AppFolio, Inc.

Good afternoon. Thank you for standing by and welcome to AppFolio's Inc. Fourth Quarter 2023 Financial Results Conference Call. Please be advised, today's conference is being recorded and the replay will be available on AppFolio's Investor Relations website. I would now like to hand the conference over to Lori Barker, Investor Relations. You may begin.

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 2023 financial results. With me on the call today are Shane Trigg, AppFolio's president and CEO, and Fei-Hsien Nguyen, AppFolio's chief financial officer. This call is simultaneously being webcast on the investor relations section of our website at appfolioinc.com. Before we get started, I would 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, for future product enhancements is forward-looking. 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. For greater detail about risks and uncertainties, please see our SEC filings. including our Form 10-Q for the quarter ended September 30th, 2023, and the section entitled Risk Factors in Amfolio's forthcoming annual report on Form 10-K for the fiscal year ended December 31st, 2023. In addition, this call includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release posted on the investor relations section of our website. With that, I will turn the call over to Shane Trigg. Shane, please go ahead.

Thanks, Lori, and welcome to everyone joining us for Appfolio's fourth quarter and fiscal year 2023 financial results. I am pleased to announce a successful fourth quarter that caps off the year in which Appfolio increased the pace of innovation while prioritizing profitable growth. Fourth quarter revenue grew 39% year-over-year to $172 million, contributing to an annual 31% increase to $620 million. Units grew 13% for the year to $8.2 million. Our customer count expanded, ARPU increased, and payments continued to grow. At the same time, we improved our margins, driving non-GAAP operating margin to 24% during the fourth quarter and non-GAAP free cash flow margin to 20%. AppFolio's strategy is all about delivering exceptional value for our customers, employees, and shareholders. Our strategy has five components and starts with our commitment to differentiate to win. There is no better example of how rapidly we are differentiating ourselves than at Folio Realm. It unites all of our AI innovation under a common umbrella and touches every single one of our customers' workflows, from leasing to maintenance and accounting. Some of these AI features and services are included in the core product, while others are sold separately or included in our premium product tiers. 93% of our customers now use one or more AI-enabled features or services through AppFolio Realm. That's twice the adoption of just one year ago, demonstrating the value our customers are realizing from Realm. We announced AppFolio Realm X, the industry's first-ever generative AI conversational interface at NAA last year, and we're piloting it with customers right now. Through RealmX, customers will be able to interact with that folio in plain language. It has three components. First, customers can ask RealmX to explain how something works. They can ask for information, or they can ask for reports. Second, customers can also tell RealmX to complete a task on their behalf, like drafting a communication. The third component is that customers can teach RealmX, to automate processes and workflows. This is crucial because our customers continue to tell us their number one challenge is operational efficiency. They have talent and resource constraints, and yet they're still doing manual, repetitive tasks. In the past, we designed products to help customers do the work. What we're building today will do the work for them. That's what differentiating to win means. The second component of our strategy is to unlock upmarket customers. We are winning larger customers by expanding our coverage of property types, which we accomplished in 2023 through the launch of affordable housing, and by extending the value of our platform to scale with our customers' complex operations, whether built natively or delivered by our integration partners via Appfolio's stack. As of the end of 2023, we've grown the number of units connected to Appfolio Stack Partners to 1.5 million. Thanks to initiatives like these, more and more large residential portfolios made the switch to Appfolio in 2023. One of those customers was AMC, which maintains and operates over 11,000 multifamily units in Southern California. Since going live late last year on Appfolio Property Manager Plus, They're leveraging not just our core system functionality, but also AI leasing assistant, Lisa, smart maintenance, websites, bill pay, and so much more. AMC's president, Daniel McCarthy, had this to say, and I quote, we see great potential in AppFolio's current offerings, as well as in their constant commitment to innovation, and view this partnership as a real investment in our future, end quote. In the fourth quarter, we introduced a third tier in our product lineup at NMHC's OPTEC conference. A folio property manager, MAX, is designed for large operators with complex and diversified property portfolios. This new plan provides everything in PLUS, as well as leasing CRM that puts all lead data in one place for actionable insights. Leasing signals that enable property managers to make thoughtful pricing decisions using their own unique pricing strategy and public data. Custom fields that allow property managers to capture, track, and report on any information with user-defined fields. A database API that gives property managers full access to their AppFolio database to build analytics, integrations, and data processes. and Max comes with dedicated customer success management. Max has been well received and adopted by new customers, as well as existing ones. Through our product tiers, we create upgrade paths, so as our customers grow, we have offerings that grow with them. The third component of our strategy is to elevate the customer by driving their adoption and success on our platform. Next month, we'll publish the second edition of our annual research benchmarking more than 5,000 property management employees. The report will show that maintaining high occupancy rates has become top of mind as rental markets become more competitive. And with operational efficiency continuing to be a challenge, reducing costs is key. Property managers tell us they're finding savings by leveraging data to fill vacant units faster, centralizing their teams and resources, and adopting AI. These are areas where AppFolio will continue to innovate in order to deliver an exceptional customer experience. We also heard that despite broader economic challenges, there's reason for optimism. According to the report, 66% of property managers expect their portfolios to grow in 2024 compared to 52% last year. Last quarter, we talked about our new bulk actions functionality available to users of AppFolio Property Manager Plus and Max that supports customer needs around managing move-ins and move-outs at scale. It's valuable to our upmarket customers, particularly those with student housing in their portfolio, given the seasonal patterns of the residential lifecycle. This past quarter, we expanded this functionality to bulk lease renewals. We recently heard from one customer, Gozen Hartman, CEO of Champaign, Illinois-based Fairlawn Real Estate, which manages more than 5,000 units on Atfolio Property Manager Plus, that our bulk lease renewal tool has reduced the time her team spends sending out lease renewals by 75%. According to Gozen, and I quote, it turned something that was looming and difficult into being easier. And that ultimately enabled most of our team to continue leasing apartments and providing great customer service, end quote. That's the kind of improvement that makes a difference to people every day. That's how we elevate our customers. The fourth component of our strategy is to scale the business. Our pursuit of profitable growth is in service of our customers. because to be the innovative, long-term partner they can rely on to power their businesses, we must be a healthy, resilient business ourselves. In 2023, we made a commitment to operational efficiency. We sharpened our focus on the closest-to-home initiatives that drive efficient growth and deliver extraordinary customer value. We right-sized our team and real estate footprint, and we drove meaningful improvement and our infrastructure spend. Ongoing discipline and our execution will allow us to reinvest in our platform, reach new customers, and drive efficient growth. At the same time, we will continue to add and enhance our capabilities to grow ARPU, particularly in the upmarket segment. The final component of our strategy is great people and culture. I'm inspired by our team's ability to rise to every challenge and deliver customer innovation and value at an exceptional pace. Earlier this month, we presented Appfolio's strategic priorities to our employees at Appfolio Kickoff 2024. During the event, we had a chance to meet several customers who are using Appfolio in meaningful ways. Hearing how our innovations are sparking productivity and helping communities thrive are powerful reminders of the impact we're making. One of those customers, Neil Cadman, president of El Segundo, California-based Cadman Group, managing 1,100 units on Atfolio Property Manager Plus, had this to say, and I quote, I'm way past understanding a lot of the X's and O's of Atfolio. I just know when I turn on my computer, when I look at my phone, tenants can pay rent, we can lease units, it all works. We view AppFolio as Cadman Group, and Cadman Group as AppFolio. It's why we keep coming back, end quote. Everything our team does is in service of customers like Neil, and our great people and culture are creating these experiences. I'm grateful to every one of our customers, proud of our accomplishments, and deeply believe in the direction of our company. Through our relentless focus on our customers, our disciplined investments, our passion to deliver industry-leading innovation, and our great people and culture, we are truly building the platform where the real estate industry comes to do business. I'll now turn the call over to Fei-Sien for more details on Abfolio's fourth quarter financial results.