Appfolio Inc (APPF) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AppFolio's second quarter earnings call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Erica Abrams. Ms. Abrams, you may begin.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us today as we report AppFolio's Second Quarter 2017 Financial Results. I'm joined today by Brian Donahoo, Jason Randall and Ida Kane of AppFolio to discuss results. This call is simultaneously being webcast on the Investor Relations section of our website at www.appfolioinc.com.

Before we get started, I would like to call everyone's attention to our safe harbor policy. Please note that certain statements made on this call will be forward-looking statements, which are subject to considerable risks and uncertainties. These forward-looking statements may relate to future plans and financial conditions, results of operations, business forecasts and plans, strategic plans and objectives and product development plans.

Forward-looking statements involve numerous risks and uncertainties that may cause actual results or performance to be materially different from any results or performance expressed or implied by the forward-looking statements. We discussed risks and uncertainties in greater detail in the Risk Factors sections of our filings with the SEC. 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 Ida. Ida, please go ahead.

Thanks, Erica. Welcome to AppFolio's Second Quarter 2017 Financial Results Conference Call. As you know from our press release today, we reported total revenue of $35.9 million, which represents a year-over-year increase of 37%, and also saw continued gains in our operating leverage. We reported GAAP net income of $2.8 million or $0.08 per diluted share compared to a loss of $2.3 million or $0.07 per share loss in the same quarter 1 year ago.

Importantly, we also announced that Brian Donahoo is retiring as President and CEO of AppFolio after over 10 years with the company. With that, we are excited to tell you that Jason Randall will succeed Brian as President and CEO. You will hear from both Brian and Jason later on the call after my financial update. My sincerest congratulations to both Brian and Jason. I am thrilled to have sat by Brian's side over the past few years and equally look forward to many successful years with Jason and the rest of the leadership team at AppFolio.

Before diving into the second quarter GAAP financial details, please note that we have included $1.6 million of noncash stock-based compensation in our cost and operating expenses for the second quarter of 2017. To those of you who track non-GAAP results, our Form 10-Q was also filed today and includes more detailed financial data points that you may find helpful in calculating non-GAAP results on your own. Customer related metrics are also included in our 10-Q filings for your reference.

Our core solution revenue was $13.9 million in the second quarter, up 32% from 1 year ago, primarily due to a 17% increase in property manager customers. Property manager units under management also increased by 22% versus the prior year to 2.93 million units. We ended the quarter with over 10,800 property manager customers. The increase year-over-year in average size of net new customer acquired during the quarter reflects the success we are having with higher value customers and in moving up market in the SMB space.

In our legal vertical, customer account increased 21% year-over-year to almost 9,000 which also contributed to the growth in core solution revenue. Second quarter Value+ services revenue was $20.5 million, up 43% year-over-year. This strong growth in Value+ services was mainly driven by increased usage of our electronics payment platform and screening services by a larger property manager customer base and an increase in units under management of 22%.

We also experienced growth in our other Value+ services, including tenant liability insurance, maintenance contact center, website hosting services and Premium Leads services. We continue to derive more than 90% of our revenue from Property Manager customers.

Turning to expenses. Total cost and operating expenses for the second quarter increased 16% year-over-year on a GAAP basis compared to the overall 37% increase in total revenue. We gained significant operating leverage, primarily from increased revenue with a more moderate increase in headcount and, to a lesser extent, from improved pricing from various third-party service providers related to our Value+ services revenue.

As we continue to grow and introduce new or enhanced Value+ services, we expect our operating costs could fluctuate from period to period. We ended the quarter with $57.8 million in cash, cash equivalents and investment securities and no debt. During the second quarter, we generated $8.1 million in cash from operating activities. We used approximately $450,000 for capital expenditures during the quarter and invested $2.3 million for additional product innovation via capitalized software.

To recap the quarter, total revenues grew 37% to $35.9 million, and we achieved GAAP net income of $2.8 million or $0.08 per share. Given our strong performance on the first half of 2017, we are raising our revenue outlook for fiscal year 2017 to a range of $138 million to $139 million, which represents year-over-year revenue growth of 31% at the midpoint of the range. We expect weighted average diluted shares for the full year to remain at approximately 35 million shares.

In closing, we remain confident in our strategic approach and business plan to deliver long-term shareholder value, while delighting our customers with technology and services that enable growth in their businesses. We invite you to submit your questions to ir@appfolio.com or through our IR website and expect to respond regularly.

With that, I'll turn the call over to Brian and Jason for additional and closing comments. Brian?

Thanks, Ida. Hello, everyone, and thanks for joining the call today. We're pleased with our strong second quarter results, another quarter of solid execution across the business as you heard from our financial detail.

Our success in the second quarter was the result of our continued focus on customers, our product and technology, innovation across those verticals and our team. I'm also happy to report that we received several awards in the quarter recognizing our achievements in products, customer service and cloud computing.

In our Property Management vertical, we increased total customer count and expanded units under management, reflecting our ongoing success in attracting and serving larger SMB customers. We continued on a rapid pace of innovation in the quarter, releasing features designed for HOA customers, including the ability to track violations, assess fines and track architectural changes. We also released an integration with a software provider of industry-standard leasing forms designed for our larger and multifamily customers, as well as the ability to send maintenance surveys to residents right from the AppFolio Property Management software.

Delivering excellent customer service is a top priority for our customers and making it even easier for them to collect resonant feedback has been well received. In our legal vertical, we continue to make enhancements to our Value+ payments offering and in the second quarter, we added the ability for an attorney to send retainer requests to their clients. Customers continue to be delighted with our expanding functionality with the seamless billing and collections experience for their clients. This success laid our path for incremental revenue growth on our platform.

We continue to make great progress on our long-term strategic and financial goals by keeping our customers happy and successful, expanding our customer base, supporting our customers growth through the adoption of Value+ services and broadening our product offerings and the markets that we serve.

Today, I'm also pleased to announce that after a careful planning and consideration, the Board of Directors and I am turn over the steering oar for AppFolio to Jason Randall, who will succeed me as President and CEO. As many of you may know, Jason currently leads the AppFolio Property Manager business and has been a great partner to me and the rest of the leadership team in building AppFolio to what it is today. In the over 9 years he has worked at AppFolio, he has proven himself to be a stronger leader across the business. He has led product development, set the strategic direction and led both the Property Management and legal verticals. And I believe there's really no one better suited for this role.

As we announced, I'm retiring my role at AppFolio but will remain in an advisory role through the end of the year to ensure a smooth transition. I'm excited about this milestone in my life, and I'm looking forward to taking time off to travel with family and friends and spend more time on my mountain bike. And I'm confident that the company will be in great hands with Jason and the rest of the leadership team at the helm. We have a solid group of leaders, many who I've worked together for over a decade, and I'm equally proud of each and every AppFolian we have serving our customers' needs everyday.

And now, I'd like to turn the call over to Jason for brief comments and closing remarks. So Jason, please go ahead.

Thanks, Brian. I know I speak for all of us when I say we are very grateful for Brian's leadership and positive impact here over the past 10 years. I know his influence on our company vision will continue to guide our employees and company culture and be felt by our customer base for a long time.

I've worked closely with Brian and many members of the leadership team for almost 15 years at AppFolio and before that at Citrix, and this moment is bittersweet for me. From our early days of choosing our first vertical and bringing the AppFolio Property Manager product to market to where we are today, we've come such a long way together, and I'm most excited about the larger opportunities that lie ahead in our existing and future markets. I'm honored to be given this opportunity and believe we are positioned well for continued growth. I look forward to meeting more of you over time.

With that in mind, as a reminder, in connection with our fifth Annual AppFolio Property Manager Customer Conference being held in Santa Barbara in September, we will be hosting an AppFolio Analyst and Investor Day. If you haven't received your invitation and are interested in attending, please reach out directly to Ida.

That concludes our call for today. Thanks, again, for joining us. From here, I'll turn the call back to the operator. Please go ahead.

Ladies and gentlemen, this does conclude the program for today. If you'd like to listen to the call afterwards, the number to call for the replay is 1 (855) 859-2056. Thank you for calling, and you may all disconnect. Everyone, have a great day.