'm grateful for the opportunity and success, we have achieved over the past six plus years.

And I'm committed to supporting Jason The board and the rest of the up folio team through a successful transition.

With the first quarter behind us and a full year of COVID-19 and the rearview mirror, we are sharing guidance for our full fiscal year 2021.

We expect total revenue from our continuing business for fiscal 'twenty, and 'twenty, one to be and the range of $348 million to $355 million.

The midpoint of the range implies year over year growth of 23.5% from our continuing business and 2021.

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

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

Thank you Ina and thanks to everyone for joining us today.

I know the board and everyone at folio, thanks, either for her contributions to our company over the past six plus years.

Through her leadership, we have built a strong finance and corporate development team and will continue its financial discipline and growth mindset together with a new CFO.

We have initiated a search for her successor and eat.

And I will work together on a smooth transition.

I will Miss working with you and wish you the best I know you'll be cheering for a polio from the sidelines moving forward.

Our first quarter results reflect our continued focus on providing great software and service to our growing customer base.

It's our goal to deliver transformational technology and exceptional customer experiences, while nurturing a strong team and culture.

And we believe these are key pillars on our path to achieve long term sustainable growth.

Our customers continue to rely on our cloud based software to power their businesses, especially as they adapt to the evolving needs and expectations of their own customers and business ecosystems.

And a fully a software and solutions are designed to serve as our customer system of record system of engagement and system of intelligence, helping them unlock more value and their business and keeping and keep up with the pace of digital transformation across the real estate industry.

And the first quarter, we added new functionality for our portfolio of property manager customers intended to improve virtual experiences and increase efficiency and <unk>.

To prepare for the demands of the upcoming residential leasing season.

Product updates focused on helping our customers retaining high quality residents increase the ease and automation of turning units and.

Drive leasing demand.

Recognizing that the number of days it takes to turn a unit and prepare it for new show inches and opportunity to improve operational efficiency for our customers.

We have digitized what was once a manual process with the unit turned board.

This capability is currently available on and limited basis for a subset of customers and provides a centralized way to monitor the work related to preparing units for new leases.

Joe Rothstein CEO of North Oak property management, which manages 800 units commented the unit turn board has been another key component of why we are happy without polio as our property management software.

And their continued innovation and willingness to listen to what innovation is needed by its users has been important to our ongoing partnership.

Our customers continue to recognize the value of and intuitive solution to drive increased efficiency and growth and their business.

According to Brian cycle General manager and Ws properties, which manages.

1145 units have polio and streamlined our processes, we have gone almost paperless and started with online applications to online payments and then online more quarters and now fully digital lease signings.

We continue to deliver value to our larger <unk> property manager plus customers, who are managing complex portfolios as well as owner and vendor relationships across multiple regions.

This past year has highlighted that remote work and dispersed teams require our customers to have even stronger oversight of their business operations and managing their businesses through multiple systems and tools can lead to gaps and visibility communications and operational efficiency.

And the first quarter, we partnered with net vendor streamline vendor compliance tracking for APM, plus customers, thereby minimizing risk and providing them with a single system of record.

Nicholas merchant VP of property management for Atlas real estate with 4300 units under management.

Commented on this plus experience.

Before using our folio, we had six or so systems doing about half of what Apple can do we keep finding new ways to incorporate <unk> into our business and upped, our reporting and workflow game substantially by upgrading to Applebee's plus.

Turning to community associations, we launched our purpose built association calendar, bringing a traditionally fragmented and offline process of managing board meeting staff updates and association events into one centrally managed location or association managers to drive team efficiency and improve communications.

Beyond property management, and the first quarter, we added new capabilities to apply and investment management, our real estate and investment management customers chose our software solution to provide a more modern investor and experience and improved deal flow and disability.

Customers like Tony Dennis President and CEO of all Pro capital L. L. C have experienced growth thanks to streamlining their business operations.

According to Tony.

Hollywood investment management allowed us to scale much larger with less staff and make it much more convenient for the investors.

And the quarter, we gained industry recognition for our technology customer partnership and business success.

We ranked number five on Forbes' list of America's Best and that's like sized companies for 2020 one.

And from a business intelligent group I believe it was a two time winner receiving awards and the areas of customer service and innovation for our <unk> AI leasing assistant Lisa.

This recognition is a testament to our team's work ethic and agility and customer focus throughout the past year.

Looking ahead, we remain focused on generating long term sustainable growth through our technology and rapid innovation, our commitment to providing exceptional service to our customers and our strong team and culture.

We are dedicated to delivering solutions and services that solve the top challenges facing our customers now and into the future.

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

And this concludes today's conference call if you'd like to your day replay of the call you may do so by dialing 800585867 or four to 166 to $1 46, four and the international number is 4166 to one.

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