AppFolio, Inc. Announces Third Quarter 2020 Financial Results

AppFolio, Inc. Announces Third Quarter 2020 Financial Results




AppFolio, Inc. Announces Third Quarter 2020 Financial Results

SANTA BARBARA, Calif., Nov. 09, 2020 (GLOBE NEWSWIRE) — AppFolio, Inc. (NASDAQ: APPF) (“AppFolio” or the “Company”), a leading provider of cloud-based business software solutions, services, and data analytics to the real estate vertical today announced its financial results for the third quarter ended September 30, 2020.

AppFolio’s operating results for the third quarter of 2020 are summarized in the tables accompanying this press release. The Company nevertheless urges investors to read its Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2020, as well as its more detailed third quarter 2020 results that will be included in the Company’s Quarterly Report on Form 10-Q, which will be filed with the SEC today. These periodic report filings, together with other documents the Company files with the SEC from time to time, will be accessible on AppFolio’s website, http://ir.appfolioinc.com. The limited information that follows in this press release is not adequate for making an informed investment judgment.

Divestiture of MyCase

On September 30, 2020, the Company completed its previously-announced sale of 100% of the issued and outstanding equity interests of MyCase, Inc. (“MyCase”), a California corporation and former wholly owned subsidiary of the Company that provides legal practice and case management software solutions to law firms. The Company sold MyCase to Mockingbird AcquisitionCo Inc., a Delaware corporation (“Buyer”) affiliated with funds advised by Apax Partners LLP, for $193.0 million pursuant to a Stock Purchase Agreement, dated September 7, 2020 (the “Purchase Agreement”), by and among Buyer, the Company and MyCase (the “MyCase Transaction”). In connection with the closing of the MyCase Transaction, and in accordance with the terms of the Purchase Agreement, the Company and MyCase entered into certain ancillary agreements, including relating to certain post-closing transition services to be provided by the Company to MyCase.

Financial Outlook

While we are encouraged by the results to date, we are not providing updated full year revenue guidance for fiscal year 2020.

Diluted weighted average shares are expected to be approximately 36 million for the full year.

Conference Call Information

As previously announced, the Company will host a conference call today, November 9, 2020, at 1:30 p.m. Pacific Time, 4:30 p.m. Eastern Time, to discuss its financial results. Investors are invited to submit questions to management via the Investor Q&A form located on the Investor Overview section of AppFolio’s website.

To listen to the live call, participants may register in advance at http://www.directeventreg.com/registration/event/6087563.  After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes for entry. Registration will be open through the start of the live call. To ensure the connection of all participants, please register in advance, a minimum of 10 minutes before the start of the call. A replay of the conference call will be available at (800) 585-8367 or (416) 621-4642 for international callers. Please use conference ID: 6087563. A live and recorded webcast of the conference call will be available at http://ir.appfolioinc.com.

About AppFolio, Inc.
AppFolio offers industry-specific, cloud-based business software solutions, services, and data analytics to the real estate vertical. Today our products include AppFolio Property Manager, AppFolio Property Manager PLUS and AppFolio Investment Management. AppFolio was founded in 2006 and is headquartered in Santa Barbara, CA. Learn more at www.appfolioinc.com.

Investor Relations Contact: ir@appfolio.com

Forward-Looking Statements

This 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 the Company’s business opportunities, the impact of the Company’s strategic actions and initiatives, the impact of the COVID-19 pandemic on the Company’s business, and the timing of providing updated financial guidance.

Forward-looking statements represent AppFolio’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 the Company’s 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 the Company’s actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in AppFolio’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which will be filed with the SEC today, as well as in the Company’s other filings with the SEC. You should read this press release with the understanding that the Company’s 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 Global Market, AppFolio assumes 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,
2020
  December 31,
2019
Assets        
Current assets        
Cash and cash equivalents   $ 144,028     $ 15,813  
Investment securities—current   32,689     22,876  
Accounts receivable, net   9,416     7,562  
Prepaid expenses and other current assets   15,720     15,540  
Total current assets   201,853     61,791  
Investment securities—noncurrent   5,135     12,089  
Property and equipment, net   26,565     14,744  
Operating lease right-of-use assets   24,645     27,803  
Capitalized software, net   33,543     30,023  
Goodwill   56,147     58,425  
Intangible assets, net   17,544     21,377  
Deferred taxes   14,826     27,574  
Other long-term assets   6,014     6,276  
Total assets   $ 386,272     $ 260,102  
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable   $ 3,591     $ 1,927  
Accrued employee expenses   18,379     17,758  
Accrued expenses   13,546     10,833  
Deferred revenue   2,457     4,586  
Income tax payable   13,571      
Other current liabilities   4,607     11,139  
Term loan, net—current portion       1,208  
Total current liabilities   56,151     47,451  
Operating lease liabilities   32,755     33,312  
Term loan, net       47,375  
Deferred taxes   10,130      
Other long-term liabilities   2,720     14  
Total liabilities   101,756     128,152  
Stockholders’ equity:        
Preferred stock, $0.0001 par value, 25,000 shares authorized and no shares issued and outstanding as of September 30, 2020 and December 31, 2019        
Class A common stock, $0.0001 par value, 250,000 shares authorized as of September 30, 2020 and December 31, 2019; 18,450 and 16,923 shares issued as of September 30, 2020 and December 31, 2019, respectively; 18,031 and 16,552 shares outstanding as of September 30, 2020 and December 31, 2019, respectively   2     2  
Class B common stock, $0.0001 par value, 50,000 shares authorized as of September 30, 2020 and December 31, 2019; 16,282 and 17,594 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively   2     2  
Additional paid-in capital   159,296     161,509  
Accumulated other comprehensive income   90     33  
Treasury stock, at cost, 419 and 371 shares of Class A common stock as of September 30, 2020 and December 31, 2019, respectively   (25,756 )   (21,562 )
Retained earnings (accumulated deficit)   150,882     (8,034 )
Total stockholders’ equity   284,516     131,950  
Total liabilities and stockholders’ equity   $ 386,272     $ 260,102  


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Revenue $ 84,086     $ 67,935     $ 237,624     $ 188,650  
Costs and operating expenses:              
Cost of revenue (exclusive of depreciation and amortization) 32,752     25,930     89,124     75,239  
Sales and marketing 14,894     12,636     43,117     37,087  
Research and product development 13,454     10,602     36,794     28,422  
General and administrative 12,946     8,955     36,303     25,361  
Depreciation and amortization 6,680     5,678     19,751     16,169  
Total costs and operating expenses 80,726     63,801     225,089     182,278  
Income from operations 3,360     4,134     12,535     6,372  
Other income (expense), net 187,747     (11 )   187,759     (68 )
Interest expense, net (853 )   (400 )   (1,909 )   (1,324 )
Income before provision for (benefit from) income taxes 190,254     3,723     198,385     4,980  
Provision for (benefit from) income taxes 52,578     (1,255 )   39,469     (26,874 )
Net income $ 137,676     $ 4,978     $ 158,916     $ 31,854  
               
Net income per common share:              
Basic $ 4.01     $ 0.15     $ 4.64     $ 0.94  
Diluted $ 3.86     $ 0.14     $ 4.46     $ 0.90  
Weighted average common shares outstanding:              
Basic 34,296     34,047     34,241     33,991  
Diluted 35,665     35,421     35,662     35,406  


Stock-Based Compensation Expense
(in thousands)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Costs and operating expenses:              
Cost of revenue (exclusive of depreciation and amortization) $ 452     $ 334     $ 1,098     $ 1,073  
Sales and marketing 367     354     1,069     904  
Research and product development 474     353     1,348     1,024  
General and administrative 1,803     1,151     3,293     2,430  
Total stock-based compensation expense $ 3,096     $ 2,192     $ 6,808     $ 5,431  

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Cash from operating activities              
Net income $ 137,676     $ 4,978     $ 158,916     $ 31,854  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization 6,680     5,678     19,751     16,169  
Amortization of operating lease right-of-use assets 902     1,088     2,973     3,016  
Deferred income taxes 36,015     (1,389 )   22,878     (27,032 )
Stock-based compensation 3,096     2,192     6,808     5,431  
Gain on sale of business (187,636 )       (187,636 )    
Other 200     28     170     136  
Changes in operating assets and liabilities:              
Accounts receivable 2,907     (83 )   (2,229 )   (2,778 )
Prepaid expenses and other current assets (567 )   796     (859 )   (4,403 )
Other assets (213 )   (125 )   (320 )   1,129  
Accounts payable 502     82     695     270  
Accrued employee expenses 1,202     (194 )   1,919     486  
Accrued expenses 1,397     (1,398 )   5,931     (14 )
Deferred revenue 283     458     815     1,039  
Operating lease liabilities (1,043 )   (1,127 )   (1,135 )   (2,886 )
Other liabilities 16,439     616     16,539     996  
Net cash provided by operating activities 17,840     11,600     45,216     23,413  
Cash from investing activities              
Purchases of available-for-sale investments (16,490 )   (10,012 )   (29,879 )   (10,690 )
Proceeds from sales of available-for-sale investments     1,000     13,942     2,750  
Proceeds from maturities of available-for-sale investments 5,550     7,000     13,300     11,000  
Purchases of property, equipment and intangible assets (2,245 )   (1,690 )   (16,551 )   (4,115 )
Additions to capitalized software (6,988 )   (6,249 )   (19,697 )   (15,669 )
Cash paid in business acquisition, net of cash acquired             (54,004 )
Proceeds from sale of business, net of cash divested 191,427         191,427      
Net cash provided by (used in) investing activities 171,254     (9,951 )   152,542     (70,728 )
Cash from financing activities              
Proceeds from stock option exercises 73     60     402     259  
Tax withholding for net share settlement (1,269 )   (790 )   (10,959 )   (5,541 )
Payment of contingent consideration         (5,977 )    
Proceeds from issuance of debt 562     528     50,752     1,697  
Principal payments on debt (97,747 )   (840 )   (99,565 )   (2,634 )
Payment of debt issuance costs             (420 )
Purchase of treasury stock         (4,194 )    
Net cash used in financing activities (98,381 )   (1,042 )   (69,541 )   (6,639 )
Net increase (decrease) in cash and cash equivalents and restricted cash 90,713     607     128,217     (53,954 )
Cash, cash equivalents and restricted cash              
Beginning of period 53,751     19,945     16,247     74,506  
End of period $ 144,464     $ 20,552     $ 144,464     $ 20,552