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AppFolio, Inc. Announces Third Quarter 2020 Financial Results

AppFolio, Inc.
·11 min read

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