Q2 2019 Earnings Call
At this time I would like to welcome everyone to the AFS told me Okay.
And now to second quarter 2019 financial results Conference call.
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Erica Abrams you may begin your conference.
Thank you Christine good afternoon, ladies and gentlemen, thank you for joining us today as therefore, it up for <unk> second quarter 2019 financial result.
I'm joined today by Jason Randall and either Mccain about pulled out to discuss speaks for itself.
This call is simultaneously being webcast on the Investor Relations section of our website at Www Dot Appfolio Inc. Dot com.
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Forward looking statements are based on assumptions as of today and we assume no obligation to update any forward looking statements. After today, even if new information becomes available in the future with that I'll turn the call over to either you to please go ahead.
Thank you Erica and welcome to everyone joining us on the call today, perhaps folio second quarter 2019 financial results.
Total revenue for the quarter increased by 35% over the same period one year ago.
To $63.6 million.
GAAP net income was $23.2 million or 65 cents per diluted share, which includes an income tax benefit of $21.3 million primarily related to the release of our valuation allowance against deferred tax assets.
Our second quarter performance reflects our continued investment in growth initiatives in advance of expected revenue generation. We believe these growth initiatives will positively impact long term shareholder value and include the following.
Appfolio property manager plus our offering that serves larger more complex real estate property manager customers.
Appfolio investment management, which serves real estate investment managers.
Lisa Appfolio is AI leasing assistant, which we developed from the technology acquired through the dynasty acquisition and is now offered at the value plus service to our real estate customers.
And folio utility management, which we developed some technology acquired through the week Wise acquisition and is now also offered as a value plus service to our real estate customers.
Also included in our second quarter results is $1.7 million in noncash charges related to stock based compensation.
For those of you who track non-GAAP results. Our Form 10-Q that was filed today includes more detailed information that you might find helpful. In calculating non-GAAP results.
Core solutions revenue was $21.6 million in the second quarter, a 27% increase year over year, primarily due to a 19% increase in property manager units under management related to a 12% increase in the number of property manager customers.
We closed the second quarter with 13737 property manager customers managing 4.23 million units.
As a reminder, we define real estate property manager customers as the number of customers subscribing to our core solution.
Customers that are not subscribing to our core solutions are not included in our customer and unit count.
In our legal vertical customer count increased 6% year over year to 10631.
Second quarter value plus services revenue was $39.1 million is 36% increase year over year.
Revenue from each of our value plus services increased year over year, and new value plus services were introduced in the quarter.
The majority of growth in value plus services was derived from increased usage of our electronic payments screening and insurance services by a larger base of property manager customers and a higher number of units under management.
Turning to expenses total costs and operating expenses for the second quarter increased 54% year over year on a GAAP basis compared to an overall, 35% increase in total revenue.
Our year over year increase in costs, primarily related to our 49% growth in headcount to support an expanding base of existing customers and our growth initiatives.
We released our valuation allowance against our deferred tax assets during the second quarter, which is the primary factor in our income tax benefit of $21.3 million.
Our balance sheet at June Thirtyth reflects a $21.7 million deferred tax asset, which we believe we can use to offset future tax expenses.
Also in the balance sheet, we closed the quarter with approximately $42.5 million in cash cash equivalents and investments securities.
And $49.4 million of debt.
We generated $11.5 million from operating activities.
He is $1.4 million to purchase property and equipment and invested $4.8 million in additional product innovation via capitalized software.
We did not initiate any stock repurchases during the second quarter.
Given our performance to date, we now expect full year 2019 revenue in the range of $253 million to $255 million, which represents year over year revenue growth of 34% at the midpoint.
We continue to expect our weighted average diluted shares for the full year to be approximately 36 million.
As a reminder, investors are invited to submit questions via the Investor cuneiform located on the Investor overview section of our website.
With that I'll turn the call over to Jason for some additional comments.
Thanks, Adam and thanks to everyone for joining us today as we report our second quarter 2019 financial results.
During the quarter, we continued on our mission to revolutionize vertical industry businesses by providing great software and services to our expanding customer base.
We did this by maintaining our focus on delivering value to our customers through end to end customer experience is product innovation investments in technology and supporting our team and are thriving culture.
In our real estate vertical we maintained our focus on innovation and advancing our technology platform to provide systems of intelligence solutions that empower businesses to deliver excellent customer and employee experience is.
During the second quarter, we released a new value plus service, Lisa Apple iOS, AI leasing assistant, which weve built leveraging technology from our recent acquisition of dynasty.
We designed the Apple iOS eight leasing assistant to address key challenges faced by property management companies.
I mean from a high volume of rental inquiries that make it challenging to follow up on every lead in a timely fashion.
Which may result in mis revenue for customer experience and longer vacancy times.
Well they are leasing assistant works 24, seven as part of a properties leasing team to provide thoughtful personable responses via text messages and email.
Lisa communicates to perspective renters in real time, and Leverages integrated reporting to track leasing performance with accurate data.
Which can be used by our customers to drive increased occupancy rates and operational efficiency.
Property managers utilizing the alphaville.
Leasing assistance stand to benefit from robust lead to lease data and insights.
Ultimately enhancing optimizing and automating the leasing flow and extending their team's capabilities.
Kayla rotor Chief operating officer of Cambridge Management group and that Folio property manager customer, who recently added Apple iOS AI leasing assistant says.
Our team's performance has increased dramatically with no misleads or lag time in response, Lisa allows for continued conversations after hours with our prospects who feel like they are getting great service.
Our team is able to focus on higher level interactions.
Cambridge is use about full year leasing assistant demonstrates the power of AI when it's fully integrated into a properties entire leasing experience as part of Apple iOS property management software.
Our leasing assistant is built for large portfolio property managers and owners and strengthens our fully owned property manager can at folio property manager pluses system of intelligence capabilities by increasing our customers overall efficiency.
Automating repetitive tasks and creating a more streamlined experience for their prospects and tenants at scale.
During the quarter, we continued the launch about fully or utility management, providing appfolio property manager and that fully or property manager plus customers value plus service to better manage operating and capital expenditures relating to utilities by eliminating late fees with on time billing and replacing a significant burden of a manual invoicing process with one that minimizes errors and maximizes net operating income.
I fully utility management provides robust analytics and increased efficiency by automating utility bill processing and resident billing a critical function for large property managers and owners.
Also in the second quarter, we continued to expand the capabilities of about four wheel investment management, a new product released earlier this year designed to empower real estate investment managers with a modern solution that streamlines bond and syndication management.
We released new capabilities to help transform our customers' businesses, including document signing.
To further automate investment operations improve processes and optimize the investors experience.
Document signing lets investors exchange sign and track important documents.
Such as fundraising materials in subscription agreements all within the portfolio investor portal.
Argo property group for real estate development investment in property management company based in Philadelphia that uses that folio property manager recently added Defitelio investment management to their suite about folio products and services.
Argo chose at Folio investment management to modernize and automate investment communications and because it fully integrates with our full year property manager.
Argos Chief risk officer, and partner Jeremy Terror recently told US fully owned investment management streamlines, the fundraising process and helps us raise more capital from each individual investor.
It helps us communicate clearly and consistently and ultimately gives our investors greater confidence in our business. So they are confidently investing even more with us.
I fully as new product offerings reflect our ongoing commitment to rapid innovation into delivering technology solutions and services to solve the top challenges facing our customers.
We are excited to announce or seven Appfolio property manager customer conference to be held October threerd in Fourq here in Santa Barbara.
We look forward to this annual event, where we connect directly with customers.
Staying close to our customers is a critical part of our mission.
Recently on boarded up fully a property manager plus and that fully on investment management customer to be living Brooks Baskin CEO commented I am a big believer in partnership and what it means to be to a successful growing business.
I truly believe we have found a great partner and that folio.
I can safely say, we have leaned into our fully relationship and we look forward to continuing the successful relationship hopefully for decades to come.
In our legal vertical we continue to focus on new functionality to help law firms improved business performance recently introduced business management dashboards provide case and financial insights to help firms make better decisions.
In my case lead management now allows electronic intake of prospective clients to automate and simplify the process of collecting data.
And that fully or we believe that great people make a great company and all the keys to driving our rapid pace of innovation that continues to bring the best in technology and services to our customers.
Reinforcing these principles during the quarter portfolio was recognized with two gold Stevie Awards from the American business Awards.
One acknowledging appfolio property manager plus as best new product.
And the second recognizing our customer first approach with a goal to TV for best customer service, both in real estate construction management solution category.
Looking ahead, we remain focused on executing our long term strategy of sustainable growth, while delivering exceptional customer experiences, leading technology and unsurpassed customer service.
Thank you for joining us and that concludes our call for today.
Please note a copy of the recording will be available as of Monday July 29, 2019 at 730 P.M. Eastern you may access the recording by dialing one 808, 592 056 and entering 7094869.
This concludes today's conference call you may now disconnect.