OREANDA-NEWS. August 09, 2016. AppFolio, Inc. (NASDAQ:APPF), a leading provider of cloud-based business software solutions, today announced results for the second quarter ended June 30, 2016.

Second Quarter 2016 Highlights

  • Second quarter revenue was \\$26.2 million, an increase of 42% period-over-period.
  • Second quarter GAAP net loss was \\$2.3 million, or a net loss of \\$0.07 per share; Non-GAAP net loss was \\$1.2 million, or a net loss of \\$0.03 per share. 
  • Increased property manager customers 32% year-over-year to 9,275; increased units under management 26% year-over-year to 2.4 million.
  • Increased law firm customers 50% year-over-year to 7,349.

The Company generated approximately \\$3.1 million in cash from operating activities and reported \\$1.1 million in positive Non-GAAP Adjusted EBITDA for the second quarter of 2016. At June 30, 2016, the Company had \\$51.2 million in cash and cash equivalents and investment securities.

“We executed well on our strategic initiatives in the quarter and made important progress toward realizing operating leverage in our business," commented Brian Donahoo, President and CEO of AppFolio.  "The market for our SMB software continues to expand, as property management and legal customers seek solutions to help them automate, modernize and grow in today's digital world. AppFolio's technology and customer focus remains a competitive differentiator, and the impact of our word of mouth marketing from happy customers continues to be a powerful tool for our long-term success.”

Financial Outlook
Based on information available as of August 8, 2016, we are updating our outlook for full year 2016 as indicated below.

  • Full year revenue is expected to be in the range of \\$103.0 million to \\$105.0 million.
  • Weighted average common shares outstanding are expected to be approximately 33.7 million for the full year.

Non-GAAP Financial Measures
To 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 EBITDA is defined as 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 Information
As previously announced, we will host a conference call today, August 8, 2016, to discuss our second 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 54075354.  A replay will be available at 855-859-2056 (Domestic) and 404-537-3406 (International) until the end of day August 12, 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 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 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)

  June 30,
 2016		 December 31,
 2015
Assets    
Current assets    
Cash and cash equivalents \\$10,963  \\$12,063 
Investment securities—current 11,234  10,235 
Accounts receivable, net 3,045  2,048 
Prepaid expenses and other current assets 3,807  3,160 
Total current assets 29,049  27,506 
Investment securities—noncurrent 28,977  34,417 
Property and equipment, net 7,143  6,107 
Capitalized software, net 12,804  10,022 
Goodwill 6,737  6,737 
Intangible assets, net 3,808  4,516 
Other assets 1,236  1,176 
Total assets \\$89,754  \\$90,481 
Liabilities and Stockholders’ Equity    
Current liabilities    
Accounts payable \\$1,090  \\$2,369 
Accrued employee expenses 6,235  5,159 
Accrued expenses 3,751  3,340 
Deferred revenue 6,101  4,953 
Other current liabilities 1,631  1,084 
Total current liabilities 18,808  16,905 
Other liabilities 1,865  879 
Total liabilities 20,673  17,784 
Stockholders’ equity:    
Preferred stock, \\$0.0001 par value, 25,000 authorized and no shares issued and outstanding as of June 30, 2016 and December 31, 2015 —  — 
Class A common stock, \\$0.0001 par value, 250,000 shares authorized as of June 30, 2016 and December 31, 2015; 11,018 and 9,005 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively; 1  1 
Class B common stock, \\$0.0001 par value, 50,000 shares authorized as of June 30, 2016 and December 31, 2015; 22,625 and 24,541 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively; 3  3 
Additional paid-in capital 143,406  141,528 
Accumulated other comprehensive income (loss) 220  (153)
Accumulated deficit (74,549) (68,682)
Total stockholders’ equity 69,081  72,697 
Total liabilities and stockholders’ equity \\$89,754  \\$90,481 

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

 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2016 2015 2016 2015
Revenue\\$26,203  \\$18,425  \\$49,414  \\$34,273 
Costs and operating expenses:       
Cost of revenue (exclusive of depreciation and amortization)11,212  8,109  21,742  15,174 
Sales and marketing7,567  6,239  15,118  11,948 
Research and product development3,024  2,154  6,067  4,163 
General and administrative4,389  3,707  7,938  7,099 
Depreciation and amortization2,359  1,431  4,476  2,614 
Total costs and operating expenses28,551  21,640  55,341  40,998 
Loss from operations(2,348) (3,215) (5,927) (6,725)
Other income (expense), net2  (5) (22) (7)
Interest income (expense), net95  (243) 119  (275)
Loss before provision for income taxes(2,251) (3,463) (5,830) (7,007)
Provision for (benefit from) income taxes13  (63) 37  11 
Net loss\\$(2,264) \\$(3,400) \\$(5,867) \\$(7,018)
Net loss per share, basic and diluted(0.07) (0.36) (0.18) (0.77)
Weighted average common shares outstanding, basic and diluted33,523  9,328  33,493  9,122 

Supplemental Revenue Information

The following table presents our revenue categories for the quarter ended June 30, 2016 and 2015 (in thousands):

  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2016 2015 2016 2015
Core solutions \\$10,572  \\$7,697  \\$20,335  \\$14,831 
Value+ services                                                                       14,399  9,408  26,653  17,112 
Other 1,232  1,320  2,426  2,330 
Total revenues \\$26,203  \\$18,425  \\$49,414  \\$34,273 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED)
(in thousands)

        
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2016 2015 2016 2015
Cash from operating activities       
Net loss\\$(2,264) \\$(3,400) \\$(5,867) \\$(7,018)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Depreciation and amortization2,359  1,431  4,476  2,614 
Purchased investment premium, net of amortization(50) —  95  — 
Amortization of deferred financing costs16  26  32  31 
Loss on disposal of property and equipment3  6  32  13 
Noncash interest expense—  223  —  223 
Stock-based compensation1,092  212  1,555  345 
Lease abandonment(31) —  60  — 
Changes in operating assets and liabilities:       
Accounts receivable(402) (557) (996) (1,222)
Prepaid expenses and other current assets634  (82) (647) (608)
Other assets18  (39) (92) (83)
Accounts payable82  674  (571) 883 
Accrued employee expenses812  163  906  1,064 
Accrued expenses(236) (240) 751  560 
Deferred revenue443  20  1,148  475 
Other liabilities637  (33) 1,495  (84)
Net cash provided by (used in) operating activities3,113  (1,596) 2,377  (2,807)
Cash from investing activities       
Purchases of property and equipment(1,270) (789) (3,161) (1,510)
Additions to capitalized software(2,980) (1,924) (5,159) (3,155)
Purchases of investment securities(7,300) —  (16,685) — 
Sales and calls of investment securities8,069  —  19,074  — 
Maturities of investment securities—  —  2,330  — 
Cash paid in business acquisition, net of cash acquired—  (4,039) —  (4,039)
Purchases of intangible assets—  (6) —  (11)
Net cash used in investing activities(3,481) (6,758) (3,601) (8,715)
Cash from financing activities       
Proceeds from stock option exercises73  250  153  318 
Proceeds from issuance of restricted stock—  —  —  141 
Proceeds from issuance of options—  208  —  208 
Principal payments under capital lease obligations(8) (9) (15) (15)
Proceeds from the initial public offering, net of underwriting discounts and commissions—  69,192  —  69,192 
Payments of initial public offering costs—  (807) —  (807)
Payment of contingent consideration—  (2,429) —  (2,429)
Proceeds from issuance of debt28  —  57  10,000 
Principal payments on debt(30) (42) (71) (42)
Payment of debt issuance costs—  (119) —  (532)
Net cash provided by financing activities63  66,244  124  76,034 
Net cash (decrease) increase in cash and cash equivalents(305) 57,890  (1,100) 64,512 
Cash and cash equivalents       
Beginning of period11,268  12,034  12,063  5,412 
End of period\\$10,963  \\$69,924  \\$10,963  \\$69,924 

Stock-Based Compensation Expense 
(in thousands)

  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2016 2015 2016 2015
Costs and operating expenses:        
Cost of revenue (exclusive of depreciation and amortization)                                     \\$138  \\$27  \\$183  \\$51 
Sales and marketing 130  28  172  51 
Research and product development 104  7  155  12 
General and administrative 720  150  1,045  231 
Total stock-based compensation expense \\$1,092  \\$212  \\$1,555  \\$345 

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

 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2016 2015 2016 2015
Net loss\\$(2,264) \\$(3,400) \\$(5,867) \\$(7,018)
Stock-based compensation expense1,092  212  1,555  345 
Non-GAAP net loss\\$(1,172) \\$(3,188) \\$(4,312) \\$(6,673)
Non-GAAP net loss per share, basic and diluted\\$(0.03) \\$(0.34) \\$(0.13) \\$(0.73)
Weighted average common shares outstanding, basic and diluted                                                33,523  9,328  33,493  9,122 
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2016 2015 2016 2015
Net loss\\$(2,264) \\$(3,400) \\$(5,867) \\$(7,018)
Depreciation and amortization2,359  1,431  4,476  2,614 
Stock-based compensation expense                                                                                        1,092  212  1,555  345 
Provision (benefit) for income taxes13  (63) 37  11 
Other (income) expense, net(2) 5  22  7 
 Interest (income) expense, net(95) 243  (119) 275 
Non-GAAP Adjusted EBITDA\\$1,103  \\$(1,572) \\$104  \\$(3,766)

The following table presents our customers and units under management at the end of each quarter for the last six quarters:

 2016 2015
 June 30, March 31, December 31, September 30, June 30, March 31,
Property manager customers9,275  8,816  8,218  7,561  7,016  6,491 
Property manager units under management (in millions)                2.41  2.30  2.15  2.01  1.92  1.81 
            
Legal customers7,349  6,834  6,145  5,566  4,891  4,253