AppFolio, Inc.

Good afternoon. My name is Kelly, and I will be your conference operator today. At this time, I'd like to welcome everyone to the At Folio first quarter of 2019 financial results conference call. All lines have been placed on mute to prevent any background noise. If you should need assistance during the call, please press star zero on your telephone keypad, and an operator will come back to assist you. Thank you. Erica Abrams, you may begin your conference.

Thank you, Kelly. Good afternoon, ladies and gentlemen. Thank you for joining us today as we report AppFolio's first quarter 2019 financial results. I'm joined today by Jason Randall, CEO, and Ida Kane, CFO of AppFolio, to discuss these results. This call is simultaneously being webcast on the investor relations section of our website at www.appfolioinc.com. Before we get started, I would like to call everyone's attention to our safe harbor policy. Please note that certain statements made on this call will be forward looking statements which are subject to considerable risks and uncertainties. These forward looking statements may relate to future plans and financial conditions, results of operations, business forecasts and plans, strategic plans and objectives, and product development plans. Forward looking statements involve numerous risks and uncertainties. that may cause actual results or performance to be materially different from any results or performance expressed or implied by the forward-looking statements. We discuss risk and uncertainty in greater detail in the risk factors section of our filings with the SEC. Forward-looking statements are based on assumptions as of today, and we assume no obligation to update any forward-looking statements after today, even if new information becomes available in the future. With that, I'll turn the call over to Ida. Please go ahead.

Thank you, Erica. And welcome to everyone joining us on the call today for Atfolio's first quarter of fiscal year 2019 financial results. Topline revenue growth accelerated in our first quarter of 2019, with revenue increasing 35% year-over-year to $57.1 million. Gap net income was $3.7 million, or 11 cents per diluted share during the quarter, Thank you for joining us today. Second, the development and launch of Atfolio Property Manager Plus in September 2018 to serve larger property manager customers. Third, the January 2019 acquisition of Dynasty and its advanced artificial intelligence solutions for the real estate vertical. And finally, the development and recent launch of Atfolio Investment Management to serve real estate investment managers, which Jason will discuss further in a few minutes. Also included in our first quarter results is $1.6 million in non-cash charges related to stock-based compensation. For those of you who tracked non-GAAP results, our Form 10-Q was filed today and includes more detailed financial data points that you might find helpful in calculating non-GAAP results on your own. We closed the first quarter with 13,409 property manager customers managing 4.08 million units. These metrics reflect our continued efforts and success in acquiring higher unit count customers. As a reminder, we define our real estate property manager customer base as the number of customers subscribing to our core solutions. Customers that are not subscribing to our core solutions are not included in our customer and unit counts. In our legal vertical, customer count increased 8% year over year to 10,485. Core solutions revenue was $20.8 million in the first quarter, a 28% increase year-over-year, primarily due to a 20% increase in property manager unit center management related to an 11% increase in the number of property manager customers. First quarter value plus services revenue was $33.7 million, a 37% increase year-over-year, Revenue from each of our Value Plus services increased year-over-year, with the majority of growth derived from increased usage of electronic payments, screening, and insurance services by a larger base of property manager customers and a higher number of units under management. Other revenue increased 72% to $2.6 million, reflecting the revenue associated with recent acquisitions' stand-alone subscription services revenue. Turning to expenses, total costs and operating expenses for the first quarter increased 50% year-over-year on a GAAP basis compared to an overall 35% increase in total revenue, reflecting our increased investments ahead of expected revenue generation. Our year-over-year increase in costs is primarily related to our 43% growth in headcount to support new offerings and customers and to drive future growth. Year over year, headcount increased to approximately 1,040 employees, which include employees that joined the Folio team via acquisitions. Operating expenses also include an increase of $1.3 million related to increased professional service fees for expanded audit, leasing, legal and acquisition related activities during the quarter. Q1 results include approximately $500,000 of Dynasty-related subscription revenue for standalone offerings included in other revenue and $2.4 million of incremental operating expenses. In addition, we recognize a one-time tax benefit related to the acquisition of over $4 million. As a reminder, we have significant deferred tax assets with a full valuation allowance against those assets. We continue to evaluate whether sufficient positive evidence exists with regards to the reversal of our valuation allowance. We believe that there is a possibility that, within the next three to 12 months, sufficient evidence may become available to allow us to reach the conclusion that the valuation allowance may no longer be needed. Release of the valuation allowance would result in an income tax benefit in the period the release is recorded. Moving to the balance sheet, we closed the quarter with approximately $40.8 million in cash, cash equivalents, and investment securities, and $49.5 million of debt. With the increased investments during the quarter, we generated $300,000 from operating activities and completed the acquisition of Dynasty for $54 million in cash. We also used $1 million to purchase property and equipment and invested $4.7 million in additional product innovation via capitalized software. Effective January 1, 2019, we also adopted ASC 842 related to lease accounting. You will notice a few changes to our balance sheet with the addition of operating lease right-to-use assets, totaling $16 million at quarter end, and short and long-term lease liabilities totaling $23.1 million. In accordance with the accounting standard, we elected not to recast prior comparative balance sheet periods. The adoption of ASC 842 will not have a material impact on our income statement. During the first quarter, our Board of Directors authorized a $100 million share repurchase program. The program allows for repurchases at prices that are below intrinsic value, conservatively determined, but does not obligate the company to repurchase any specific dollar amount or number of shares and may be modified or suspended at any time. We have not initiated any repurchases under this program as of today. In summary, Q1's top-line growth accelerated to 35% year-over-year with increased investments in growth initiatives. We are pleased with the progress we continue to make towards our long-term goals. For fiscal year 2019, we remain focused on executing full-year revenue in the range of $250 to $255 million, which represents year-over-year revenue growth of 33% at the midpoint of the range. We expect our weighted average diluted shares for the full year to be approximately $36 million. As a reminder, investors are invited to submit questions via the investor Q&A form located on the investor overview section of our website. With that, I'll turn the call over to Jason for additional comments.