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spk01: Ladies and gentlemen, thank you for standing by, and welcome to the AppFolio, Inc. Announces Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Erica Abrams. Thank you. Please go ahead.
spk00: Thank you, Christine. Good afternoon, ladies and gentlemen, and thank you for joining us today as we report AppFolio's fourth quarter and fiscal year 2020 financial results. With me on the call today are Jason Randall, AppFolio's president and CEO, and Ida Kane, AppFolio's chief financial officer. This call is simultaneously being webcast on the investor relations section of our website at www.appfolio.com. Before we get started, I would like to remind everyone that Aptolia's Safe Harbor policy comments made during this conference call and webcast containing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subjects to risks and uncertainties. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement. Abfolio's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings. Abfolio assumes no obligation to update any such forward-looking statements except as required by law. Please see our filings with the SEC, including our Form 10-K, which was filed earlier today, for greater detail about risks and uncertainties. With that, I'll turn the call over to Edith Kane, CFO. Edith, please go ahead.
spk02: Thank you, Erica. Welcome to everyone joining us for Aptolia's fourth quarter and fiscal year 2020 financial results. We reported total revenue of $310.1 million for fiscal year 2020. GAAP net income was $158.4 million, or $4.44 per diluted share. This includes a pre-tax gain of $187.7 million related to the sale of my case, offset by net tax expense of $51.3 million. For fiscal year 2020, we recorded income tax expense of $38.4 million. Also included in GAAP net income is $9 million in non-cash charges related to stock-based compensation. Our Form 10-K was filed today and includes more details on our results. On the call today, to enhance clarity and comparability, I will discuss the results of our continuing real estate business, excluding the impact of the my case operation. To that end, revenue from our continuing business for fiscal year 2020 was $284.7 million, which represents an increase of 23% over revenue of $231.1 million in the year-ago period. As you know, we provide innovative software services and data analytics to customers in the real estate industry. Our solutions are used by property managers whom we refer to as customers in our public filing and also by numerous other constituencies in the property management business ecosystem. These other constituencies include property owners, rental prospects, tenants, and service providers whom we collectively refer to as users. We generate revenue from customers and from these users as our software and services aim to serve the full business ecosystem. Core solutions revenue derived from subscriptions to our customers in our continuing business in fiscal year 2020 was $86.5 million, an increase of 19% over $72.6 million for the year-ago period. Value plus services revenue from our continuing business was $184.2 million in fiscal year 2020, an increase of 27% over $145.2 million for the year-ago period. The increase in revenue year-over-year was primarily attributable to 10% growth in the number of property manager customers using our software and 17% growth in units under management. Throughout 2020, demand for electronic payment services increased as residents, property managers, owners, and customers transacted more business online, which we attribute in part to the COVID-19 pandemic. During the year, we also introduced new Value Plus services and expanded the functionality of others, which resulted in incremental revenue. As a reminder, a significant majority of our Value Plus Services revenue comes directly and indirectly from the use of our electronic payment services, tenant screening services, and the insurance services we make available to customers. At December 31, 2020, we had over 15,700 real estate property management customers managing an aggregate of 5.36 million units in their portfolios. We continue to focus on growing our customer and user base and expanding their adoption and utilization of value-plus services, which are designed to enhance, automate, and streamline processes and workflows that are essential to our customers' businesses. For fiscal 2020, our annual dollar-based net expansion was 112% for our property manager customers. I encourage you to read our 8 filing today for more information on how we calculate annual dollar base net expansion. Turning to spending, we saw an overall increase in expenses from our continuing business of 23% in fiscal year 2020 compared to prior year. Total expenses of $277.1 million included a $4.3 million legal settlement with the FTC previously discussed, an increase in professional service fees and other costs of $2.3 million related to the MyCase transaction, offset by a benefit of $2 million for third-party service provider incentives earned related to adoption and utilization of online payment services that was recorded in cost of sales. The increase in costs over the prior year are mainly attributable to the growth in our value for services revenue and the third-party costs incurred to support them, as well as growth in personnel costs, with headcount increasing 16% year-over-year to over 1,300 upholiums dedicated to our continuing business at fiscal year-end. In addition, advertising and promotion costs increase year over year, offset by reductions in workplace, event, and travel-related costs as we adjusted our business in response to the COVID-19 pandemic. As we move into 2021, we continue to operate as a remote workplace and expect to return to the office no sooner than the second quarter. We do hope to transition back to in-person work during fiscal 2021, COVID-permitted. To that end, we continue to invest in our physical office locations with the build-out of Santa Barbara, the expansion of our Dallas location, and the signing of a new lease in San Diego early in 2021. In addition, we expect to continue to invest in areas of our business that enable future growth aligned with customer success. Turning to the fourth quarter performance, total revenue from our continuing business was $72.4 million, which represented growth of approximately 20% year-over-year on a comparable basis. As a reminder, we experienced limited seasonality in the fourth quarter in our value plus services revenue, primarily with respect to certain leasing-related services we provide to our property management customers. The fourth quarter of 2020 was no different. Core Solutions revenue was $22.9 million in the fourth quarter, and Value for Services was $46 million, which represented growth of approximately 18% and 25%, respectively, year over year. Other revenue in the quarter was $3.5 million from our continuing business. Total expenses from continuing business in the fourth quarter was $74.6 million, which is an increase over the year-ago period of 23%. Moving to the balance sheet, at December 31, 2020, our principal sources of liquidity were cash and cash equivalents and investment securities, which had an aggregate balance of $175.3 million. During the fiscal year, our cash and cash equivalents increased primarily as a result of the proceeds from the MyCase transaction, net of repayment of amounts owed under, and termination of our credit agreement. For fiscal year 2020, we generated $48.3 million from operating activities. Our primary uses of cash were capitalized software development costs of $26 million in connection with continued investment in our technology and service offerings and capital expenditure of $19 million to purchase property and equipment for the continued growth and expansion of our business. In addition, we spent $4.2 million for the repurchase of shares. Looking ahead, We are not providing revenue guidance for fiscal year 2021 at this time due to continued limited visibility into future business trends and financial performance in the current operating environment. We expect to reevaluate this throughout the year. We also expect our weighted average diluted share count for fiscal year 2020 to be approximately 36 million shares. With that, I'll turn the call over to Jason for additional comments.
spk03: Thanks, Ida, and thank you all for joining us today as we share our fourth quarter and fiscal year 2020 results. Our financial performance in 2020 is a testament to our steadfast focus on three areas. First, innovating to better enable our customers to automate essential business processes, enhance business interactions, and leverage data to predict and optimize business workflows. Second, delivering an exceptional customer experience, and third, enabling a thriving company culture. 2020 was a year filled with challenges, but also adaptability, innovation, and resilience. Entering 2021 with more than 5 million units now under management on our property management platform, we remain focused on positioning our company for long-term sustainable growth. As we've discussed in previous calls, the pandemic has spurred changes to the way our customers do business. We believe there is a continued need for digital transformation across the real estate industry, and that Folio customers are well equipped to navigate this transformation with our software and services at the foundation of their business. At Folio, software and solutions are designed to serve as our customers' systems of record, engagement, and intelligence, enabling exceptional customer experiences and increasing efficiency across our customers' businesses. Throughout the fiscal year 2020, we evolved in lockstep with our customers, unlocking value and delivering capabilities that enabled our customers to focus on their customers and business ecosystems so they can spend more time on strategic work and less time on repetitive tasks. At the beginning of the pandemic, we heard from customers that maintaining high resident service levels to enhance digital communications was a priority. We delivered the ability to post custom announcements across resident, homeowner, and owner portals and added functionality to the maintenance workflow to enable property managers to post important safety announcements. We also introduced new and expanded functionality across one of our customers' most essential workflows, leasing. With the launch of Appfolio virtual showings, customers are able to further modernize their leasing process and conduct live showings without in-person contact. We also added capability to support previewing units through 3D tours hosted by a number of leading providers that can be enabled into our customers' Appfolio-powered websites, making it easy for prospective residents to engage with available units and self-qualify at a distance. These enhancements brought value for our customers in times of social distancing, and we believe these new capabilities will change the way our customers manage the leasing process going forward. We also made meaningful advancements in further automating and optimizing another critical workflow for our customers' accounting. We expanded online payment features to enable rent collection flexibility. And in the fourth quarter, we advanced a set of purpose-built capabilities that allow property management customers to track corporate books alongside but separate from the property books, providing our customers with more accurate reporting and improving their accounting workflows. Another key area of focus has been our continued expansion of Portfolio Property Manager Plus, a team of software designed to meet the unique challenges facing larger customers managing distributed teams and portfolios across multiple regions. Our Plus customers benefited from enhancements to business-critical processes around leasing data and workflow automation, which provide our customers real-time visibility into total portfolio leasing performance, actionable dashboard views around employee performance, and further automation of workflows. We continue to hear positive feedback from our customers on the value and impact our software and services are bringing to their business. Josh McIntyre, president of McIntyre Management, managing over 1,500 units, commented, Appfolio allows us to provide full transparency to our clients, automate reporting and recurring work orders, and manage tenant correspondence with ease. With Appfolio, we've also been able to double our units under management during COVID-19, while our staff has had the flexibility to work from home. We also continue to expand our offering for community association managers, focusing on streamlining efficiency, and helping them better serve their homeowners and board members. In 2020, we released an end-to-end mailing service accessible within our core product that allows customers to avoid manual mail work, transforming traditional workflows and unlocking operational efficiencies in one platform. More recently, we announced a new multiple fund accounting capability to visualize assets, liabilities, and equity for separate funds on a single balance sheet in an integration with CheckAlt for LocksBox automation. Ari Shore, who manages 3,800 units in Atfolio Property Manager's Chief Operating Officer of Association Management Company, CAP Management, recently said, consolidating all of our management business activities in Atfolio Property Manager has allowed us to access all critical and background data quickly and via a wide range of devices. We've increased homeowner and board of director satisfaction while increasing the amount of data, and it's easy to view for all. Turning to Atfolio Investment Management in 2020, we released functionality that helps real estate investment managers grow their portfolios and investments by engaging with investors and driving efficiencies in their business. New capabilities enable general partners to create and manage tasks from their dashboard, view visual diagrams of their more complex investment structures, track and withhold taxes from distributions, and enhance security on signature request documents. Now to our team. At Upfolio, we believe that engaged, happy employees deliver a better customer experience. Our people and culture have always been at the heart of Appolio's success. In 2020, we quickly pivoted to a work-from-home environment and found new and creative ways to collaborate and innovate while continuing to satisfy customers. During 2020, Appolio continued to gain industry recognition for our innovative technology, company culture, and business success. Since our last update, Appolio was selected number one on Fortune's list of the 100 fastest-growing companies. We were also recognized for our strong culture as one of Battery Venture's highest-rated public cloud companies to work for, which is based on the Glassdoor ratings of current and former employees. And at Folio AI Leasing Assistant, Lisa was voted Real Estate Product of the Year by the Business Intelligence Group Awards for Innovation. In summary, despite its many challenges, 2020 marked another year of strategic and operational progress for Atfolio. Looking ahead, we remain focused on areas that enable long-term sustainable growth for our business. We expect to accomplish this by delivering innovative technology solutions that create exceptional experiences for our real estate customers, all fueled by an engaged and happy team. Thank you all for joining us today. I will now turn the call back to the operator. Please go ahead.
spk01: Thank you for participating in today's conference call. This call will be available for replay beginning at 730 Eastern Standard Time today through 1159 p.m. Eastern Standard Time on March 4th, 2021. The conference ID number for replay is 843-8087. Again, the conference ID number for replay is 843-8087. The number to dial for the replay is 1-800-585-8367. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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