Q3 2021 Appfolio Inc Earnings Call

Good afternoon. Thank you for standing by and welcome to our failure incorporated third 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. Please press Star Wars day right.

Now I'd like to hand, the conference I bet, you Erica Abrams.

Thank you Emily good afternoon, everyone and thank you for joining US today as we report absolutely as third quarter of 2021 financial results with me on the call today are Jason Randall, absolutely as president and CEO and states Yangon.

Affiliates see Oh this call is simultaneously being webcast on the Investor Relations section of our website at Www Dot absolutely Oh, Inc. Dot com.

Before we get started I would like to remind everyone of the absolutely it's 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.

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

<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 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 <unk> third quarter of fiscal year 2021 financial results.

Our third quarter results reflect our continued focus on delivering foundational software and exceptional experiences to our growing base of customers and the real estate industry.

Within our portfolio a property manager.

Giving our customers the innovative solutions they need to solve their biggest challenges.

This excludes this includes mobile first experience is designed to enable seamless business operations.

More flexible leasing solutions to accommodate new hybrid modes of operating.

<unk> automation that can help drive down the time and cost or recurring business operations for more than 6 million units now on our platform.

During the third quarter, we partnered with a national apartment Association to better understand the top challenges facing property managers today.

As part of our ongoing commitment to help customers stay at the forefront of the real estate industry's rapid transformation.

Many property managers are encountering the same staffing shortages affecting the broader U S economy. In fact, the research revealed that HR staffing and recruitment is by far the most urgent challenge for property managers, followed by operational efficiencies and maximizing revenue and profits.

Recruiting and retention challenges make it even more critical for our customers to automate and standardize their processes and systems.

Enabling them to operate effectively and efficiently meet staffing constraints.

<unk> cloud based solution like Oh your property manager addresses many of these challenges and is a competitive differentiator, giving.

Giving our customers employee space and time to execute valuable business activity, but.

Automating some of the most critical aspects of property management across the county financial reporting maintenance management and leasing.

According to the Chief operating officer, Redwood property investors, Ohio property manager does at all.

More empowered and Naples.

And our company is undoubtedly a better place to work now technology.

Technology is no longer an excuse it's an advantage for us it's even helped us attract new challenge.

Our customers are in the midst of budget and planning season, a time when they are planning for future growth and optimizing expenses and one of our customers' biggest optimization opportunities in the area of maintenance.

Is that in this past quarter, we introduced Apollo a smart maintenance a modernized version of our maintenance contact center.

This maintenance management and vendor dispatch service is designed to meet the high volume needs of our customers with larger portfolios.

Apply a smart maintenance provides customers with greater speed and accuracy and more consistency for operations.

With multichannel flexibility and smart operations, such as AI powered text and predictive prioritization.

So quickly dispatched vendors and reduced resident hold times.

In the third quarter, we also introduced loan tracking and accounting automation, enabling customers to begin tracking existing loans and mortgages, but didn't have all the property managers to further streamline our accounting processes.

Thereby saving time, and making it easier for property owners, who are SaaS and optimize their debt financing strategy.

Additionally, we're making the leasing and renewals flow more convenient and flexible by offering our customers the ability to use any leasing forms of their choosing but the full benefits of our digitized workflow.

And we are continuing to invest in mobile optimized experiences and I'll provide offline accessibility for property inspection workflows.

For our customers with more complex portfolios using Apple <unk> property manager plus we've continued to invest in the areas of corporate accounting.

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Using workflows communications automation and technology integrations to deliver more predictable operations and better resident experiences.

According to the president of Tcs property management, our value to our clients is greatly enhanced by our folio property manager plus allowing us to offer more services to our clients and their tenants over.

Over the past six years, we've achieved growth levels that have surpassed our wildest expectations.

Turning to investment management, we expanded capabilities in the third quarter to allow real estate investment management customers deliver a moderate investor experience.

Also gathering insights and maintaining the visibility they need to more effectively manage and grow their business.

It includes streamlining and better communication with contact activity history enhancing.

Enhancing our investor portal mobile experience, enabling vital 60 fundraising support.

We believe being trusted advisors to our customers is key to our success and we continue to cultivate these partnerships through education training and events the.

The third quarter marked the ninth year of our annual customer conference, which continues to grow and evolve in lockstep with our customers.

<unk> conference was available at no charge to all customers, providing a digital space for product showcases training and customer research.

We highlighted new capabilities across marketing and leasing maintenance and operations accounting and budgeting and customer service.

We use opportunities like customer conference to maintain strong customer connections and gather feedback and insights to drive product and service innovation.

Finally, since our last update we've continued to garner industry recognition for our company culture and overall success being recognized by Fortune twice.

First is the best place best workplace for women, marking our fourth consecutive appearance and second is one of the 100 fastest growing companies for the second consecutive year.

This type of recognition is especially meaningful because of our long held belief that a great workplace engaged employees are foundations delivering exceptional customer experiences.

As we head into the end of 2021 and beyond I'm grateful for the dedication of our employees to serving the evolving needs of our customers and their ecosystems, leveraging modern experiences and rapid innovation to help them be efficient in new ways and in turn contributing to long term sustainable growth, perhaps for you guys.

Since our last update baked into them became chief financial officer about folio.

Variance will be instrumental in helping us execute on our vision to transform the real estate industry.

I'm pleased to welcome fish into my leadership team and believe her experience commitment to operational excellence and focus on customer success strongly overlap with our culture and our focus on continued growth.

Thank you, Jeff Holy as Finance organization organization for their support and commitment to the high performance during this transition.

I will now turn the call over to ACM for more detail on <unk> financial results.

Thank you Jason effects, it's exciting to me.

Part of it's all in the face of girls to join a company with engaged customers a great culture and a commitment to innovation I am looking forward to helping the team execute on our vision to revolutionize the real estate industry.

For the quarter, we reported total revenue of $95.8 million and a GAAP net loss of $141000 GAAP net loss includes fall by $1 million in stock based compensation expense. Our Form 10-Q was filed earlier today and includes more details on our results on a.

Call today to enhance comparability I will discuss the results of our continuing real estate revenues, excluding the impact of our former my case business. We should we divested in the second quarter of 'twenty 'twenty.

To that end revenue from Q3, 2021 represents a year over year increase of 28% of our revenue from our continuing business in the same quarter last year of $74 $6 million. The increase is mainly due to growth in the number of property management customers, we serve which Karl.

Those two an increase in use of our core subscription solutions and I'll use H base value plus services.

I'm very bus services are designed to enhance automate and streamline processes and workflows that are essential to our customers' businesses.

At the end of the third quarter, we had approximately $16 8000 real estate property management customers managing over 6 million units in their portfolios compared to approximately $15 4000 real estate property management customers and over 5 million units a year ago.

Core solutions revenue derived from subscription to customers was $26 $9 million in Q3, an increase of 23% over yeah value plus services revenue was $65 $6 million a year over year increase of 34%.

Q3 revenue from our value plus services benefited from increased demand for electronic payment services as residence property managers and owners and customers transacted mob business online than they did a year ago. Furthermore, usage of our tenant screening and insurance.

Services offerings increase year over year as we saw increases in units under management.

As a reminder.

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

Turning now to spending a year over year increase in expenses is primarily related to additional head count neither too few outgrowth additional marketing spend and then increase in third party cost off revenues in mind missed the increase in the relevant Filippo services revenue.

These expense increases in the third quarter were offset by a.

One $9 million insurance recovery related to a prior you previously disclosed settlement with the Federal Trade Commission.

With a solid quarter behind us we are raising our full year outlook. We are raising guidance for total revenue to 355 million to $357 million from 350 million to $355 million. The midpoint of the range represents a full year yoga yoga.

Loss from continuing real estate operations of 25%, we continue to expect our weighted average diluted share count for the yet 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 joining today's call you may now disconnect. Your lines. Please be advised the replay will be made available shortly.

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