Q3 2024 AppFolio Inc Earnings Call
<unk> property manager Max recently, Alex ran a competition for the staff member achieving the highest number of lease renewals.
At the time Atlas was participating in the robotics beta program testing <unk> renewal flow at one of its property portfolios. The property manager overseeing this particular portfolio outperformed their colleagues by a significant margin claiming victory in the competition impressed by these results Atlas.
Quickly adopted roadmaps flows across all its properties the outcome has been remarkable and 8% overnight increase in renewal rates.
Just imagine an 8% improvement in your business overnight.
The futures here and we can't we can't wait to get it into the hands of our customers to help them be more productive give their teams and customers an exceptional experience and fuels our performance of their business.
Second component of our strategy is to unlock upmarket customers, we are winning larger customers by extending the value of our platform to scale with their complex operations and the accounting domain, where beta launching a new budget creation tool for plus in Max customers, where users can input and adjust their assumptions for future leasing.
Metrics and watch the system predict the resulting revenue and real time. Additionally, our bill approvals process has a new interface that allows users to design custom approval workflows that run automatically based on conditions, they establish improving the pace and accuracy of their monthly payable cycles.
Another way, we support mixed portfolio of customers, both large and small is by expanding our coverage of property types. We continue to innovate in the area of affordable housing exemplified by our new weightless capabilities that allow customers managing HUD units to oversee critical weightless requirements directly.
And at Folio property manager.
Pat Shoemaker Executive Vice President of our craft management with 5300 units on at Folio property manager plus recently told us quote.
Photos HUD waitlist feature enhances our ability to efficiently manage applicant queues, ensuring compliance and transparency throughout the rental process. This feature will make it easier to manage our HUD properties, but also improve the overall experience for both our team and prospective residents aligning perfectly with our commitment to providing.
Quality management services and quote.
Speaker Change: The third component of our strategy is to elevate our customer by driving their adoption and success on our platform across the industry cases of rental fraud are rising and consequently, so or the time and resources. It takes to qualify prospects for units to help our property management customers combat this with less.
Speaker Change: Effort and better accuracy, we're launching new anti fraud solutions like document verification, which detects paste-up tampering improves authenticity and a new idea verification solution that verifies and applicants identity and real time combined with our existing income verification offering these services gift.
Speaker Change: Customers access to a complete integrated anti fraud screening solution. It's one way we are delivering on our company value to build trust every day.
Speaker Change: The final strategic pillar I would like to cover today is great people and culture thoughtfully evolving our organization as we scale continues to enable our strategy since our last call. We have on boarded Marci Campbell as our new Chief revenue officer, leading our sales and client services organizations, where she will focus on optimizing the customer journey and.
Speaker Change: Strengthening our go to market capabilities her leadership will be instrumental and inspiring new customers to choose at folio and elevating existing customers to grow with us.
Speaker Change: Through our process our progress in the strategic areas I've highlighted a fully its future has never been brighter speaking of the future I look forward to seeing many of you at our future conference in San Diego next week, where our industry, leading innovation and customer impacts will be on full display.
Speaker Change: As you may have seen in our 8-K facing goon, our CFO is leaving the company Tim Eaton, our chief of staff will assume the role of interim CFO, while we conduct an extensive and inclusive search for her successor.
Speaker Change: As I hand, it over to face and to share more about our fully as third quarter financial results. I also want to take an opportunity to thank her for her leadership over the past three years. She has helped foster an efficiency driven mindset across the organization and brought deep finance expertise to streamline and optimize our processes on behalf.
Speaker Change: For the entire absolute team we wish her the best in her next chapter taken away basically N. Thank.
Speaker Change: Thank you Shane if I start I want to take a moment to thank you and the rest of the team for these last three years. It has truly been a rewarding experience to help at all you have to kind of a more healthy.
Speaker Change: Business I have total confidence that that's all it is headed in the right direction and there'll be cheering from the sidelines as a shareholder now.
Speaker Change: Now onto our results we are pleased with our execution in third quarter growth in revenue and profitability.
Speaker Change: Our industry, leading innovation and our exceptional customer focused at driving our third quarter financial results in the third quarter, we delivered revenue of $6 million growing 24% year over year.
Speaker Change: non-GAAP operating margin expanded to 28, 7% from 16, 1% last year, and we generated free cash flow margin of 27, 5% compared to 23% last year car solutions revenue was $46 million in Q3.
Speaker Change: 15 by 8% year over year increase driven by new customers and additional on total units on platform. In addition, we are winning larger new customers and we continue to see growth in adoption of <unk> property manager plus at Max.
Speaker Change: The end of this quarter, we manage approximately $8 5 million units from 20483 customers.
Speaker Change: Compared to 758 million units from 19418 customers and yet.
Speaker Change: This represents a 5% increase in customers and a 9% increase in ending units as he continues to emphasize residential portfolios.
Speaker Change: Third quarter revenue from value added services grew 28% year over year to $158 million. The growth primarily resulted from higher utilization of our online payments platform and our decision to start leaving a E check fees in August of 2023.
Speaker Change: Partially offset by reduced fees associated with certain card based payments.
Speaker Change: Additionally, carefully risk mitigation and screening services grew in line with seasonal expectations.
Speaker Change: Turning to spending the exited the quarter with 1549 employees up slightly from there probably acquire this reflects our continued investment in innovation, including strategic initiatives like real Max the resident experience and expanding into new.
Speaker Change: Your property type knees.
These investments are aimed at delivering even more value to our customers cost of revenue exclusive of depreciation and amortization was 34% of revenue compared to 36% last year.
Speaker Change: The decrease was primarily due to E taxis and internal operational improvement on a sequential basis cost were down slightly from 35% of revenue due to the seasonality of certain value added services and product mix.
Speaker Change: Demand for our screening services and risk mitigation product is typically seasonally higher in second and third quarters and slower in the fourth quarter as leasing activity declines during the winter months.
Speaker Change: As a percentage of revenue combined sales and marketing R&D and G&A felt that 35% from 44% last year due to growth in revenue and our collective focus on operational efficiency.
Speaker Change: Sales and marketing expenses as a percentage of revenue decreased from 15% in the third quarter of last year to 11%. This quarter Oh conference related expenses shifting from the third quarter to the fourth quarter of this year, our R&D expenses as a percentage of revenue decreased from 20% in the third.
Speaker Change: Quite up last year to 16% this quarter, we achieved this through.
Operational efficiencies and disciplined allocation of investments.
Speaker Change: G&A expenses as a percentage of revenue decreased from 10% in the third quarter of last year to 8% this quarter.
Speaker Change: Overall non-GAAP operating margin grew to 28, 7% compared to 16, 1% last year.
Speaker Change: Free cash flow margin. This quarter was 27, 1% compared to 23% in the third quarter of last year, our strong cash and investment position of 331 million at the end of the quarter is a testament to our disciplined approach to execution and investment.
Speaker Change: The acquisition of lazy fault.
Speaker Change: 80 million in cash exemplifies how creating investment flexibility and enabled us to deliver on our strategy revenue fall leafy zebra will be immaterial in the fourth quarter, and we anticipate adding approximately 65 employees to our operations.
Speaker Change: We are raising our projected full year revenue guidance to $786 million to $719 million, which implies an annual growth rate of 27% based on the mid range midpoint of their age.
Speaker Change: Our updated guidance reflects our expectations for continued customer upgrades to premium product tiers and adoption of our value added services.
Speaker Change: Our guidance also factors in a modest increase in card usage and reduce transaction fees associated with card based payments.
Speaker Change: Cost of revenue exclusive of depreciation and amortization is expected to decrease slightly as a percentage of revenue compared to the prior year due to the E check fees product mix and operational efficiencies.
Speaker Change: We expect the fourth quarter of 'twenty 'twenty four to have a higher percentage of revenue than the third quarter, primarily due to the seasonal nature of some of our value added services.
Speaker Change: We are raising our guidance for the full year non-GAAP operating margin to 24 by five to 20, 555%.
Speaker Change: Our free cash flow margin guidance remains 22% to 24%. This reflects continued growth in units and our pool, partially offset by reduced card based fees and increasing head count and enabling us to achieve our strategic objectives, all while we continue focusing on operational efficiency.
Speaker Change: Fees on a sequential basis, we expect a decline in operation operating margin in the fourth quarter as our revenue resumed its typical seasonal pattern the timing in England investment of a future conference.
Speaker Change: And the partial quarter impact of operating expenses associated with the leave easy acquisition.
Speaker Change: The weighted average shares outstanding are expected to be approximately three 7 million shares for the full year. In summary, we are pleased with our revenue growth profitability and strong financial discipline, which has provided us with the flexibility to continue strategic acquisitions that benefit all customers.
Speaker Change: You all for joining us today operator this concludes today's call.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
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