AppFolio's Revenue Grows 34%

AppFolio (NASDAQ: APPF), a provider of cloud-based business software that is used by property managers and law firms, reported its third-quarter results on Monday, Nov. 6. The company's customer bases once again showed double-digit growth. When combined with increased usage of its Value+ services, the company's overall revenue growth reached 34%. The strong top-line growth enabled AppFolio to eke out a small profit for the third quarter in a row.

Let's take a closer look at AppFolio's results to get a better sense of where this business is headed.

AppFolio Q3 results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Change


$37.9 million

$28.2 million


Net income

$3.6 million

($1.1 million)


Adjusted EPS




What happened with Appfolio this quarter?

  • Total core solutions revenue -- which is revenue earned from subscription fees that increase as its customers' business grows -- increased 30% to $14.7 million.
  • Total Value+ services revenue -- which is primarily earned from usage-based services like electronic payments processing, application screening, collections, advertising, website hosting, and more -- grew 39% to $21.8 million.
  • Other revenue -- which is mostly earned from customer onboarding -- rose 26% to $1.5 million.
  • Appfolio ended September with approximately 11,250 property manager customers, which represents growth of 17% over the year-ago period. Total property manager units grew 22% to 3.1 million. 
  • Law firm customer count grew 18% to more than 9,200. However, total revenue from its legal vertical still represents less than 10% of total revenue.
  • Total GAAP Expense only grew 17% year over year.
  • On a non-GAAP basis -- which is a metric that excludes stock-based compensation charges -- net income would have been $5.2 million, or roughly $0.15 per share.
  • Cash balance at quarter end was $64 million. The balance sheet remains debt free.

What management had to say

AppFolio's management team likes to let the company's numbers speak for themselves.  However, on the company's call with investors, CEO Jason Randall did elaborate on some of the new services that were recently rolled out to customers:

Randall also mentioned that the company welcomed over 800 customers to its annual AppFolio Property Manager Conference. "It's clear that our customers consider us their partner to the future and I am very proud of that," Randall said.

Looking forward

The company's strong quarterly revenue growth allowed management to raise its full-year guidance for the third time this year. Management is now projecting that full-year revenue will land between $140 million and $141 million. That represents a $2 million bump from its prior guidance range. The midpoint of the updated range represents growth of 33% year over year.

Despite posting strong revenue growth and raising full-year guidance, shares of AppFolio fell about 7% in afternoon trading following this report. Even with the small sell-off, shares have still risen more than 80% since January.

Overall, AppFolio's results clearly show that the company is having success in attracting new customers to the platform while simultaneously getting legacy customers to use its Value+ services more often. With new services on the way and a business model that is starting to scale, investors appear to have plenty of reasons to believe that this fast-growing company's future remains bright.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Amazon and AppFolio. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends AppFolio. The Motley Fool has a disclosure policy.