Q2 2021 Appfolio Inc Earnings Call

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Good afternoon. Thank you for standing by and welcome to day at Folio incorporated second quarter 2021 financial results Conference call.

Please be advised today's conference is being recorded and replay information will be given at the end of the broadcast if you require operator assistance press Star Zero I would now like to hand, the conference over to Erica Abrams.

Thank you Holly good afternoon, ladies and gentlemen, thank you for joining US today as we report absolutely of the second quarter of 2021 financial results with me on the call today is Jason Rando.

He is president and CEO of.

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

Before we get started I would like to remind everyone of absolutely of the Safe Harbor policy comments made during this conference call and webcast contain 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 absolutely as actual future results could differ materially from those expressed in such forward looking statements for any reason, including those listed in our.

SEC filings at Folio of assumes no obligation to update any such forward looking statements, except as required by law.

Please see of our filings with the SEC, including our form 10-Q, which was filed earlier today for greater detail about risks and uncertainty with that I will turn the call over to Jason Randall absolutely as President and CEO. Jason. Please go ahead.

Thank you Erica and welcome to everyone joining us for folio of second quarter of fiscal year 2021financial results.

And so as those of you who follow US closely know either keen of former Chief Financial Officer day part of that Folio in early June 2021 and the finance team as President reporting to me on an interim basis.

With our search for a new Chief Financial Officer currently underway I will be discussing the details of both of our financial and strategic progress in the second quarter.

For the quarter, we reported total revenue of $89 million and GAAP net income of $2 million or 6 cents per diluted share GAAP.

GAAP net income includes an income tax benefit of $3 million as well as $3.2 million of noncash charges related to stock based compensation.

Our form 10-Q was filed today and includes more details on our results.

On the call today enhanced clarity and comparability I will discuss the results of our continuing real estate business for comparable periods historically, excluding the impact of our former my case business, which we divested in the third quarter of 2020.

To that end revenue from that fully is continuing business for the second quarter of 2021 was $89 million, which represents an increase of 22% over revenue of $72.8 million reported in the same period in 2020.

The increase in revenue year over year is mainly attributable to growth in a number of property management customers. We serve that's.

This correlates to an increase in use of our core subscription solutions and our usage based value plus services.

Designed to enhance automate and streamline processes and workflows that are of central to our customers' businesses.

At the end of the second quarter, we had over 16500 real estate property management customers.

It represents an increase of 10% reported in the same period 1 year ago.

Those customers had 5.82 million units under management and our property management ecosystem at quarter end, which represents growth of 18% from 4.94 million units reported in the same period in 2020.

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Core solutions revenue derived from subscriptions to customers in our continuing real estate business in the second quarter was $25.4 million, an increase of 20% over $21.2 million from the same period, 1 year ago.

Value plus services revenue from our continuing business was $60.4 million in the second quarter, an increase of 25% over $48.2 million for Q2.2020.

Revenue from that fully as value plus services benefited from increased demand for our electronic payment services from the second quarter of 2021 is primarily resident's property managers owners and customers transacted more business online than they did a year ago.

Furthermore, usage of our tenant screening and insurance services increased year over year consistent with the increase in units under management.

As a reminder, while we also experienced growth in several other value plus service offerings, especially those primarily related to the rental process of <unk>.

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

Turning now to spending total costs and operating expenses from the second quarter were $87.8 million, representing a year over year increase of 30% relative to $67.5 million from our continuing business in the prior year.

Our year over year increase in cost is primarily related to 3 key expense areas.

First we saw an increase in personnel related costs stemming primarily from a 22% year over year expansion in head count that we believe will enable future growth and positively impact long term shareholder value.

Second we saw an increase in third party of transactional costs that supported a 25% year over year increase in our value plus service.

Services revenue.

Third we saw an increase in expenses related to online advertising and virtual marketing events that were designed to support key investments in the business. This year M beyond.

Moving to the balance sheet at June 32021 of our principal source of liquidity were cash cash equivalents and investment securities, which had an aggregate balance of $163.1 million.

During the quarter, we generated $15.1 million for operating activities. In addition, we used $5.7 million for capitalized software development in connection with ongoing investment in our technology and service offerings as well as $1.9 million for capital expenditures. We also spent $4.9 million.

In connection with tax withholdings for RSV net share settlements.

Our Q2 financial performance reflects that poly is continued focus on delivering value to new and existing customers in the form of foundational software and services designed to address key challenges and opportunities both now and into the future.

Our customers rely on our fully unlock value and efficiency in their businesses.

Leveraging of digital transformation is a competitive advantage in the real estate industry.

Within that fully of property manager, our solutions automate and streamline core aspects of property management accounting leasing maintenance and communications.

In the second quarter, we introduced key functionality in our core portfolio of property manager solutions to improve customer success in leasing and renewals.

Rental history verification of new lease renewal proration of are designed to help customers increase revenue retention by minimizing manual tasks throughout the rental application flow and bringing their lease renewal process online into a single workflow Rob.

Rob Korea of property manager at century, 21 aggregate company commented now that we have of process. It can be filled out quickly and electronically. We're seeing same day, sometimes same hour of responses, which makes our turnover so much quicker.

We continue to serve large larger portfolios without folio of property manager plus in the second quarter, recognizing the evolving needs of these distributed portfolios have or deeper business insights robust automation and more advanced customer experiences.

Smart home technology and hardware see more adoption in the multifamily housing space.

We're laying the foundation for plus customers to manage their properties remotely through technology integrations with leading hardware vendors like smart rent.

Our software is designed to deliver efficiency gains for automating workflows to free staff to focus on growth and customer relationships.

According to Mark TUI director of operations for locations of large portfolio of customer.

How fully of property manager plus is an integral part of our operation the customization of the reporting functions online application features bill pay and excellent customer service support of truly helped our business reach its maximum potential.

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For our customers managing community Association portfolios, we've expanded capabilities of their designed to help them serve homeowners and board members by digitizing automating certain aspects of their business.

Customers like Crystal Smith director of Finance for Elite housing management of realizing added value recently, telling us since using it fully of 3 and a half years ago. Our business has grown from 600 units to nearly 10000 units.

So of delivers top of the market customer service and new ideas that help us do more with ease every day.

As part of that polio is ongoing mission to be of trusted long term partner of the customers. We hosted the fully O virtual way of summit in May, bringing together technology education and service.

This conference was available at no charge to both existing and potential customers, creating a digital space for industry leaders to discuss the latest trends technologies and innovation to the forefront of real estate.

We're proud of that fully of property manager was selected in Q2 as the best AI based solutions for real estate from the annual AI Breakthrough Awards.

By applying more automation and standardization through technology, we strive to create more freedom for our customers to focus on the strategic aspects of their business and make space for them to foster deeper connections with their customers.

Folio of property manager customer Karina Lions corporate Vice President of concept property management had this to say.

Lisa Folio AI leasing assistant has changed the game for us.

We were simply unable to keep up before Apple, it's been fantastic and absolutely allowed us to run faster.

We started the gradual reopening of that fully was office helps in Santa Barbara Los Angeles, San Diego and Dallas, While we are mindful of CDC state and local guidelines with respect to workplace safety. We're also encouraged by the sense of community and innovation is being felt across our campuses as.

As we look toward returning to the office more fully over time, we're excited to utilize of hybrid working model.

Provides flexibility and work location, coupled with vibrant offices designed for collaboration.

With that said, we continue to monitor our business team and culture carefully as we experienced some of the same challenges of other companies are facing including a competitive labor market and COVID-19 related impacts.

I'd like to express my sincere appreciation to our team for the resilience and dedication they've shown in leading our business. During this period of.

A testament to our customer centric culture. Just this month, we received the news that I folio has been re certified as a great place to work, marking our fifth consecutive year congratulations to all our affiliates.

Looking ahead, we remain focused on generating long term sustainable growth of our technology and pace of innovation and on providing exceptional experiences to our growing customer base that relies on a photo of cloud based software to power their businesses of.

Especially as they adapt to the evolving needs and expectations of their own customers and business ecosystem now and into the future.

Given our performance to date, we now expect total revenue from our continuing business for fiscal year 2021 to be in the range of $350 million to $355 million.

The midpoint of the range of plays year over year of growth of 23, 8% in 2020.1.

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

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

Thank you for participating in todays M. Folio incorporated second quarter 2021 financial results Conference call. This call will be available for replay beginning at 730 P. M. Eastern time today through midnight on August 12.2021.

The conference I'd number for the replay is 2995 to 9.3 again the conference I'd number for the replay is 2995 to 9.3.

The number to dial replay is 855859056 or 4045373406 once again, we'd like to thank you for participating on today's conference call. You may now disconnect.

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