AppFolio, a Goleta-based property management software company, fell just short of breaking even during the third quarter of 2021, missing analysts’ expectations despite delivering a slight revenue beat.
AppFolio, which has seen earnings decline in each of the past three quarters, delivered a net loss of $101,000 in the third quarter of 2021, down from net income of $137.6 million in the same quarter last year. The loss in the most recent quarter equates to break-even on a per-share basis, compared to earnings of $3.86 per share a year earlier.
Last year’s net income was inflated, however, due to AppFolio’s sale of its MyCase legal practices suite of services for $193 million to a group of private equity funds. According to AppFolio’s third-quarter 2020 earnings report, the company netted $187 million from the deal.
Zacks’ Consensus Estimate projected the company to have earnings of 2 cents per share for the third quarter of 2021, but with the break-even quarter, it missed expectations.
Through the first three quarters of this year, AppFolio’s net income was $2.3 million, or 7 cents per share. During the same period last year, it had net income of $158.9 million, $4.49 per share, again inflated by the sale of its legal suite.
AppFolio shares closed at $134 on Nov. 8, just before the earnings release, and have remained around that level since, closing at $133.80 on Nov. 10.
Fay Sien Goon, AppFolio’s new CFO, said during the company’s Nov. 8 earnings call that the net loss included $4.1 million in stock-based compensation expense. Another reason for the third-quarter loss was ballooning expenses, as AppFolio saw expenses rise to $95.8 million in the third quarter of 2021, compared with $80.7 million in the same quarter a year ago.
“Our year-over-year increase in expenses is primarily related to additional headcount needed to fill our growth, additional marketing spend, and then increase in third-party cost of revenues,” Sien Goon said.
Those expenses were partially offset by a $1.9 million insurance recovery related to a settlement with the Federal Trade Commission, Sien Goon added. In December 2020, AppFolio agreed to pay $4.25 million as part of a settlement with the FTC over allegations the firm failed to follow reasonable procedures to ensure the accuracy of its reports about potential tenants.
Excluding the impact of the MyCase sale, revenue for the third quarter was up 28% year-over-year, according to Sien Goon.
Revenue for AppFolio in the third quarter was $95.8 million, beating Zacks Consensus Estimate’s projection by about 3%, the investment research firm said.
“The increase is mainly due to growth in the number of property management customers we serve,” Sien Goon said.
According to AppFolio’s quarterly report, the company’s Value+ service was the big reason for the growth, with a 34% year-over-year increase in revenue, to $65.6 million.
Sien Goon said the company’s Value+ arm “is designed to enhance, automate, and streamline processes and workflows that are essential to our customers’ businesses.”
That includes electronic payments services, tenant screening and insurance services, all of which saw increased demand in the most recent quarter.
AppFolio’s core solutions arm delivered $26.9 million in revenue, a slight drop from $27.1 million in the same quarter last year.
The company raised its revenue guidance from $350 to $355 million to $355 to $357 million for the full year.
AppFolio CEO Jason Randall said during the company’s earnings call that it is continuing to add more services for its clients such as streamlining accounting processes, leasing workflows, and communication automation.
“A modern cloud-based solution like AppFolio property manager addresses many of these challenges and it is a competitive differentiator, giving our customers, employees space and time to execute valuable business activities by automating some of the most critical aspects of property management across accounting, financial reporting, maintenance management, and leasing,” Randall said.