AppFolio, Inc. Announces Third Quarter Financial Results

SANTA BARBARA, Calif., Nov. 07, 2016 (GLOBE NEWSWIRE) -- AppFolio, Inc. (NASDAQ:APPF), a leading provider of cloud-based business software solutions, today announced results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

•         Third quarter revenue was $28.2 million, an increase of 39% period-over-period.

•         Third quarter GAAP net loss was $1.1 million, or a net loss of $0.03 per share; Non-GAAP net income was $0.2 million, or $0.00 per share.

•         Increased property manager customers 27% year-over-year to 9,612; increased units under management 26% year-over-year to 2.5 million.

•         Increased law firm customers 40% year-over-year to 7,799.

The Company generated approximately $2.3 million in cash from operating activities and reported $2.7 million in Non-GAAP Adjusted EBITDA for the third quarter of 2016. At September 30, 2016, the Company had $49.6 million in cash and cash equivalents and investment securities.

"We are pleased with our results in the quarter, achieving strong revenue, increasing units under management and continuing to realize operating leverage," commented Brian Donahoo, President and CEO of AppFolio.  "During the quarter we hosted over 700 property manager customers at our Fourth Annual Customer Conference for three days of industry education, networking events, and hands-on product demonstrations and feedback sessions with AppFolio experts. We also announced two new product offerings for our Property Managers customers, including Collections and Revenue Management, which will enhance our platform and further highlight our commitment to helping our customers successfully manage and grow their businesses and expand our market opportunity."

Financial Outlook

Based on information available as of November 7, 2016, we are updating our outlook for full year 2016 as indicated below.
  • Full year revenue is expected to be in the range of $104.0 million to $105.0 million. 
  • Weighted average common shares outstanding are expected to be approximately 33.6 million for the full year.

Non-GAAP Financial MeasuresTo supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, we provide investors with certain Non-GAAP financial measures, including Non-GAAP net loss, Non-GAAP net loss per share, and Non-GAAP Adjusted EBITDA which are financial measures that have not been prepared in accordance with GAAP. Non-GAAP net loss and non-GAAP net loss per share are defined as net loss and net loss per share, respectively, attributable to common stockholders before stock-based compensation expense. Non-GAAP Adjusted EBTIDA is defined as GAAP net loss before depreciation and amortization, stock-based compensation expense, provision for income taxes, other income (expense), net, and interest income (expense), net.

We use these Non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. The principal limitation of these Non-GAAP financial measures is that they exclude expenses that are required by GAAP to be recorded in our financial statements. These financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these financial measures may be different from Non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A reconciliation of the Non-GAAP financial measures to the most direct comparable GAAP measure has been provided in the financial statement tables included below in this press release.

We urge investors to review these reconciliations and not to rely on any single financial measure to evaluate our business.

Conference Call InformationAs previously announced, we will host a conference call today, November 7, 2016, to discuss our third quarter financial results at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. A live webcast of the conference call will be available at http://ir.appfolioinc.com. The conference call can also be accessed by dialing 844-239-5286 (Domestic), or 513-268-0783 (International). The conference ID is 98002643.  A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day November 11, 2016. An archived webcast of this conference call will be available for 12 months on our website listed above.

About AppFolio, Inc.AppFolio provides comprehensive, easy-to-use, cloud-based business software solutions for small and medium-sized businesses in various vertical markets. Our products include cloud-based property management software ( AppFolio Property Manager) and cloud-based legal practice management software MyCase). The Company was founded in 2006 and is headquartered in Santa Barbara, CA. Learn more at www.appfolioinc.com. 

Forward-Looking StatementsThis press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements that are not statements of historical fact contained in this press release, and can be identified by words such as "anticipates," "believes," "seeks," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "could," "will," "would," or similar expressions and the negatives of those expressions. In particular, forward-looking statements contained in this press release relate to our future or assumed revenues and weighted-average outstanding shares, as well as our future growth and success.

Forward-looking statements represent our management's current beliefs and assumptions based on information currently available. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, which we filed with the Securities and Exchange Commission (the "SEC") on February 29, 2016, as well as in our other filings with the SEC. You should read this press release with the understanding that our actual future results may be materially different from the results expressed or implied by these forward looking statements.

Except as required by applicable law or the rules of the NASDAQ Stock Market, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par values)
 
    September 30,  2016   December 31,  2015
Assets        
Current assets        
Cash and cash equivalents   $ 7,603     $ 12,063  
Investment securities—current   10,018     10,235  
Accounts receivable, net   2,707     2,048  
Prepaid expenses and other current assets   3,964     3,160  
Total current assets   24,292     27,506  
Investment securities—noncurrent   31,930     34,417  
Property and equipment, net   6,867     6,107  
Capitalized software, net   14,434     10,022  
Goodwill   6,737     6,737  
Intangible assets, net   3,457     4,516  
Other assets   1,293     1,176  
Total assets   $ 89,010     $ 90,481  
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable   $ 574     $ 2,369  
Accrued employee expenses   4,957     5,159  
Accrued expenses   4,259     3,340  
Deferred revenue   6,627     4,953  
Other current liabilities   1,377     1,084  
Total current liabilities   17,794     16,905  
Other liabilities   1,747     879  
Total liabilities   19,541     17,784  
Stockholders' equity:        
Preferred stock, $0.0001 par value, 25,000 authorized and no shares issued and outstanding as of September 30, 2016 and December 31, 2015        
Class A common stock, $0.0001 par value, 250,000 shares authorized as of September 30, 2016 and December 31, 2015; 11,523 and 9,005 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively;   1     1  
Class B common stock, $0.0001 par value, 50,000 shares authorized as of September 30, 2016 and December 31, 2015; 22,170 and 24,541 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively;   3     3  
Additional paid-in capital   145,015     141,528  
Accumulated other comprehensive income (loss)   124     (153 )
Accumulated deficit   (75,674 )   (68,682 )
Total stockholders' equity   69,469     72,697  
Total liabilities and stockholders' equity   $ 89,010     $ 90,481  

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts)
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Revenue $ 28,162     $ 20,305     $ 77,576     $ 54,578  
Costs and operating expenses:              
Cost of revenue (exclusive of depreciation and amortization) 11,645     9,264     33,387     24,438  
Sales and marketing 6,979     7,028     22,097     18,976  
Research and product development 3,464     2,797     9,531     6,960  
General and administrative 4,642     3,888     12,580     10,987  
Depreciation and amortization 2,636     1,638     7,112     4,252  
Total costs and operating expenses 29,366     24,615     84,707     65,613  
Loss from operations (1,204 )   (4,310 )   (7,131 )   (11,035 )
Other expense, net (12 )   (1 )   (34 )   (8 )
Interest income (expense), net 102     (426 )   221     (701 )
Loss before provision for income taxes (1,114 )   (4,737 )   (6,944 )   (11,744 )
Provision for income taxes 11     23     48     34  
Net loss $ (1,125 )   $ (4,760 )   $ (6,992 )   $ (11,778 )
Net loss per share, basic and diluted (0.03 )   (0.14 )   (0.21 )   (0.68 )
Weighted average common shares outstanding, basic and diluted 33,600     33,314     33,529     17,274  

Supplemental Revenue Information

The following table presents our revenue categories for the quarter ended September 30, 2016 and 2015 (in thousands):
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016   2015   2016   2015
Core solutions   $ 11,302     $ 8,330     $ 31,637     $ 23,161  
Value+ services   15,684     10,783     42,338     27,895  
Other   1,176     1,192     3,601     3,522  
Total revenues   $ 28,162     $ 20,305     $ 77,576     $ 54,578  

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
               
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Cash from operating activities              
Net loss $ (1,125 )   $ (4,760 )   $ (6,992 )   $ (11,778 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
Depreciation and amortization 2,636     1,638     7,112     4,252  
Purchased investment premium, net of amortization 90     (380 )   185     (380 )
Amortization of deferred financing costs 16     410     48     441  
Loss on disposal of property and equipment 1     (6 )   33     7  
Noncash interest expense     (223 )        
Stock-based compensation 1,289     278     2,844     623  
Lease abandonment 101         161      
Changes in operating assets and liabilities:              
Accounts receivable 337     286     (659 )   (936 )
Prepaid expenses and other current assets (157 )   (737 )   (804 )   (1,345 )
Other assets (71 )   (37 )   (163 )   (120 )
Accounts payable (538 )   (716 )   (1,109 )   167  
Accrued employee expenses (1,050 )   2,046     (144 )   3,110  
Accrued expenses 603     674     1,354     1,234  
Deferred revenue 526     187     1,674     662  
Other liabilities (312 )   373     1,183     289  
Net cash provided by (used in) operating activities 2,346     (967 )   4,723     (3,774 )
Cash from investing activities              
Purchases of property and equipment (399 )   (724 )   (3,560 )   (2,234 )
Additions to capitalized software (3,395 )   (2,218 )   (8,554 )   (5,373 )
Purchases of investment securities (7,649 )   (60,426 )   (24,334 )   (60,426 )
Sales of investment securities         10,016      
Maturities of investment securities 5,724     8,950     17,112     8,950  
Cash paid in business acquisition, net of cash acquired             (4,039 )
Purchases of intangible assets (2 )   (5 )   (2 )   (16 )
Net cash used in investing activities (5,721 )   (54,423 )   (9,322 )   (63,138 )
Cash from financing activities              
Proceeds from stock option exercises 107     10     260     328  
Proceeds from issuance of restricted stock             141  
Proceeds from issuance of options             208  
Tax withholding for net share settlement (85 )       (85 )    
Principal payments under capital lease obligations (9 )   (7 )   (24 )   (22 )
Proceeds from the initial public offering, net of underwriting discounts and commissions     10,378         79,570  
Payments of initial public offering costs     (3,192 )       (3,999 )
Payment of contingent consideration             (2,429 )
Proceeds from issuance of debt 30         87     10,000  
Principal payments on debt (28 )   (9,958 )   (99 )   (10,000 )
Payment of debt issuance costs     (7 )       (539 )
Net cash provided by (used in) financing activities 15     (2,776 )   139     73,258  
Net (decrease) increase in cash and cash equivalents (3,360 )   (58,166 )   (4,460 )   6,346  
Cash and cash equivalents              
Beginning of period 10,963     69,924     12,063     5,412  
End of period $ 7,603     $ 11,758     $ 7,603     $ 11,758  

Stock-Based Compensation Expense(in thousands)
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016   2015   2016   2015
Costs and operating expenses:                
Cost of revenue (exclusive of depreciation and amortization)   $ 138     $ 35     $ 321     $ 86  
Sales and marketing   124     33     296     84  
Research and product development   109     10     264     22  
General and administrative   918     200     1,963     431  
Total stock-based compensation expense   $ 1,289     $ 278     $ 2,844     $ 623  

Reconciliation of GAAP Measures to Non-GAAP Measures(in thousands, except per share data)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Net loss $ (1,125 )   $ (4,760 )   $ (6,992 )   $ (11,778 )
Stock-based compensation expense 1,289     278     2,844     623  
Non-GAAP net income (loss) $ 164     $ (4,482 )   $ (4,148 )   $ (11,155 )
Non-GAAP net income (loss) per share, basic $     $ (0.13 )   $ (0.12 )   $ (0.65 )
Weighted average common shares outstanding, basic 33,600     33,314     33,529     17,274  

  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Net loss $ (1,125 )   $ (4,760 )   $ (6,992 )   $ (11,778 )
Depreciation and amortization 2,636     1,638     7,112     4,252  
Stock-based compensation expense 1,289     278     2,844     623  
Provision for income taxes 11     23     48     34  
Other expense, net 12     1     34     8  
 Interest (income) expense, net (102 )   426     (221 )   701  
Non-GAAP Adjusted EBITDA $ 2,721     $ (2,394 )   $ 2,825     $ (6,160 )

The following table presents our customers and units under management at the end of each quarter for the last seven quarters:
    2016   2015
    September 30,   June 30,   March 31,   December 31,   September 30,   June 30,   March 31,
Property manager customers   9,612     9,275     8,816     8,218     7,561     7,016     6,491  
Property manager units under management (in millions)   2.53     2.41     2.30     2.15     2.01     1.92     1.81  
                             
Legal customers   7,799     7,349     6,834     6,145     5,566     4,891     4,253  

 
Investor Relations Contact:Erica Abrams, ir@appfolio.com, 805-364-6093

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