AppFolio, Inc.

Good afternoon. Thank you for standing by and welcome to the AppFolio, Inc.' 's fourth quarter 2022 financial results conference call. Please be advised today's conference is being recorded and a replay will be available on AppFolio's investor relations website. I would now like to hand the conference over to Lori Barker, investor relations.

Thank you. Good afternoon, everyone. I'm Lori Barker, investor relations for AppFolio, and I'd like to thank you for joining us today as we report AppFolio's fourth quarter 2022 financial results. With me on the call today are Jason Randall, Appfolio's President and CEO, and Fei-Hsien Nguyen, Appfolio's Chief Financial Officer. This call is being simultaneously webcast on the Investor Relations section of our website at www.appfolioinc.com. Before we get started, I'd like to remind everyone of Appfolio's safe harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections, future market conditions, or future product enhancements or developments, is a forward-looking statement. At folios, actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed on our SEC filing. AppFolio assumes no obligation to update any such forward-looking statements, except as required by law. For greater detail about risks and uncertainties, please see our SEC filing, including our 2B file form 10-K for the fiscal year ended December 31st, 2022. In addition, this call includes non-GAAP financial measures. reconciliations of those non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release posted on our investor relations section of our website. With that, I will turn the call over to Jason Randall, AppFolio's president and CEO. Jason, please go ahead.

Thank you, Laurie, and welcome to everyone joining us for AppFolio's fourth quarter and I'm pleased to report that Atfolio continued to show resilience in the changing real estate industry in evolving macroeconomic environments. Fourth quarter revenue grew 30% year-over-year to $124 million, capping off an annual 31% increase to $472 million. Units grew 15% for the year to $7.3 million. Also, the total number of our customers expanded. ARPU increased, payments continued to grow, and we were Our continued focus on delivering innovation that positively impacted our customers resulted in continued high retention, as customers continued to recognize the value of Appfolio to drive operational excellence in their business. One recent example of innovative solutions you've heard us talk about is the Appfolio Stack Partner Integrations Marketplace. Another important case in point is our investment in AI. As of the end of 2022, 40% of our customers now use one or more AI-enabled features or services, including our newest ones like Smart Insure, to help property managers enforce their insurance lease requirements, and BankFeed, a smart accounting tool that automatically imports bank transactions and simplifies reconciliation. Our path to increasing profitability is focused on growing revenue while executing a company-wide initiative to be more efficient. We are always evaluating how various businesses meet both our customers' needs and portfolio strategic priorities. And in 2022, we divested and wound down a non-core asset to drive focus in our business. We are continually working to identify areas where we can improve our cost structure, such as transforming our sourcing and procurement capability, right-sizing our real estate footprints, and migrating certain roles to third-party resource providers. In addition, we have been moderating and will continue to moderate our headcount growth rate. We are pleased with the early progress from these efforts and look forward to continuing them in 2023. From a macro perspective, it is an important time for our customers to continue investing in AppFolio to save costs and add operational efficiency. Earlier this week, we published the inaugural AppFolio benchmark report of nearly More than 80% expect their organization's revenue to increase in 2023, and nearly three-quarters expect net operating income to grow. They reported their top priorities are as adding new units to their portfolio, increasing revenue, improving customer service, and growing their staff. They also expressed a desire to leverage data to make faster, better decisions and to make financial interactions easier for both residents and the businesses they work with through processing more rent payments online, and improving their accounts payable process. These are all priorities that Appolio has been and will continue to help with. Appolio's long-term strategy is, at its core, all about helping our customers solve problems in innovative ways. Our goal is to keep our customers happy, resulting in low churn, growing ARPU, and added new customers and units. In 2023, we will continue to innovate at a fast pace. We are building on our one powerful platform for mixed portfolios as we expand support for property types and capture new revenue streams. Another example is accounting and reporting. This functionality is at the core of our product offering, and we will focus R&D efforts around the themes of automation, centralization, and flexibility. These are the pipes of each customer's business, and it is critical that we remain the source of record for property-level accounting. And we are delivering service excellence at scale by enabling an intuitive onboarding process and leveraging technology to make it easier for customers to get the help they need, when and how they need it. These are just a few of our long-term projects. There's more in the pipeline for 2023 and beyond. Also core to our long-term strategy are our sustained efforts and investments behind acquiring and supporting larger customers. Our corporate segment is quickly growing and is a major contributor to our increasing ARPU. The strategic bets we made in 2022 drove success with more than a 60% growth rate in our portfolio property manager plus or APM plus tier. These units are fueling our go-to-market efforts and improving our ability to win up market. Large customers are increasingly coming to us to partner on the current and future needs. And our team is introducing new and creative ways to help our fastest growing customers organize around their future residential portfolio expansions. Let me share an example. Evernest is an APM Plus customer managing a mixed portfolio of 30,000 units across the U.S., and they have a goal of six-figure unit growth through a focused organic growth and acquisition strategy. They are heavily invested in the AppFolio technology platform, and together we have worked closely to maximize their adoption and performance. As a testament to the strength of this partnership, Evernest recently early renewed a multi-year agreement with AppFolio. According to Matthew Whitaker, CEO at Evernest, Quote, we are growing rapidly and AppFolio technology helps Evernest accelerate growth. We're happy to be working closely with the AppFolio team to achieve our growth goals. End quote. We will continue to deliver differentiated experiences to meet the needs of more customers like Evernest. Large and small customers alike are embracing Stack, our partner integrations marketplace that launched in June 2022. Stack seamlessly integrates our customers' preferred software applications More than 800,000 of our customers units are now connected on Stack and the number of partners we've onboarded has more than doubled since Stack's launch, spanning marketing and leasing, smart home technologies, utility management, inspections and maintenance, and our newest category, compliance. J.T. Morrison, President of Horizons Asset Management LLC of Columbus, Ohio, Introducing more mobile and user-friendly software that removes many daily administrative burdens, allows our teams to concentrate on maintaining the asset, closing on active renters, and heading home to their families more energized, end quote. Large customers are also looking for functionality to serve their mixed-use housing portfolios. We've previously shared our plan to deliver purpose-built features for the affordable housing segment. In 2022, we partnered with Charter customers to deliver meaningful, affordable housing capabilities Payments continues to be the fastest growing of our value added services and we are working to find additional creative ways to deliver customer value to our growing ecosystem of end users. One example is our integrated security deposit return feature announced at our October customer conference. No longer is it necessary to write a check, mail it out, then make residents go and take it to the bank for deposit. The whole process is now done electronically. We have seen meaningful adoption of this new offering helping more than 4,000 customers automatically return funds to another 75,000 residents. Another customer conference announcement was Apple Pay. Now when a resident wants to pay their rent, they don't need to type in their credit card information. They can just click twice on their phone and pay. For property managers, this removes friction in the payment process, improves on-time payment, and delights their customers. Early indications show that resident card transactions increase by approximately 6% when our customers adopt AppFolio's link with Apple Pay. Based on these early results, we plan to expand Apple Pay capabilities and use cases, and we anticipate the full rollout to be complete in the first half of 2023. While we are making meaningful strides in achieving upmarket growth, we remain committed to growing our SMB customer base by adding capabilities, simplifying the service experience, and driving deep adoption across the leasing, accounting, and maintenance domains. In 2023, our SMB efforts will focus on improving the owner experience You've just heard about the innovative ways we are expanding, and it is all made possible through our people. At our annual employee kickoff event earlier this month, we discussed the importance of sharp execution and a focus on the actions that will deliver the greatest customer impact. As I've already mentioned this year, we are looking to improve our internal efficiency. We will continue to invest in our current team and simplify our portfolio to create an environment built for meaningful impact empowered by performance. We also continue to embrace a hybrid workplace, and I'm proud that our team and culture are recognized as an employer of choice. In 2022, we were selected among Glassdoor's Best Places to Work and Fortune's Best Workplaces in Technology. Great people make a great company, and I'm confident in our nearly 1,800 appollions' ability to achieve our goals. As we enter 2023, we are well aligned on growing the business and increasing our focus on profitability. During 2022, our payments business we expect that card usage growth rates will naturally moderate. While we are becoming more efficient, we also need to continue to invest in R&D to support our move-up market. The result of our estimates for revenue growth and expenses is a moderate level of free cash flow, and FACN will take you through more details shortly. Over and over, Appalachia's business has delivered consistent, resilient results in various market conditions. We are growing steadily by driving efficiencies for owners, property managers, residents, and vendors, I'm proud of our accomplishments and believe in our ability to drive continued success through our committed focus on innovative products and services, trusted customer partnerships, and a strong team and culture. I will now turn the call over to FACN for more details on Appolio's fourth quarter financial results.