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 marketing14,894  12,636  43,117  37,087 
Research and product development13,454  10,602  36,794  28,422 
General and administrative12,946  8,955  36,303  25,361 
Depreciation and amortization6,680  5,678  19,751  16,169 
Total costs and operating expenses80,726  63,801  225,089  182,278 
Income from operations3,360  4,134  12,535  6,372 
Other income (expense), net187,747  (11) 187,759  (68)
Interest expense, net(853) (400) (1,909) (1,324)
Income before provision for (benefit from) income taxes190,254  3,723  198,385  4,980 
Provision for (benefit from) income taxes52,578  (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:       
Basic34,296  34,047  34,241  33,991 
Diluted35,665  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 marketing367  354  1,069  904 
Research and product development474  353  1,348  1,024 
General and administrative1,803  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 amortization6,680  5,678  19,751  16,169 
Amortization of operating lease right-of-use assets902  1,088  2,973  3,016 
Deferred income taxes36,015  (1,389) 22,878  (27,032)
Stock-based compensation3,096  2,192  6,808  5,431 
Gain on sale of business(187,636)   (187,636)  
Other200  28  170  136 
Changes in operating assets and liabilities:       
Accounts receivable2,907  (83) (2,229) (2,778)
Prepaid expenses and other current assets(567) 796  (859) (4,403)
Other assets(213) (125) (320) 1,129 
Accounts payable502  82  695  270 
Accrued employee expenses1,202  (194) 1,919  486 
Accrued expenses1,397  (1,398) 5,931  (14)
Deferred revenue283  458  815  1,039 
Operating lease liabilities(1,043) (1,127) (1,135) (2,886)
Other liabilities16,439  616  16,539  996 
Net cash provided by operating activities17,840  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 investments5,550  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 divested191,427    191,427   
Net cash provided by (used in) investing activities171,254  (9,951) 152,542  (70,728)
Cash from financing activities       
Proceeds from stock option exercises73  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 debt562  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 cash90,713  607  128,217  (53,954)
Cash, cash equivalents and restricted cash       
Beginning of period53,751  19,945  16,247  74,506 
End of period$144,464  $20,552  $144,464  $20,552 

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