Q4 2024 AppFolio Inc Earnings Call
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non-GAAP operating margin during the fourth quarter was 20% and for the full year, we more than doubled operating margin from 12% to 25%. These financial results along with our continued growth in customers units and are to strengthen our position as the real estate innovation leader and allow us to lock.
EBIT more value for our customers.
That leadership was evidenced adapt folios inaugural future conference in San Diego, where we brought together 2200 customers prospects partners and affiliates plus industry leaders from a N M. H C normal and more we showed how we're building the platform where the real estate industry comes to do business.
Through our investments in industry, leading innovation and how we're delivering real meaningful customer impact across investors property managers residents and vendors, we heard from one attendee Dom beverage the principle of multifamily industry resource 'twenty 'twenty quote. This show is now on par for.
Tenants in content with the largest user conferences in our industry more impressively future presented the broadest and most cohesive vision I have seen of how AI may change property management and quote.
I, let future with gratitude for our customers and a sense of pride in our team and how we're showing up as a voice of trust and leadership for our industry. One of the exciting announcements we made in the days leading up to future was our acquisition of Livezey to accelerate the potential we see in the resident industry segment, we talked last.
<unk> about how folio space will enable our folios property management customers to create a unified and elevated experience for the millions of residents residents. They served from application through renewal.
By integrating levy and operating it services as part of Folio space resident Onboarding will reduce the stress of moving deliver increased convenience and safe renter's time and money.
The integration of our teams and technology is progressing well and I'm confident that the combination will drive significant value for residents and property managers through our platform.
The outcomes, we've achieved and the momentum we built demonstrate that our strategy is working I want to share all the pillars of this strategy are powering success for both our customers and our business. Our first strategic pillar is differentiate to win leveraging advanced AI technologies is creating better experiences and performance for our.
<unk> the generative AI powered capabilities of rollbacks automate routine tasks and key workflows streamline communications and enable property managers to transform their operational performance.
Since launching rollbacks to every customer following future over 1 million actions have been completed and rolled ex assistant and users are rapidly automating their processes and roll next flows which is available to customers on our app fully <unk> property manager plus and Max plans our legacy work.
Slow capability took four years to reach the adoption level Roadmaps flows has reached in only three months.
We're accelerating the pace of AI innovation across our customers' day to day work flows and accounting leasing and maintenance at future. We showcased two updates to our AI powered smart maintenance offering.
First is the smart maintenance scheduling and enough calendar that allows teams to schedule and assign work orders in a single step.
Second is smart maintenance billing, allowing users to set strategic billing rules and automate fill creation.
Through our recent integration about folio stock partner Lula, we can now connect smart maintenance customers with the Lula vendor network a community of qualified local vendors. This integration enables our customers to automatically dispatch a lula vendor to ensure work gets done even after hours.
Jesse: According to Jesse what's principal brokered odor of Aspire Realty group with 208 units on a folio quote smart maintenance assigns the work order and notifies the vendor via text and email the vendor can accept it all before I wake up it's been a lifesaver and quote.
Jesse: Our second strategic pillar it deliver value efficiently customers of all sizes are switching to and growing their businesses without folio as their trusted partner in May we won our largest customer to date in September we won our largest customer to date and again in November we won our largest.
Jesse: This customer to date.
Jesse: More customers are choosing our plus and Max plans for their flexibility and extensibility to power their growth in fact, one in five of our customer units is now on one of these premium plans.
Jesse: One of our many new customers in 'twenty 'twenty four is the breeding company in Virginia Beach, Virginia, with 9800, plus units spanning multifamily and commercial.
Jesse: <unk> evaluated and ultimately chose up fully at for our shared commitment to innovation after seamlessly migrating their entire portfolio Breeden is now live on our Max plan and has adopted many of our services from payments Tactfully ISTAT Folio Guard AI leasing assistant Lisa smart maintenance screening and web.
Jesse: Sites occur.
Speaker Change: According to Bonnie more Breeden's President of property management quote we built such a wonderful partnership without folio that partnership means everything to us their team truly listens to everything we have to say and values are input to help us improve end quote.
Speaker Change: Along with innovation another way, we're standing out in the market is by delivering exceptional service at scale, which is a top priority for our customers. We exited 2024 with a 361% year over year increase in instant support case resolutions and a service satisfaction score of 92%.
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Speaker Change: Throughout the year, we consistently earn top recognition for peer to peer software marketplace G. Two thanks to the feedback from the people who matter most our customers.
Speaker Change: The third pillar of our strategy is great people and culture, you've heard about the innovative ways, we're differentiating ourselves to win in delivering value efficiently to our customers and it's all made possible through our people. We're honored to be recognized in two new lifts from Forbes America's best companies for 2025, and most trusted companies in America.
Speaker Change: Liquor for 2025.
Speaker Change: Forbes evaluated the nation's largest public companies and considered factors such as financial performance Trust and customer and employee satisfaction.
Speaker Change: Across the organization, we're operating with a sense of urgency and focus and it shows in our results and the value we're delivering to our customers with that I will now share more about Apple is fourth quarter financial results.
Speaker Change: In the fourth quarter, we delivered revenue of $204 million growing 19% year over year full year revenue was $794 million, representing 28% growth year over year.
Core solutions revenue was $47.6 million in the fourth quarter, a 15% year over year increase driven by growth in new customers and total units under management.
Speaker Change: In addition, as I mentioned earlier, we continue to win larger customers and more customers are choosing our plus and Max plans at the end of the year. We managed approximately $8 7 million units from 20000, and 784 customers compared to $8 2 million units from 19737 customers.
Speaker Change: A year earlier this represents a 6% increase in ending units and a 5% increase in customers as we continue to emphasize residential portfolios for the full year core solutions grew 15% year over year.
Speaker Change: Fourth quarter revenue from value added services grew 20% year over year to $153 million has expected in 2020 four we had sequential increases in value added services revenue in the first second and third quarters and a sequential decline in revenue in the fourth quarter due to the seasonal nature.
Speaker Change: Revenue associated with leasing activities full year value added services revenue growth was 33%, primarily resulting from our decision to stop waiting E check fees in August of 2023.
Speaker Change: Higher resident usage of online payments increased adoption of risk mitigation services and growth in units under management, partially offset by reduced fees associated with certain card based payments.
Speaker Change: Other revenue includes revenue from the live the Zee acquisition, which was completed in October.
Speaker Change: Turning to spending we exited the quarter with 634 employees, which is an increase of 9% compared to the fourth quarter of 2023 and up 5% from the prior quarter. This reflects employee growth primarily due to our acquisition of live easy and also continued investment and innovation <unk>.
<unk> strategic initiatives, such as robotics, the resident experience and expanding into new property types.
Speaker Change: Cost of revenue exclusive of depreciation and amortization in the fourth quarter was 37% of revenue compared to 35% last year, primarily due to increased adoption of credit cards for payments and the reduction in fees associated with certain card based transactions for the full year cost revenue declined more.
Speaker Change: And then 200 basis points as growth from our decision to stop waiting each egg fees and operational efficiencies were partially offset by the impact of increased adoption of credit cards for payments and a reduction in fees associated with certain card based transactions. The sequential quarterly increase reflects typical seasonality due to the decline.
Speaker Change: And revenue associated with leasing activities.
Speaker Change: As a percent of revenue in the fourth quarter combined sales and marketing R&D and G&A expense grew to 41% from 37% last year for the full year operating expenses as a percentage of revenue declined from 46 in 2023% to 38% in 2020 four.
Speaker Change: And marketing expenses as a percentage of revenue increased from 12% in the fourth quarter of last year to 15%. This quarter. This includes increased investment in our future conference, which shifted from the third quarter to the fourth quarter. This year additional hiring and the impact of the Levy the acquisition for.
Speaker Change: Full year sales and marketing decreased from 16% to 13%.
Speaker Change: Our R&D expenses as a percentage of revenue increased from 17% in the fourth quarter last year to 18%. This quarter. This includes additional hiring to resource strategic initiatives on a full year basis R&D declined from 21% to 17%.
Speaker Change: Our G&A expenses as a percentage of revenue were comparable.
Speaker Change: In the fourth quarter of last year at 8% for the full year G&A declined from 10% to 8%.
Speaker Change: Overall in the fourth quarter non-GAAP operating margin was 22% compared to 24, 3% last year through disciplined execution of our financial strategy, we expanded non-GAAP operating margin to 25% for the full year, which was a significant improvement from 12, 2% and two.
Speaker Change: 23.
Speaker Change: Free cash flow margin. This quarter was 17, 3% compared to 19, 9% in the fourth quarter of last year and expanded to 23% and 2024, a significant increase from 12% in 2023.
Speaker Change: The acquisition of lives easy for $79 million exemplifies how creating investment flexibility is enabling us to deliver on our strategy even with this investment our cash and investment securities grew to $278 million from $212 million at the end of 2020 three.
Speaker Change: Our 2025 guidance for annual revenue is $920 million to $940 million, which implies a full year growth rate of 17% based on the midpoint of this range, we expect to deliver non-GAAP operating margin between 24, 5% and 26, 5% and diluted weighted average.
Speaker Change: Shares outstanding are anticipated to be approximately $37 million for the full year.
Speaker Change: We expect to continue growing our customers and units under management. We also believe we will continue growing <unk> as we increase adoption of our plus and Max plans and our value added services and a small but growing contribution from the residents segment.
Speaker Change: Consistent with 2024, we believe the high interest rate environment will continue to limit our current customers' ability to expand their portfolios. We anticipate 20 twenty-five revenue seasonality to be mostly consistent with 2024 <unk>.
Cost of revenue exclusive of depreciation and amortization is expected to remain relatively flat as a percent percentage of revenue compared to the prior year as we believe the benefit from operational efficiencies will be mostly offset by product mix.
Our 2025, ending head count is projected to grow as we continue to invest in high priority initiatives that enable us to achieve our strategic objectives. However, we expect the rate of head count growth to be less than revenue growth as we maintain our focus on operational efficiency.
Speaker Change: In summary, I'm proud of our strong performance in 2024, we are acquiring growing and retaining customers, while delivering exceptional service and our investments in AI and the resident experience are translating into meaningful outcomes for our customers as we continue the process of selecting a new CFO I wanted to.
Speaker Change: Thank Tim Eaton, our interim CFO and the rest of our team for their commitment during this transition.
Speaker Change: We are truly building the platform for the real estate industry comes to do business, and creating a resilient and sustainable future for growth.
Speaker Change: Thank you all for joining us today operator this concludes today's call.
Speaker Change: Everyone for participating in today's conference and you may now disconnect.
Speaker Change: Okay.
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